Steven Buss knows commercial real estate. He’s worked for big-name companies such as CBRE and JLL during a career that has lasted for more than 25 years. During this career, Buss has thrived: As a principal and institutional advisor, he’s completed more than $200 million of industrial, office and multifamily acquisitions since 2017. He’s also closed more than 130 industrial transactions totaling 44 million square feet.
Buss could have continued at this pace. But last year, he decided to take a risk. This industry veteran in September opened Likewise Partners, a commercial real estate investment company based in the Minneapolis suburb of St. Louis Park. And Buss did this even though the COVID-19 pandemic continued to upend life throughout the United States.
So far? The move has paid off. With his new investment firm, Buss is focusing primarily on industrial real estate in Minneapolis, Des Moines, Milwaukee, Madison and Grand Rapids. Business has been strong, as the industrial sector continues to grow during the pandemic.
Midwest Real Estate News spoke with Buss about his new business and why this was the right time to start it. Here is some of what he had to say.
We should start with the obvious question: Why did you make the decision to start a new business during the pandemic?
Steven Buss: The truth was, not many other people were doing it at the time. I started the business in August of 2020 and opened the office on Sept. 1 of last year. I had been traveling and talking to people at a time when most people were not doing those things. People had time on their hands. They were tired of not seeing anybody or talking about what was happening in the real estate market. In a way, the quiet in the marketplace led to some nice conversations. It was so quiet, I found a good audience of investor partners who were interested in what I was doing. I was able to promote the business fairly heavily before it even officially started. It helped me get off to a strong start.
A lot of people reevaluated their careers during the pandemic. Did you do the same before deciding to start Likewise Partners?
Buss: I’ve invested and developed property during my career on the side. My day job was brokerage at two big shops and leading good-sized teams at each of them. For me, this was an opportunity to go full time on the investment side. This was the chance to focus on building an investment business. At the same time, there was a slowdown in the brokerage business. It just made sense to make the move from the brokerage world at this time. And the other part of it was that the industrial sector, which I am focusing on, has really become the standout product type.
I know that you’ve sold other product types, but you also have a long history with industrial, right?
Buss: A large part of my career at CBRE was selling industrial buildings across the country, especially in the Midwest. Starting this business gives me a chance to get back to my roots. This is a chance to get back into this space in a directed way. Industrial is certainly a part of the commercial real estate market that has benefitted during the pandemic. So, really, everything came together to make this the right time to start Likewise Partners. Let’s do this full time. Let’s get back to my roots in industrial real estate. Let’s take advantage of my knowledge base in this sector. And during the last nine months or so, this move has worked out well.
What sets Likewise Partners apart from other CRE investment companies?
Buss: I looked around for opportunities in the marketplace that we feel great about working with investors on, that we have a strong conviction about. We wanted to bring a different viewpoint than other people might have. That’s why we are not focused on the biggest markets in the Midwest. We are looking at the next tier of markets. Minneapolis is the largest market that we are thinking about. Milwaukee, Madison, Grand Rapids and Des Moines are all markets with strong economies and a good industrial sector. But they are not the biggest markets in this region.
The bigger players in this industry are focused on markets like Minneapolis, Indianapolis, Columbus and Chicago in the Midwest. They are not so focused on the tertiary markets we are serving. We like that. We think that is an opportunity for our investors to see great results. Amazon is making big moves in all the markets we are looking at. There is a changing dynamic in how the distribution market works. It started in bigger markets, but it is now dispersing to some of the more tertiary markets.
Steven Buss, founder, Likewise Partners
What makes the markets on which you are focusing so strong?
Buss: They have diverse economies. Milwaukee and Grand Rapids are more manufacturing driven. Milwaukee is transitioning from a manufacturing market to a distribution market. Des Moines is more of a distribution market. Madison is not on a lot of people’s radars. We like it, though, because the Madison region has 1 million people. That’s a significant market. The big national players haven’t focused on Madison yet.
Has it been difficult selling investors on these tertiary markets?
Buss: Not at all. We put up the statistics on the economies in these markets and the performance of the industrial market in these cities and the results speak for themselves. These are strong markets. We put up the vacancy stats and absorption and show what is happening in the economy. It speaks for itself. Investors are open-minded about these markets. The yields for industrial property in the biggest markets in the Midwest are as low as they’ve ever been. We see more room to maneuver on yields and returns in our tertiary markets.
What do you enjoy most about working in the industrial market?
Buss: The industrial market has room to grow. We wanted to work in a sector that has long-term growth potential. There has been a shift in demand because of ecommerce. But when you look at the bigger picture, it’s not just ecommerce driving the growth in the industrial sector. It’s about speed to the customers and being close to your products.
There is a shift being driven by Amazon and other online retailers that is changing how we distribute goods to people. Companies used to have big distribution centers in Chicago, Los Angeles and New Jersey. They then distributed their products to the whole country from there. But back then you had a week or more to get your products to people. What has changed is the speed you need to focus on when it comes to getting products to your customers. Customers want their products faster today. That has fundamentally changed how you need to organize your distribution network. Instead of having the big three in L.A., Chicago and New Jersey, you have to focus on opening facilities in markets across the country that let you deliver that day or the next day to your customers.
There was another factor, though, that is spurring even more demand in the industrial market. Companies had a shock to their systems during the earlier days of the pandemic with the disruption to their supply chain. They found that they couldn’t get their parts from China, where they had to shut down facilities because of COVID breakouts. Companies’ finished goods were trapped in these facilities and they couldn’t get them to their customers. They had everything under one roof. This danger was always there, but it’s human nature to minimize risk or problems until they happen.
There is no denying that companies have had to rethink the materials they have on hand here in this country. Do they need a new facility? If they are getting parts from overseas, do they need to hold more materials in case something happens? When you are running things tight and just-on-time, there is an incentive as a business operator to reduce the material you have on hand. The downside is that when there is even a small disruption, or a bigger disruption, it can be painful. People realized that last year. That is another major factor in the growth of the industrial market.
How has business been since you launched your new business?
Buss: We are busy. We have built out the foundation of the business. We will be buying our first property in the Milwaukee market soon. We’ll be making an official announcement on that soon. During the first six months of the company’s existence, I think I met with 70 brokers across the markets we serve, explaining to them what we are doing. That has paid dividends in terms of the deal flow we are seeing and the success we’ve had in getting dollars out there.
Do you see many of the online innovations that companies made during the pandemic continuing even after COVID-19 fades?
Buss: Yes. I don’t see ecommerce sales backsliding. Retail sales are growing year-over-year. The percentage of ecommerce sales of total retail sales was already increasing rapidly before the pandemic and that has only accelerated. People are now more comfortable with ordering online. They are comfortable with curbside pickup and grocery delivery. I don’t expect that to go backward.
The Amazons of the world took more industrial space last year than anyone in the industry by a huge factor. Everyone says companies have to compete with that. What do they need to do then? The Home Depots need to be closer to their customers. They opened smaller distribution centers last year in Grand Rapids and Madison, opening distribution centers in those markets for the first time. You have smaller businesses that have the same desire to be competitive. We will only see the need for distribution centers increase over time.