Ep. 57 Coy Davidson

Chris Rising (00:02): Welcome to the Real Market with Chris Rising, the only podcast that brings the real estate conference panel to your headphones. You'll hear from superstars from every realm of commercial real estate, the biggest brokers, the most well-known architects, the largest investors, and the most visionary developers. And learn what they do, how they do it, and what drives their success. We'll discuss the latest trends across latest markets, capital flows, both national and global, and we'll explore technology's role in shaping all of it. We'll take a clear-eyed look at where we've been, where we are now, and what's to come. Real conversations. Real experts. Real insights. This is Real Market.

Chris Rising (00:49): Welcome to the Real Market with Chris Rising. I'm excited to have Coy Davidson here with me today. He's with Colliers in Houston. He and I... The remarkable thing about technology today, he and I met on Twitter, and have gotten to know each other a little bit, but this is really our first conversation, and I'm excited to bring Coy to the audience here because I think there's a lot of people who are just starting out in the real estate business, or five or 10 years in, and I think Coy can give some stories and some good lessons about what it takes to be successful from the brokerage side of things, but also he has a lot of clients who are principals who have been long-time clients and I think he can give some perspective on that. So, Coy, welcome to the Real Market.

Coy Davidson (01:30): Well thank you for having me Chris.

Chris Rising (01:33): Love having you here. I spend a lot of time in Houston. One of our partners is Limestone Investments, and I've got to see some of the great things they've done in Houston. And then also in Austin. So it's nice to have somebody who knows the Houston market on, and excited to talk to you about it. How are things looking in Houston right now, here we are in month 10 of the pandemic?

Coy Davidson (01:55): I think things are looking more positive. As you might know, in Texas our lockdowns were probably not as restrictive as some other cities and states around the country. I mean I was out yesterday doing some work, and I mean I guess a great barometer is traffic was pretty bad at rush hour. So it tells me that people are working. I think our office building occupancy at this point is probably higher than a lot of places. But we're still not fully back to work, but the economy has, in Houston, despite lower energy prices, has managed to stay relatively unscathed. I mean obviously there's been a downturn, but maybe not near as bad as people might anticipated when we entered the pandemic and oil prices were low. So it's remained pretty resilient. My business I'm keeping right now, I've got a full slate of deals I'm working on. So clients are moving forward.

Chris Rising (03:06): And let me ask you this. Have you been in the office since the year started?

Coy Davidson (03:10): I have not been in my office in nine months.

Chris Rising (03:13): What's your take... I mean, I want to get into this a little bit later but I'll also start right there. What's your take on some of these pundits that follow us or we follow on Twitter who are convinced that we're never going to see an office again?

Coy Davidson (03:24): I don't believe that. I've read a lot. I've been somewhat hesitant to make bold predictions online because it just gives people an opportunity to argue with you or come back and say you were wrong six months from now. But I read all the surveys, I read all the articles. More important I talk to my clients, and I haven't one had client say, "We're getting rid of the office." In fact, they're all pretty much anxious to get back into the office. So that's maybe a limited sample size. I think it probably varies by industry. Obviously the tech side of the business seem to be more open to working remotely.

Coy Davidson (04:07): But the crazy thing is, I've been working the hybrid model for six or seven years now because I live so far from my office out in the 'burbs. So traffic is bad in Houston. It's not LA bad, but it's pretty damn bad. So I made the decision a long time ago to... My kids are out of the house, so it's just me and my wife here and I have my own home office. So I've only been going to the office a couple days a week for the past six or seven years.

Chris Rising (04:36): It's interesting. I get a lot of pushback when I complain that the office isn't going away because I've spent all this time writing about how you don't need to have an office, and how you can be paperless. And I think what I missed in all the writings about it is that for getting work done, we no longer need an office. I mean I remember being a young lawyer and if I wanted to work on a Saturday you had to go to the office. That's where everything was and everything. And now we've moved to a place where it's actually more efficient to get work done at your home, or in a place that's focused and that the office is really for collaboration. But after 10 months, we've collaborated as a company on Zoom. I'm sure that's how you've kept up with a lot of our clients. I think the question that can't be answered until everyone feels safe is: How much does collaboration drive the use of office coming out? I think it will be strong. Our tenants say they're coming back. That's what I hear.

Coy Davidson (05:33): My clients say they're coming back. And me from a personal standpoint, not being around my colleagues for nine months now, there's definitely... I mean there's some serendipity that you might be walking down the hallway and one of your colleagues, they ask me about a property or a client and all of a sudden you have an idea and there's that serendipitous moment that creates opportunities. And those go away. It just doesn't work the same online. And I think face-to-face meeting with clients, there's obviously some translation lost, or intent lost, in even video versus sitting down in a face-to-face conversation.

Coy Davidson (06:14): So I think it's going to be turn out to be companies are... There's some real productivity losses. And as a broker, it's easy for me to work from home because I'm motivated. If I don't do anything, I'm not going to make any money. But you go to another type of company, the guy or lady might be out in their pool drinking a Heineken instead of doing their work because they got nobody... Not everybody's disciplined like that. So I just don't know that companies are going to trust to send all their employees home. I think certain roles, obviously sales people being one, and some other roles, I mean that's a given that they can work in that work-from-home format. But I still think you've got to collaborate. And it's just my gut feel. I don't base it on any empirical studies. I'm having a hard time keeping these ear pods in. But I just think people are going to realize they miss the office, and it's a productivity issue. And I think demand will come back pretty strong when that happens.

Chris Rising (07:26): Yeah. And I say a lot. Nobody's going to college right now to get out and get a job where they stay in a small apartment and work all day. I mean we're both married. Your kids are grown, my kids are getting older. We have an ecosystem of a life around our families. But if you're young and you're coming out of school and you want to learn and you want to be engaged, I mean the workplace is where that all begins and ends. So I really think it's going to come back. It'll come back a little bit different than we think.

Chris Rising (07:53): I mean, from the landlord perspective, we've been getting ready for this a while but I think it's going to hit us in the face, when you negotiate a lease that has normal work hours from 8:00 to 5:00 or whatever, and after hours before and after. I mean those things I think are going to go the way of fax machines or whatever. I mean I think people are going to say, "If I get an office, I should be able to use it 24/7 and you can't tell me or penalize me for using it." And I think there will be some other things around the edges, but at the end of the day, the Apple campus was designed so that people would want to be there 24/7. The Google campus, the Facebook campus. I just don't see them stripping all that and that not coming back.

Coy Davidson (08:36): Well I can say from a broker's perspective, I mean even myself I would have said not going to the office everyday because I made a decision, really because of commute times and other issues. Even myself, I find myself... If you're not showing your face around the office, people forget who you are. So if you're a Millennial and you join a corporation, if you're working from home all the time you're going to have a hard time climbing up the ladder.

Chris Rising (09:10): Yeah. Well let's stake the conversation a little bit, because you and I met on Twitter, and you are really good at posting articles. I find myself about to post something that I think is a great article and I look at my Twitter feed and you've already beat me to it. That happens almost daily because you're so good at it. I mean you and I started in brokerage probably at the time when you had to lock your office and check the fax machine so nobody took a lead. But you've jumped into technology, and therefore I can tell you're collaborative in the way you use technology. But what was the thing that made it happen for you? What made your different than some of your contemporaries your age that all of a sudden you found Twitter as a vehicle to communicate and get your brand out?

Coy Davidson (09:54): Well I've told this story dozens of times. But going back to the global financial crisis in '06, '07 ish, obviously my business took a downturn like everyone else in the industry's did. And also just gone through a divorce, so it was kind of a tough time for me personally. And it was a tough time professionally because of the economy. So I'd been in business... 30 minus 12. 18 years. So I was pretty well established and had had a good career. People knew who I was in the Houston area, but not really outside of the industry. And was looking for a way to reinvent myself. And I looked around and I saw what was happening in the world with the advent of social media, Facebook, Twitter, all these tools.

Coy Davidson (10:51): And I also had a yearning for a long time to do my own website, which not many people were doing 12 or 14, 15 years ago. But I was seeing what was happening in the world, and I knew even if I was looking for an accountant or an attorney, and someone referred someone's name to me, the first thing I was going to do is Google them. So I assumed commercial real estate was going to be no different. So I wanted to start having some control, because I'm not a big cold caller. My business is a lot of word of mouth referrals. And I wanted to have some control over what they see instead of just the general bio on the company website. So I wanted to start putting content out there and getting my name out there. And it was an experiment, but it just took off.

Chris Rising (11:47): Well it takes discipline, right? A real soft discipline to be consistent on this. Did you look at it the same way one would've looked at cold calling or anything like that?

Coy Davidson (11:56): Yes I did. I mean I probably put a couple hours a day into it everyday, and I have for 12, 13 years now. I mean, I wish I cold called more. I mean I make warm calls, but I was fearful of it when I first started out like a lot of people. I don't even think that's effective. And I mean people do well with it, but they make a lot of calls. I was just never willing to do that. I wanted to find another way. So yeah consistency was important, and I also knew at the time, this was 2008, and I know our industry and how slow they are to adopt new ways of doing business and new technology. This is a wide open field. I mean I started looking around and I couldn't find more than three or four guys, commercial real estate professionals, on the inter webs doing anything. So it's like, "This is a golden opportunity because I just have such a head start." And it's an experiment, but it became very obvious to me very quickly that it was going to be a very effective tool.

Chris Rising (13:03): Yeah I think it is an effective tool. I've been fooling around in the last Christmas holidays with Clubhouse. Just trying to go a little bit further in my use of technology, and what I'm finding is that there's this big disconnect between Gen Z, Millennials and our Gen X and Baby Boomers. They're consuming Clubhouse, I see this younger generation. They're consuming Twitter in a way that isn't just to post an article, but lots of DMs back and forth. And I think it speaks a lot to the push of prop tech that's happened, and whether it's VTS or you name the software that's out there, that it's changing our business. But it's changing our business in some ways, in other ways it's not. But I wanted to go back a little. And so I know you went to University of Texas. You look at where the world is today and how we communicate. But let's go back in time and when you came out and... When did you decide you wanted to be a broker? And why?

Coy Davidson (13:59): I graduated from UT in 2005, and if you know anything about Texas the economy was just pretty terrible in 2005. I mean... Sorry. 1985.

Chris Rising (14:11): I was just doing the math going, "You got 20 years younger on me real quick."

Coy Davidson (14:15): No, no. Sorry. 1985. And Texas was in the depth of the oil bust. So I got out of school, and I went to work for an industrial construction company, working in their accounting department. Worked there about a year and a half and got laid off because the economy was just terrible. And I started doing some graduate school work, and I was sitting in class one day and one of my finance professors, "Anybody willing to do an internship in a commercial real estate company for three hours credit?" So I raised my hand immediately, interviewed for that position, got it, and just fell in love with the business. It was exactly what I wanted to do. I wanted to get into something that could be lucrative if I put the effort in, and afforded me a great lifestyle. And I was just always kind of intrigued by real estate. So after my three-hour internship, the firm asked me to come on because I already had my degree. So never actually finished my graduate work. I did take a few more classes, but I just dove right into brokerage and I've been there ever since.

Chris Rising (15:25): And have you always felt that brokerage was it? Have you ever thought about being a principal or moving over to the other side?

Coy Davidson (15:32): I have, but life's gotten in the way for whatever reasons. But no, there's two schools of thought of that. And I have colleagues that do both. One of my early mentors said, "If you own something, you don't want to put yourself into a conflict of interest. You should keep brokerage..." Sometimes I regret that I haven't. I probably could've created a lot wealth with some of the property opportunities I've seen over the year. But at this point, I've only made some small investments.

Chris Rising (16:03): Well I can tell you that when I moved over the one thing I wasn't ready for was signing those non-resource carve out guarantees with those lenders. That's not much fun. And one of my mentors was John Cushman, who I worked for, and I worked for him in the 90s just after the early 90s catastrophe, and he had big loans out. And when he got those things all worked out he said, "I'm never going back to being a principal. Only want to do brokerage. Only want to be transactional." I didn't really listen to that advice, but there are nights in bed when we have a deal that's not going the way I want it to where I'm like "Why didn't I just take a commission and just move on from this thing?" So I think it goes both ways.

Chris Rising (16:44): Well I wanted to make the connection though. So when you came out, you started as an internship. You were learning brokerage. How do you think the business has changed for a young person from the way you started? And if you're a young person listening to this saying "Hey I'm a year in." Or, "I'm two years in at a brokerage shop. How do I get to that next level in a 2020 world as opposed to a 1990 world?"

Coy Davidson (17:08): Well I can say at least when I started, first of all I didn't have the computer and I didn't have the cell phone. Nobody did. They didn't exist. I mean, they might've existed but nobody was using them, not that I can remember. So what I did was just immerse myself into learning all the technicalities about a commercial real estate interaction that I could, and trying to learn my sub market at the time as well as I could. So I was fortunate. I was single. I didn't have a family. So the only person I had to feed was myself, because you don't make a lot of money in the first couple years in brokerage. There was no salary. There was no commission advances. It was just, "Go get it and can you make it or not?" And first couple years were really lean. I was eating 99 cent tacos from Taco Bell and driving around in my little beater. But I was just determined.

Coy Davidson (18:08): I'll never forget, I think it was maybe my first or second year in the business and there was a prominent developer in our community that built several Class A office buildings, and there was a building that came for sale and I called him up and asked if he wanted to go look at the property. And he agreed to do so, and I drove up in my grandmother's 19 whatever Torino, just looked like hell, and he said, "Coy I'm going to buy this building just so you can get yourself a new car." He didn't follow through on that, but it wasn't long after that I started making some more significant deals, and then once that got a little more stable and I was at least making the money that my friends from college were making at the time, then I was hooked. But there was no technology at that time. You remember the Black's Guide?

Chris Rising (19:01): Yes absolutely. Black's Guide. And then out in California, the Thomas Guide was how you found anything because there was no Google, there was no... People were memorizing pages of, page 72 C8 was where we want to go. I remember those.

Coy Davidson (19:17): I mean when I went to look for office space, I had to pull the Black's Guide out, go photocopy the list of the buildings, mark off the ones I wanted. Of course the data was out because by the time they printed it it was old, so you had to call all the buildings. And then once you picked your buildings out, you had to get those little stickers and paste them on a photocopy of a key map and make a tour book for your client. So there was no CoStar, no Googling. Loopnet. None of that stuff existed.

Chris Rising (19:46): Well let me ask you this, because this is where I think a lot of young people are always curious. Where did it go from struggle, maybe make a small commission because you were working with somebody, to "I've got a client." And that's a big transition in a broker's life. And for you, when did you realize "This is how I get somebody to be my client where they will trust me and I can then make commissions"?

Coy Davidson (20:11): Yeah I've told this story many times to younger brokers. And I had to figure out what it was going to be that... I'm a 25, 26-year-old man, 28-year-old man, because I do tenant rep, and I'm going to walk into the office of this seasoned president of a company who's 55 years old. Why is he going to get this young kid to trust me? And I always thought salespeople had to be extroverts and smooth talking, and that's really me. I asked a client one time, I said, "Why do you work with me?" He said, "Because I trust you." And I realized that that was my biggest strength. I at least come across as a very trustworthy person and try to what I say I'm going to do, and people like that.

Coy Davidson (21:01): So that was my aha moment. I don't know exactly how I portray that to people, but it kind of comes naturally to me. So I'm not an extrovert by nature. I'm not Mr. Networker. I came from a very middle class family, and I wasn't born into the upper middle class, or elite circles. My dad was a working guy. He wasn't a prominent lawyer or doctor or any of those things.

Chris Rising (21:32): So what's really interesting about you... One of the reasons I left brokerage was I thought people who did it well had the ability to take the technical skill that it takes, but then to be able to relate to people and get confidence, just like you just said. Get their client to have confidence with them. I think my problem was always, as a broker, that I always wanted to tell somebody what was right. It's just my personality. I'm going to go take the risk. And I think the best brokers I know are conciliaries. They really are able to make their client feel comfortable on a big decision that they have to make. But how would you tell a young person today, or how do you look at it, in a world where forget just the pandemic, let's say we're past the pandemic and you can go take someone to lunch. But in a world that's so heavily focused on technology and not having the interpersonal, how are you going to approach your business? Or how would you tell a young person who needs to make that step at 28, 30? How would you do it today?

Coy Davidson (22:32): Well it's not any different than the way we did it 30 or 40 years ago. The cliché is the real estate business is all about relationships, and it is. That's the one thing that hasn't changed. I think technology has brought a lot of efficiency to what we do, but it also creates more expectations. People expect better, and they expect faster in terms of information and things of that nature. But it still comes down to: Do I trust this guy that is guiding me on a big financial decision for my company? Do I trust this guy? Does he have the experience and the competence? I kind of just fly by the seat of my pants, but I have a lot of experience. But once I felt like... And I just immersed myself into learning how to crunch the numbers, and knowing every aspect of a lease document.

Coy Davidson (23:33): Once I felt real comfortable with all that stuff, my confidence just soared. So then I can be myself and really impart my wisdom or my knowledge to my clients. It just came naturally to me. But at first, when you don't know those things stone cold, it was a little intimidating to me. And once I did, I've seen guys come into the business and do well much quicker than I did in my career, but that was just how I evolved. Because some people are natural sales people and they can open doors, and maybe for a young person they've got a senior broker they work with or whatever and they're able to secure business and they're real good at that. I didn't really have that. I kind of just attacked it on my own and survived and more than anything it was just determination.

Chris Rising (24:27): Yeah. You've been at Colliers. There's a lot of different shops out there. There's the Colliers and C&Ws and the CVs that still are pretty much commission-based. I mean some of them have some draws and things like that. And then there's the JLLs and maybe the Eastdils that really do kind of a salary plus bonus structure. What do you think about the future of brokerage? Is it still set up to stay where someone can do multiple disciplines within brokerage and live off commissions purely? Or do you think the business is going to evolve into a salary plus bonus kind of business?

Coy Davidson (25:04): That's a tough question. I think it may eventually. I still think it's going to take quite some time, because from a brokerage company perspective the revenues are just such an ebb and flow and it's hard to make that financial commitment to give salaries when your revenues can be so drastically different year by year, quarter by quarter, based on what's going on in the world, the economy, et cetera. So from the brokerage companies, to figure out how they get the best brightest and pay those... If you're going to start eyeing MBA kids from really good schools, they've got great offers making great money from a regular corporation. I think it's going to be difficult for brokerage companies to move to that model.

Coy Davidson (25:54): As a result, it takes a certain type of person to get into the brokerage business. It's not for everybody. I've got kids that are in their 20s and they're getting out of college, or they've been out of college three or four years and they call me and say, "Coy I'm thinking about getting in the brokerage business. Can I come talk to you?" I'll sit down with them and I'll start asking them questions. And usually I just say, "Are you prepared to make no money for two years?" And they're out. It takes a special person. It's a very delayed gratification business, so not everybody's willing to take that risk.

Chris Rising (26:32): It's also a very long haul business, and if you make a big commission, this is what I tell people all the time, you have to understand how to control your expenses. And I think that's what's really hard for people, especially I found that the people who have the toughest time in brokerage are the ones who come in early and make a little bit of money early on things that they didn't quite do. And then all of a sudden a year or two in they're going, "Wait. Where's that $100,000 check again? Where is that?" And so I agree with you. I don't know how it's going to play out too. We're in that point in the cycle where if we were talking in January of 2020 I'd be telling you, "Yeah we're looking at maybe bringing our leasing in-house. That way we keep the brokerage fees and pay someone a salary." And now that we're a year later, I'm like, "No let's keep that third party. I don't want to have those employees on."

Chris Rising (27:23): So that's the thing about the brokerage side of things, is because it's so cyclical, I don't know if it can... I remember when Goldman Sachs went and bought a firm in west LA, and thought that maybe real estate brokerage had the same kind of elements of investment banking, and they quickly found out that wasn't the case. This was probably in the late 90s. So I think brokerage is going to be its own... There's a reason it exists, and I don't see even with technology how that goes away. And I think one of the things...

Chris Rising (27:55): This is I wanted to get to about brokerage is there's VTS, which I'm sure you're very aware of, which as an owner of property I like. But let's be honest, for a lot of it what I like about it is it's taking that spreadsheet back in the old days that would get faxed across and turn it into a very useful tool on my phone. But I still have weekly calls with all my landlord listings. We have about five million square feet, and I'm on most of the calls for our projects. So that hasn't changed. Brokerage hasn't changed that much. It's just how they deliver it. Do you see anything striking that would change it? I mean are we going to get to the point where some CFO is going to look at their phone and go, "Okay I want 100,000 square foot lease," and hit three buttons and then they have it?

Coy Davidson (28:40): I don't. And I think actually if you go back when I started in the business and we didn't have all this technology and all these tools, people needed brokers one just to find the space. I always felt like me as a tenant rep, the easiest thing that I do that anybody could do is find the space. It's really advising them and moving them through all the aspects of the transaction and dealing with all the stakeholders involved. Take an office lease for example. You've got architects and attorneys and construction guys. I've seen all the predictions over the last 30 years, but my little quip about it is: A commercial real estate transaction is a whole lot different than booking an air flight or a hotel. That can be streamlined. There's just too much involved in the process to get it to that point.

Coy Davidson (29:47): And I think, actually, that technology is making brokers have to be better. You can't just be in the industry by default because they need you to find the space. You really have to be an advisor these days to excel, because they don't need someone to go find the space. They can do that. But they still need us to negotiate the deals, know what deals are being signed for. I don't care if you're on the landlord side or the tenant side. There's just a lot involved. So I think it's a very tough service business to commoditize.

Chris Rising (30:28): I'll tell you, the audience here, if you're not following Coy you need to, and one of the reasons is you put out, Coy, it was over the holidays I think, was it a 24-section, or 12-section, tweet on the ins and outs of a real estate deal, talking about the lease, talking about... I was really impressed with that. And I think it gets lost. I think everybody thinks, "Oh you hire a lawyer and that's how my lease is going to get done." But it's never worked for me. If you don't have a broker as the intermediary between the landlord and the tenant side, I don't know how deals get done because lawyers don't know how to get to a compromise on anything. And it can be a valuable role. I don't know if you want to talk a little bit about your experience. I was really impressed with what you tweeted out. I don't know if you want to talk about that, or maybe just talk a little bit about the process of negotiating a lease.

Coy Davidson (31:19): I don't even remember it to be honest.

Chris Rising (31:24): It was like 12 tweets, and it was the ins and outs of a lease is what I think.

Coy Davidson (31:29): Right. Well, yeah. So I think a good real estate attorney knows there needs to be a good real estate broker involved in the transaction, and they should work well together because there's things from a legal perspective that I shouldn't be advising any clients on. That definitely needs to be a lawyer. You'll get in trouble with your local real estate commission, number one. But I don't necessarily have the expertise. But lawyers aren't out in the marketplace everyday, knowing where deals are getting signed and what landlord's offering this. And whether you're on the landlord side or the tenant side, if you own a building you want to know what deals are getting signed on one of your competitor's buildings. And a lawyer can't provide that for you.

Coy Davidson (32:19): And like I said, you find the space, you look at the space, you start negotiating. But then you got to figure out: How much does it cost to build off the space to your needs? How much are you getting from the landlord? How much are you going to put in? How long of a lease you're going to sign. What's the risk? How much are you growing? If you've got to get out of it quick, what options do you have? There's just all these nuances that a lawyer's just not necessarily familiar with.

Chris Rising (32:50): And I would say for those who think that you can just do it with a lawyer, try having one discussion with a client when the base building description in the lease isn't what they thought the base building description was, and the tenant has to come out of pocket for $10 a square foot or something.

Coy Davidson (33:04): Right. And the tenant permits is a minefield for both tenants and landlords, no question.

Chris Rising (33:13): And I'll tell you, in my experience, why I've so valued... Well first of all, going back to when I started, my father would always say, "If my lawyer's outside, if my banker's outside, or if there's a broker, I always meet the broker. The broker's going to give me more information and bring more value to me than the other two. But the other thing that I was taught early on is that the relationship that a broker has with their client is going to be important to a landlord long after the lease has signed, because things come up in a lease. And boy if the pandemic hasn't proven that. And a broker can be an ally to a landlord if you treat a broker properly when a lease gets interpreted differently by the parties, or there's an issue about parking.

Chris Rising (33:57): And I think a lot of landlords forget that, and we try not to. We try to value a broker, because the fact is if we get a tenant, we'd like that tenant to stay there for 20 years. We don't want them to just be there for five or seven or a ten-year term. From your side of the aisle, how do you view landlords? How are they treating brokers in the last few years? Not just at the height of the market and now in the pandemic. Do you think landlords are valuing brokers?

Coy Davidson (34:26): I think so. For the most part. I mean there's good landlords and bad landlords, and there's good brokers and there's bad brokers. I mean I've always represented my clients the best of my ability, but I'm not the scorched Earth kind of broker that tries to get every penny on everything. Let's find a fair market deal for this tenant's size and credit, and commitment to the building. Because like you said, things are going to come up. You hope it's going to be a long-term relationship. You hope they're going to be happy and be there for 20 years. I mean obviously from a landlord's perspective, you know that it's cheaper to renew a tenant than put one in. So you can keep a tenant there for 20 years and happy.

Coy Davidson (35:10): And there are certain landlords in Houston that I'm always thrilled my client picks if I want to get to work with them because I know they're going to be professional, they're going to respect the broker, they're going to respect the tenant. They're going to do what's best for themselves, but it's a business relationship. It's not just a transaction. It's a relationship that's going to go forward.

Chris Rising (35:34): Yeah. So I know every market is different, but I had someone on Twitter reach out to me and ask me a question recently. I'd love to get your take on this. What is the role in a down market like we're in now of a broker bonus as it relates to the broker and their client? And there's the rules, which a broker should always tell their client, at least in California on the rules, that they have been offered a broker bonus. But how do you deal with that ethically? Because I said I'm too far removed. I would expect a broker would always tell their client if I'm offering him two bucks extra as a bonus. How does the bonus play in your world?

Coy Davidson (36:12): I've never tried to let it make any influence on the advice I would give to my client. Here's how I handle it. I always disclose it to my client, and I always offer to give it back to my tenant. And 98% of the time they say "No. If we sign a lease in this building and they're willing to give you that, you keep it." But I always offer to pay it back to my client to put it into rent, TI, furniture, whatever they want to do. And that way I'm never at a conflict of interest. And if they say, "No. That's fine. You deserve it. You get your bonus." I haven't gotten that many bonuses. And to be honest, I can think of maybe five or six times in 30 years that I've got any kind of bonus.

Chris Rising (37:00): That may change. I know that all my partners on our calls, because we're just not getting many tours, what does it take? And the bonus is coming up a lot. And then I've had other brokers say, "Well don't give it to me in cash. Give it to me in American Express gift cards." We try not to ever play in any of those games because the IRS will come knocking. But it's an interesting question in a downturn and I think young people are curious how veterans in the business handle it.

Coy Davidson (37:26): Well I think we're going to see more of it. And I haven't really seen much of it in the last 10 years because we've been in a very good up cycle for a long time. Landlords don't typically offer when times are good and they might have the extra money to do it. They typically offer when they're trying to get the spaces filled up. And I've worked on the landlord side too, and I've never been a big believer that a bonus is going to bring tenants to the building. I really don't. I mean-

Chris Rising (37:52): I agree with you. I think you're better off encouraging the brokers to come tour your building through giving them gift certificates and things like that than you are trying to say, "Hey here's two bucks." But I've had people I've known in the business as landlords that say, "I'll advertise a $10 broker bonus." So I don't know if this is a uniform. I think it's tricky for a tenant rep broker because there's so many conflicts. And as a landlord, I don't want things to be tricky. I want them to make money, I want them to be incentivized, but I don't want to put them in a difficult position.

Coy Davidson (38:26): I mean I've heard horror stories, brokers that are asking for bonuses even when there's one not offered.

Chris Rising (38:32): Yeah. In the markets we're in, yeah there's almost always an ask at some point. It's somewhere in the 2020 brokerage of tenant reps that you're supposed to at least ask.

Coy Davidson (38:43): I mean I've never done that in my 30-year career, but like I said it gets back to my statement earlier. The reason I get business is because people trust me. And doing things like that are going to make people not trust you.

Chris Rising (38:57): That's true. So let me ask you this. So you've spent the last seven years or so commuting in and out and spending some days in the office and some days not. I know that you tweet a lot, so that means you're on your phone and your computer a lot. How do you do a work/life balance? Is there one? Is that even possible in the world we live in today? How do you look at that?

Coy Davidson (39:22): I have probably a very unique situation because for one, my wife is a residential realtor. So she lives on her phone all day long, and she's out often working evening hours showing homes, and on weekends. So time when two spouses might normally be spending time together, but we just understand that's the businesses that we're in. I never turn off. I mean every once in a while I go on vacation and turn off. And people don't bother me on the weekends, but I work some strange hours, and particularly through this pandemic. I might go work out at 11:00 AM on Tuesday because I can, but I might be working at 9:00 at night, or 5:00 in the morning. So I don't really have... I put my hours in, probably more than most people do, but I don't have a very strict regiment.

Coy Davidson (40:18): So I don't think everybody's in that position because they have young kids, their spouse may have a job as well. They just don't have those opportunities. People ask me how do I spend so much time on social media. Even my wife is giving me a hard time in and out about Twitter. And I said, "Well you know what? I don't watch the Bachelor."

Chris Rising (40:47): That's a good answer. Good answer. Let me ask you this. Outside of Twitter, and we mentioned VTS, what's your setup? People are always interested. I always say we're Google-based company. We use Asana as a project management system. We use HubSpot for our CRM, and we use Google Mail and G Chat. How are you set up? Are you set up within a Collier system? Or do you have your own system that attaches on to it? How do you keep your stuff organized?

Coy Davidson (41:20): It's a bit of both. I mean so there are some software programs that at least Collier Houston that has been employed company-wide through all our professionals. And there's stuff I use on my own. And it changes from time to time. I've changed CRMs a few times. I have some financial lease analysis software that I use. I've recently been using some new tools to put together a collaborative file that I can share information through. So it's always changing. It's ever changing. I think the most frustrating thing about technology is getting stuff that works well with each other, that's integrated.

Coy Davidson (42:12): So much of it's standalone. And sometimes technology can cause you to spend more time doing things when you should be out doing something that's going to be income-producing. I think you mentioned my tweet when I was cleaning up my database. It's been a long time since I'd done that. And I'm not a huge database guy because I'm just at a point in my career where I have a good core of clients and some of them are giving me multiple transactions per year. So I'm not out beating the streets for clients as much as somebody else might be. But that's because I've been in the business 30 years. If I've been in the business five years, that's a whole different story. So back in those days I was cold calling and getting out and networking as much as possible, but for as much as I use technology... I'm trying to see how I word this. I may not be as prolific as people might think in terms of the tools I use. I still write my list down everyday what I got to do on a legal pad.

Chris Rising (43:29): Yeah I switched over in the last couple years to doing the same things, but just using the tools. We use Asana as a project management, and I keep a lot in that. But when you really break it down, it's the same paper and pen list that it was 25 years ago. But you're not using Slack. I'm trying to think of the other things I get pinged on a lot. Like how are brokers using Slack today? I just don't see how that would work.

Coy Davidson (43:55): I never even been on Slack.

Chris Rising (43:59): Yeah. So I think there's some things that work within brokerage and the real estate industry and some things that don't. I'll tell you, the most important thing that I know about a broker is their ability to get a client. Driven by getting a client, is their understanding of a market. Could we walk through just a little bit of what we see happening in your home Houston market? And I think you do some things in other parts of Texas. Obviously you and I have gone back and forth and I'm the first to say it. California is doing things that are forcing companies out, and it's outrageous in my opinion and I'd love to see some changes. I still think there's great things about California that make me want to stay here, but Texas is certainly the place right now. Some are saying Miami and others say maybe Tennessee. My wife's British, but she said if we ever had to move we'd move to Austin. So I know a lot of Californians are moving there.

Coy Davidson (44:57): Oh they are.

Chris Rising (44:58): That just signals things are going well in the state. Why don't you tell a little bit about the Houston market and the Texas market and what you think is so appealing for companies to move there.

Coy Davidson (45:06): First of all, let me say, my wife's a Californian. She's only been in Texas since like 06 or seven. So I've spent a lot of time in California with her. But certainly Texas, one the cost of doing business it just cheaper than most places. And I think companies are looking at... For instance, I did a lease last year for a Silicon Valley-based company that is staying in Silicon Valley for now, but they've chosen Houston as a place to expand versus Silicon Valley. Their rents are cheaper, and their office rents are cheaper. They don't have to pay their people as much money in Houston as they do in California. And the housing's way more affordable for their employees in Houston. And that's all you really need to know. That's why it makes sense.

Coy Davidson (46:09): Austin's not nearly as affordable as it used to be. It's getting pretty expensive. My stepdaughter used to always say, "Austin is a baby of California and Texas." So that's Austin. But it's starting to exhibit some of the things we've seen in California in terms of housing cost, because all these tech companies are moving there. Houston has still remained a relatively affordable place. Everybody gripes about the hot summers in Houston, and it is hot, but it's pretty comfortable about nine months out of the year. So I think people are often surprised. Sorry. I just can't keep these Airpods in my ear.

Chris Rising (47:03): That's all right.

Coy Davidson (47:03): I got a problem with my ears. Houston's been heavily driven by oil and gas over the years, and still is. We have a few drivers. The energy business, our ports, and the petro chemical business, and the Texas Medical Center, which is a huge thing. I do a lot of work in healthcare. But it definitely needs to diversify going forward. And I think city leaders are just finally starting to realize that. We can't be totally dependent on the ups and downs of the oil industry in Houston, and who knows what's going to happen to the oil industry over the next 50 years? So I don't think it's good for Houston to be so heavily reliant on one industry. But it's a very entrepreneurial city. From a development standpoint, we don't have zoning. It's pretty easy to get properties developed. So it's just a relatively unrestrictive place to do business as compared to other parts of the country.

Chris Rising (48:09): Yeah. Well we got very close and I'm still heartbroken we lost an industrial deal in Houston over the holidays that we were trying to buy. But one of the things that jumps out to me about Houston, I had a former partner and a dear friend who worked with Jerry Hines going back to the 70s, the thing about Houston is it's a very sophisticated city, and I don't think people quite understand that as much. Dallas in the last 10 or 15 years have built museums and had the opera, but I've always been impressed with the cultural stuff that they have in Houston. And it's a really appealing place to be. It's not as appealing in August. That's why they do have underground tunnels. But I think it's an amazing place, and it's also got an infrastructure that Austin doesn't quite have. Houston is quite the area of the multi-level interchange and seven lane highway.

Chris Rising (49:00): And it's really poised to grow. And we think it will. That's one of those markets that we have saying if we can buy some industrial or multi-family. I think we'll stay away from office right now. So we're big supporters of Houston.

Coy Davidson (49:13): I actually wrote an article on my blog, I don't know how many years ago, maybe five or six years ago, and it was entitled Houston has a PR Problem. Or Houston Needs a Good PR Agency. Then I subsequently got asked to be on a radio interview and they were asking me, and I was on with... There was a couple other guests and one was like the head of tourism for the city of Houston, and he didn't like my comments quite so much. But the truth is, a lot of people's perception outside of Houston and who have never been here is very different than what it's really like. And I think the city is finally starting to realize that. I mean, nobody says, "Hey I've got some vacation time. I'm going to take a week. Let's go to Houston." They don't do that. And as much as people don't want to hear that, it's the truth.

Coy Davidson (50:13): But people who do come here are pleasantly surprised. And I've heard that over and over from people I know on social media that have come to Houston for whatever reason, a conference or this or that and were like, "Wow I had no idea Houston was so cool.

Chris Rising (50:27): Yeah. No I agree. I like your Texans, but I used to love your Oilers. It's an amazing place. And the reason I bring that up is the investment that's been made in some of the public infrastructure and some of the public places, like the stadium and like the... As a Dodger fan, we have a little trouble with the Astros. But like the Astros park and all. It's pretty amazing and I think it's important that people recognize it. I do think over the next 20 years Houston's importance as a US city is going to continue to grow. One because of where it sits in the middle of the country, and two because one of the positive aspects of that oil industry has been its investment in technology. And so if you're a technology company that is looking to get out of California or out of other parts of the country, there's a load of computer scientist talent sitting in Houston. And it's only going to continue to grow in my opinion.

Coy Davidson (51:22): There's a huge amount of people in Houston in IT and in the past our tech industry has been pretty focused on oil and gas. So now when people talk about the Facebooks or the Googles or the Oracles of the world, Houston doesn't necessarily resonate. Although we just got HP to move here. But there are a lot of people in that industry in this city. The actual tech employment is huge. It just doesn't have a real cluster like you would see in California or Austin or some other places around the country.

Chris Rising (51:59): Yeah. And it will probably evolve. It will probably evolve around what I think is going to happen with technology and healthcare, which I think what we have gone to the doctor for for the last 40 years, 50 years, is going to be totally different in the 50 years going forward and that's going to be driven by technology and its marriage with healthcare. The other thing I was going to ask you before we get done here is: Has life science become big in Houston the way it has in other markets?

Coy Davidson (52:26): It's starting to become, and there's been a big push by the city because we have a huge resource. A lot of people are not familiar with the Texas Medical Center. It's the largest medical center cluster in the entire world, and we have all these hospitals and hospital systems, and teaching hospitals, and we have some huge life science developments coming online in the next couple years in Houston that are both backed by the state and universities. So that's a very promising industry in Houston. Are we San Diego or Boston yet? No. But it's moving in that direction.

Chris Rising (53:20): Yeah it certainly feels that way. And as we're trying to figure out markets to invest in and do things in, Houston keeps coming up. And as I said, we're disappointed we lost that deal over the holidays.

Coy Davidson (53:31): I was going to say, I get calls all the time, people, "I need 20,000 feet of lab space." And I just look at them. Good luck. It doesn't exist. Because if it does, it's leased.

Chris Rising (53:45): Yeah. We're seeing that life science and building out life science space is a big push right now. I don't know if it's a new new thing over the long haul, because I think there is some sophistication to it, but it's something we're looking at and I think places like Houston I can definitely see it. I think the problem with San Diego, as much as I love San Diego, is to get young people a place to live. You're going to do a life science company down there, it's really hard. It is really hard. And I think that comes up over and over again.

Chris Rising (54:19): But Coy, this has been... We've been going here for about 50 minutes. And I've really enjoyed this. But before we get done, I do want to ask you a question about your view of a young person who says, "Okay I can live with two years of not making any money, as long as after two years I start making real money." But what would your advice be to someone who's 23 or 24 who says, "I just really like real estate and I know I want to be in brokerage"? It doesn't feel like we have the same entry paths we used to have, being a runner for somebody. Maybe I'm wrong. But what would you tell that 22, 23-year-old about how they should get into real estate brokerage?

Coy Davidson (55:05): That's a tough one to answer. I think you just got to be determined. You just got to be sure that's what you want to do. Look at it from the long run perspective where you can be in five years and 10 years, and understand that there's going to be some pain. I mean there's probably some things you could do. You could be an Uber driver I guess and make some money on the side. Those kind of opportunities weren't there for me when I was breaking in the business in the late 80s. But I don't think much has changed. If you can get a mentor, that's the most important thing, someone who's willing to mentor you, that's going to probably ensure your success rate and maintaining yourself in the business and get going forward. That's a tough question. The way we're set up to do it, it's a very tough barrier of entry, and that's one of the reasons a lot of people don't do it.

Chris Rising (56:05): Yeah. Well I think one of the opportunities is for women in the business, because at the end of the day a broker has to have a relationship with their client, and more and more, whether it's law firms, accounting firms, or whatever, women are more prominent in those firms. And there's a real opportunity for women in brokerage. There's still all the issues you've got to deal with, but I also think for a young person, figuring out how to use technology, not communicating with other 22-year-olds per se, because when you're a young person you're going to make your first deal doing it with an older person. So how do you bridge that gap? Maybe 30 years from now brokerage will all be done on Slack for all I know. But right now, you still have to have the confidence of the decision maker. And that's what I say to young people is just: Try to get yourself positions where you can build those kind of relationships with people 10 years older than you are, 15 years older than you are.

Coy Davidson (57:01): You got to be competent, you got to learn the basics. And I said, like I said, in my situation I was scared to death of that whole scenario when I started out and I just immersed myself into crash course learning everything I could. And eating, sleeping and drinking commercial real estate 24/7 for a couple of years. And then all of a sudden I woke up one day and I felt very confident that I could walk into anybody's office and really believe that what I was telling them was the truth and very sound advice. But how you get there, that's a tough question to answer.

Chris Rising (57:44): You're a good man. I can tell. I'd hire you in a heartbeat. I hope to buy you a beer when I get to Houston next. For audience, please find on Coy on Twitter. He's a tenant advisor @CoyDavidsonCRE. We'll put all this stuff in the notes, but I really enjoyed it and thanks. This was my first video. I've done this all audio before, and I appreciate you being a guinea pig for me. And I really enjoyed the conversation. I really want to see you when I get to Houston next.

Coy Davidson (58:10): Sounds great. I'll look forward to seeing you when you do. Chris Rising (58:13): All right. Thanks. Bye.

Chris Rising (58:14): And please don't forget to follow us. We'd really appreciate it if you subscribed to the podcast. You can do that on Apple iTunes, or any of the other podcasting services. It's the Real Market with Chris Rising. And follow us on Twitter @ChrisRising or @RisingRP, and follow our blog: chrisrising.com, or risingrp.com. Thanks so much.