IREI Interview: The Booming Southeast Meets its Match in the 'Inland West' | Durable Value Ep. 100
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Ryan Swehla: Thank you for joining us for The Durable Value podcast. I'm Ryan Swiela, and in this episode, we'll be using the conversation that I had with Mike Consol with Institutional Real Estate Americas and their podcast regarding our most recent white paper comparing the Southeast to the Inland West. Enjoy.
Mike Consol: The following podcast is a production of Institutional Real Estate Incorporated. To sign up for our free daily news reports or trial subscriptions, visit our website at irei.com.
Welcome to the program, and thank you for joining us. This is Mike Consol, your host, and our guest is Ryan Swehla, a repeat guest.
We haven't had him for years, but he's been on the program one, one or two times before. He is president and co-founder at Quesada Partners, which is a value-add real estate investment manager focused on apartments and industrial parks in the Inland West. Just completed a study regarding the Inland West, so we'll get into the details about what exactly the Inland West is, and there's an interesting comparison that was made that he will elaborate on.
He earned his Bachelor of Science degree in Engineering and Management with minors in Finance and Economics from Columbia University, and, uh, joins us right here from Modesto, California. Ryan Swehla, welcome back to the program.
Ryan Swehla: Thank you for having me, Mike.
Mike Consol: Well, as I said, it's been a long time. It's good to have you back, and you had, uh, put a, a research, uh, paper in front of me.
But before we get into that, you did make mention that you've been spending a lot of time on the road, uh, probably as much time away from Modesto as you've spent in Modesto. What's been going on? Is this a Jack Kerouac thing or more a- ... or more a W- Warren Buffett thing? What, what's had you on the road?
Ryan Swehla: I'd love to say it's Jack Kerouac, but unfortunately not.
Um, you know, we've been fortunate to be growing, uh, in this environment, and, uh, that requires me to be on the road a little bit more, uh, on the road in front of, uh, investors of ours and prospective investors of ours and then also, uh, on the road, uh, you know, looking at our portfolio and some of the, the properties that we've acquired as well.
Um, so it's just a, a nature of the, the business, but happy to do it because we really enjoy the opportunity to be able to, like this, uh, speak a little bit more about, uh, kind of the interesting dynamics that we see in the, the markets that we serve.
Mike Consol: Tell... What is Inland West?
Ryan Swehla: Yeah. So the Inland West is really, uh, the Western US ex the coastal, uh, California and Washington.
So it's, it really is the Western US, uh, minus the coastal west. Uh, so from Colorado, uh, west, you know, through the Rockies, uh, and then across into, uh, inland California and inland Washington and, and Oregon as well. And this is a region- D- Uh, sorry. Go ahead, Mike.
Mike Consol: Yeah. No, no, go ahead. I mean, but, but that's a region that I think you're, you're...
I was about to ask you a follow-up question, but it sounds like you're already answering it. Go right ahead.
Ryan Swehla: Yeah, that, that region, uh, contains about 47 million people, and, uh, the, the region... The reason it operates as a region is because, uh, the dynamics are, are similar across that entire region. Uh, it's defined by kind of the three north-south interstates, I-5, uh, in inland California going up to Oregon and Washington, I-15, um, Utah, Nevada, Arizona, and, and I-25 in, in Colorado and New Mexico.
And the reason we say that it o- operates very similarly is because if places like Fresno and Bakersfield in inland California or Spokane in Washington behave much more like Boise and Reno or Phoenix than they do like coastal, coastal markets like San Francisco, Los Angeles, Seattle, um, it's defined by high quality or high affordability, a strong quality of life.
Uh, these are diversified economies with no one industry that's a heavy concentration. And when it's seen as a whole, there's, again, 47 million people. It's larger than any single state. Um, but it, it does get missed because inland California and Washington, uh, which have about 17 million people, gets, uh, washed out in the averages of those states.
Uh, the coastal California and Washington have 30 million people, so twice the, the population. And so when you start to look at California as a state or Washington as a state, really these inland markets that behave a lot more, uh, similarly to the rest of the West, uh, get washed out, and that's why we, we, uh, r- really built the data around this.
Uh, we really are the only institutional investment manager focused on the inland West as a whole region.
Mike Consol: Now, that's a switch for your organization, correct? 'Cause you've been Central Valley, California has been your footprint, but you're up to fund number four, I believe now. Have you just- Yeah ... found that, hey, there's just opportunities that are too good to overlook, or that the Central Valley, you've kind of, um, exploited the opportunities you saw there and, and you're enlarging- Yeah
the map?
Ryan Swehla: Yeah, it, it really honestly came from our learned experience because what we found in inland California, um, which is kind of the Central Valley, Inland Empire area, is that these are markets that were broadly, uh, uninstitutionalized. They, they, uh, broadly are... do not, um, see the same level of capital competition that places like coastal California see.
And so we, we found early on that, um, there's just a, a much richer environment for investing opportunity when you don't have the, you know, kind of frothy capital competition that you have in, uh, more, you know, consensus markets. And we found the same dynamics to extend across the rest of the inland west.
So yeah, over the last, uh, decade or, or seven years or so, we've, we've slowly expanded across the west of the inland west. Markets that, um, you know, secondary and tertiary markets that have anywhere from on the small end a half a million people up to 3 or 4 million people, uh, MSA population. Uh, but yet these are markets that are, you know, not, not, uh, as much on the institutional radar, uh, as, as we believe they should be, and that's, that's where we found the opportunity.
Mike Consol: So now you, i- in, in this research, you took that region that you just outlined and went across and compared it to the southeastern United States. Is that right? The Carolinas- Mm-hmm ... and what, uh, Carolinas, Georgia, and Florida? Or, or what, what's the, uh, footprint there?
Ryan Swehla: Yeah. So, uh, y- you know, part of the, the me-nexus of this is just that the, the Southeast is a very, um, understood, um, kinda consensus allocation market.
Uh, and that's because it's had a decade of research, uh, that has shown really that there are a, a lot of strengths to that market. Obviously, right now it has a little bit of oversupply, but take that out, you know, the demographic and the economic trends there are very strong, but really priced into the markets.
You know, cap rates have compressed, that sort of thing. Um, and so what we looked at, uh, what, what we wanted to do is really create a fair comparison between these two markets. Um, we, we pulled from federal, uh, data, US Census, uh, Bureau of Labor Statistics, uh, Bureau of Economic Analysis, looked over a 21-year period and compared the two.
Um, and so the Southeast that we looked at is really the high-growth Southeast. Um, it includes, uh, Virginia, the Carolinas, uh, Georgia, um, Alabama, Tennessee. Um, and, uh, it excludes Florida because Florida really has different dynamics than the rest of the Southeast. It's got international migration, retirees, coastal dynamics, um, also some insurance and climate costs that are a little different.
Um, but we also excluded the less strong growth Southeast to really create a fair comparison. So, uh, you know, no West Virginia, no Kentucky, no Mississippi, Louisiana, Arkansas. Um, this is really the high-growth states in the Southeast. Um, and you know, it, it adds up to about the same population, about 49 million people in the Southeast, uh, versus the 47 million people in the, in the inland West.
And, and again, we really did this not to say... Uh, you know, the goal of the research initially was not to say, "Hey, look, we're better," at all. And, and as we get into the research, we'll see that there's strengths to each of these regions. But really the goal was just to say, "Look, we know that this is an area that people already understand and already see the strengths.
Let's compare that to a region that really doesn't have the same level of understanding."
Mike Consol: So to what end? I mean, you, the report, what, what, what is the, what were you- Yeah ... hoping the, uh, there's one thing where, you know, you want a report to come out a certain way and, and- Yeah ... but at the same time, you try to make sure, "I, I don't wanna lead the jury here.
I want to have an honest, uh, mapping- Absolutely ... of these two regions." So you did that, uh, with the idea in mind that what, what was your goal in doing this?
Ryan Swehla: Yeah. Yeah, it really, it really was just to create a, a fair comparison of the two and see where the results lie. Because we weren't looking to set out to, you know, show the strengths of our region, but rather marry up to a region that already has clear, um, strengths.
Um, the goal was really just to... The, the, the title of the research is Equal Footing, you know, to put the two on equal footing. And, and I'd say y- when you look at the research, um, broadly speaking, maybe what I'll do is I'll, I'll mention some of the key findings and then some of the things that were a little bit surprising.
Um, when we look at population per capita income, real GDP growth, and employment growth over that 21-year period, um, the Inland West and the Southeast really measure fairly similarly. The, the, the Inland West did actually, um, the data showed stronger on all four of those measures, but slightly stronger, so this isn't like, you know, "Hey, this region's way better."
But I think an important point is on those key measures, the population CAGR, the per capita income CAGR, um, real GDP employment, um, they, they showed better, um, uh, slightly. But, um, for instance, like on population, the Inland West grew since 2020-- 2003, the Inland West grew by 11 million residents, which is a million more than the Southeast.
So during that same, you know, 21-year period that we looked at, um, even though the Inland West is a slightly smaller population region, it actually grew by a million more people. Um, on the employment, similar story. It added about 5.4 million people, uh, jobs compared to the Southeast adding about 4.4 million, so it added about a million more jobs, um, even though the region has slightly less population.
I'd say just kind of some of the surprises from the data, um, in the, on the income side, uh, starting about six years ago, um, the Inland West and the Southeast crossed in terms of income and that the Inland West trended closer to the national average and the Southeast actually trended away from the national average.
And that was just over the last five years. That, I'd say that was a, a surprising finding. Um, and also a-another thing was the, the consistency in, um, performance in the Inland West across, uh, the, this twenty-one-year period. Um, seventeen out of the twenty-one years, um, the Inland West grew at a stronger population growth than, than the Southeast, and sixteen out of the twenty-one years, the GDP grew, uh, str- at a stronger rate than, than the Southeast.
So while again, we didn't set out to, you know, to position it as a better region than the Southeast, the data shows, you know, the two are comparable and, and probably the Inland West has a slight, um, you know, edge i-over that period of time, even though, uh, you know, it's just not as understood of a region.
Mike Consol: Interesting. So, uh, what will you do with this information? You're in the business of raising funds and investing those funds and, and making investors happy. Uh-
Ryan Swehla: Yeah ...
Mike Consol: did this, is this serving your purpose? How will you actually use the information? 'Cause I suspect when you're having these, traveling and you're having these meetings- Yeah
with would-be investors, this report's going to play into it. In what regard will, uh, you know, will it play int- play into your agenda? How will you use it?
Ryan Swehla: Yeah. Y- you know, I think an important thing to understand, because if we were, for instance, a manager in the Southeast, we would be spending a lot of time talking about why we're better than other managers there, because the region's already understood.
So you wouldn't be spending a lot of the conversation talking about why the Southeast. You'd be spending a lot of time saying, "Why are we the better manager to pick?" What we've found, because the Inland West is not, uh, really as much on the institutional radar, uh, what we found is that research is the key way that we help people understand the merits of what we're doing and why we're doing it.
So we do spend a lot more time talking about the research and what it shows, and that education process is a much bigger part of what we do. But that's also why the research has to stand on its own, because we're, we're not, we're not building on kind of consensus understanding that people can kind of nod their head and say, "Yeah, yeah, yeah.
We know. We've heard that." Rather, we're, we're presenting things, uh, that in some ways might be, you know, against common convention or at least just not known. And so that's why it's important that the research that we provide is, you know, high caliber. It's backed by, you know, like in this case, it's backed by all these federal data sets.
We actually have the data model available, um, on our website, so not only can investors or, or, uh, others who are interested download the, the white paper, they can actually pull the data model and, and look at the data because w- uh, we've just found that that education and research is a really necessary part of, uh, our conversation.
So
Mike Consol: So, uh, I believe, check me on this, but, but I believe the report says that, um, the inland West as you've defined is, has been overlooked because conventional research doesn't define it as a single- Mm-hmm ... region. So you've taken that region. Uh, now just for clarification, you've taken out the West Coast states.
You made that clear. I- is everything west of the- The West Coast
Ryan Swehla: counties, yeah ...
Mike Consol: the West Coast. Uh, uh, and so everything west of the Mississippi, uh, those states west of the Mississippi are included other than California, Washington.
Ryan Swehla: Yeah. You're pretty much from Colorado west, so Montana, Colorado, New Mexico, west of there, uh, excluding coastal California.
And then for coastal Washington, it's really around the Seattle metro area 'cause that's, that's really the, the region that has the similar coastal dynamics as California.
Mike Consol: So when you did this comparison, where did the Southeast win? Where, when, when did the- Yeah ... Southeastern states actually exceed inland, uh, the Inland West?
Ryan Swehla: Yeah, yeah. Um, they... A couple interesting things. Number one, uh, on recent population growth, so over the last, call it four years, the Southeast d- uh, did pull ahead on a year-over-year annual population growth. So while the Inland West over the 21-year period on average was higher over the last, um, four years, the Southeast was stronger.
Now, this is all relative because both the Southeast and the Inland West are arguably the fastest-growing, most dynamic regions in the United States. So Inland West still grew ahead of the national average and grew str- in a, in a very strong way. But the Southeast did, over the last four years, grow at an even faster rate.
The other thing I'd- I'd say is, um, the Southeast, uh, GDP per capita, um, is, uh, higher in the Southeast than it is in the W- Inland West. It's about 60,000 versus 58,000 in the Inland West. So, you know, slightly more productive per capita than, than the Inland West. And then the, um, the last thing is, um, during the GFC, uh, the West definitely experienced a much bigger housing bust than the Southeast, and you can see that in GDP.
It took a little longer for the Inland West to recover from that than the Southeast did. Um, so certainly, you know, as I mentioned, the Southeast is a incredibly strong region. Um, a- and it, it in some ways, uh, is stronger and in some ways is not as strong, but, you know, that's, that's expected.
Mike Consol: Yeah. Yeah. You know, I used to live in Char- I spent five years in Charlotte, North Carolina, and it was booming, and I go back and visit occasionally, and it's- Yeah
still booming. It's amazing how hot the Carolinas have been. In fact, when I was there, a lot of people were moving from Florida up to the Carolinas bec- both because of the heat was so extreme there. They were also complaining about the hurricanes that seemed to come two and three per year. Uh- Yeah ... it kinda quelled, uh, since then, but it was looking pretty dismal for a while when, uh, there were so many hurricanes coming in.
Now-
Ryan Swehla: Well, you, you add, uh, s- now housing cost, insurance cost of the Florida. Yes. The Southeast really, it's kind of interesting. They're almost like two sister regions, the Inland West and the Southeast, because when you think of the Southeast, you think affordability, you think kind of dynamic economics, inbound migrant population migration, income growth, and the Inland West is kind of the, the Western version of the same thing.
Mike Consol: But, but a far bigger footprint, correct? I mean, the we- one of the- Geographically ... distinguishing characteristics- Yeah ... of the West. Yeah, I mean, big states. I mean, big sprawling states and great distances between, uh, major markets. Does that- You know, you're- How does that play into that at all?
Ryan Swehla: Yeah, you're, you're hitting on one of the reasons that this region has kind of been overlooked.
You know, you hear people talk about Mountain West, so kind of, you know, Rockies, uh, Utah. You hear people c- talk about Smile States, so they'll include, you know, Phoenix in that. Um, but the re- the reason the, the West as a whole is not, um, I believe, the, the reason it's not looked at as a cohesive region is because you fly over it and you see a bunch of vacant land because there's deserts and mountain ranges in between a lot of these areas, and they really are connected along those three north-south interstates, I-5, I-15, I-25, and that's where all the commerce, that's where all the population is.
But the, the drivers, the, um, y- you know, the, the reasons that these re- these regions exist and are growing are similar across that whole region. And I do look at, um... You know, the West in general is the expansionary part of the United States. The density that you see in the Southeast, while it's continuing to grow, it was already a very dense region, um, relatively speaking, whereas the West is still kind of the, you know, the, the area of the United States that is the most expansionary.
And I think that's partly why population growth, job growth has actually been, as I mentioned, even though it's a slightly smaller population region than the Southeast, it has had stronger population and stronger job growth, and I think part of that is 'cause there, there is more land available and more, um, you know, ability to grow as well.
Mike Consol: Mm-hmm. So, uh, this report sounds like it's an outgrowth of some of the pushback perhaps that you and Joe- Mm-hmm ... meaning, meaning your business partner, Joe Muratore. Uh, did I get Joe's last name right? It's not in front of me. Yeah. It's been a while. Okay, Joe M- Muratore, your, your business partner. Uh, so you, any- anybody who's, uh, doing what you do, anybody who sells anything at all gets pushback, and then they take that into account.
Like, okay, these are the objections, so what are my counter, uh, arguments to this? What kind of pushback are you getting when people are... I hope I'm not getting into an area that, that you don't wanna talk about, Ryan, but, you know- Oh, no. Absolutely ... give reasons why they've decided, "Well, interesting, but I'm not gonna invest."
Uh, what has been the s- maybe some of the, the major pushbacks and, uh, and, and did- Yeah ... this, uh, report, in fact, uh, was this done, uh, expressly to, to cr- create a, a, a counter narrative?
Ryan Swehla: Yeah. Yeah, a, a great question, and I'm happy to address that head on. Um, I, I, I joke, but it's actually true. We've never b- been in a room meeting with an LP and they say, "Oh, we already have a manager that covers your area."
Mike Consol: Mm-hmm.
Ryan Swehla: So, so on the one hand, that's a, that's a great thing because, you know, it underscores the lack of competition. On the other hand, that's a bad thing because it, it says, "Well, you know, why should I care?" And, um, I w- I would say that the single, you know, biggest thing that, um, you know, investors and allocators look at when they look at our, our region is really understanding the dynamics of the region.
A- and so I would say that investors that, um, are less comfortable, you know, moving out of consensus, because there's risk with that, right? You know, if you, if you move out of kind of consensus, um, understanding, um, you know, there's risk. You're kind of sticking your neck out. Um- Right ... obviously the counter to that is that's where some of the best opportunities exist, um, is outside of the consensus.
But I would say, uh, certainly, um, you know, there, the, if, if there is, you know, kind of apprehension or pushback, it really is around understanding or, or being skeptical of the merits of the region and the, and, uh, and the markets in it. And I, and I think, yeah, certainly research like this, um, is, is designed to help address and provide meat and data around, around those, those misconceptions.
But at the end of the day, um, you know, it's, a, a- an investor has to, you know, decide what their best opportunity is and, and some investors see the benefit of, you know, kind of being in early, um, and in a region or a, or a strategy and, and others, you know, are a little more cautious in that regard.
Mike Consol: What are some of the, uh, takeaways for people who, um, you know, uh, look at this region, the, uh, inland West?
Uh, what, what do you think the report really kinda lays on them in terms of, of takeaways?
Ryan Swehla: I would say a broader takeaway that's not even in relation to, um, this region is really, um, this heuristic around y- looking at states as a whole and, and measuring data around but on a state-by-state basis has, you know, holes in it.
It has potential challenges because economies don't run along state lines. Economies run along, you know, the lines that, uh, that they do for the economic reasons that they do, and this is a, a really clear example. And, and that's where I... You know, sometimes w- we have in- investors that, um, say, you know, "Hey, I'm not a big fan of California or investing in California."
And, and the thing that we point to is inland California is like a different country. Um, you know, it's, it has high affordability. It has, um, low, you know, rent-to-income ratios. It's politically more moderate. Um, and, and it has, you know, tremendous in-migration and economic growth. And so it's, it really is a different animal.
And I would say that the broader point being that, you know, as you're looking at regions, just kind of going along where state lines happen to land, uh, might not be the, the best way to look at a region. Um, and then the other thing that I would say just, you know, drilling down into this region is, y- you know, as, as a, you know, as an investor, we're always looking for alpha.
We're always looking for ways to do better than the market does. And, and part of that is looking in, you know, under-looked asset types, under-looked strategies, under-looked regions. And so, um, you know, taking that lens and, and being as authentic as possible and, and pulling back the conceptions that we have because conceptions form through a myriad of reasons.
Some of them are data, and some of them are intuition, and some of them are, uh, you know, conversations and, and, you know, headlines and whatever other ways that we formulate our opinions. And, um, you know, working to, to pull back those, uh, you know, those conceptions as much as possible or, or challenge them to, to see that they stand up to the, to the analysis.
Mike Consol: What, uh, property types... Were there any standout property types in each of the regions surveyed? Uh, housing, of course, you know, everybody wants more housing. We have a housing shortage. And if an ar- area is booming, it would seem that all property types lifts all property types- Yeah ... so to speak. Yeah. But are there...
Were there... Was there a property type or two in each region that, that was surprisingly robust?
Ryan Swehla: Yeah. So this, this, uh, research didn't drill down into that, but I can tell you kind of based on our experience, 'cause it is interesting, you know, we're across, you know, 15 markets or something like that, and when you're across many markets, you do have kind of a, a bird's eye view of where the opportunities exist.
And we do find-- we, we only invest in multi-tenant industrial, um, so no, you know, big box distribution and, and, uh, and then in multifamily workforce housing. So those are the only two that we really look at. Number one, to answer your broader question is I, I would suspect that across asset types, there's opportunities since this is really speaking more to the region.
But we do see just in our day-to-day, where with micro opportunities where, um, for instance, I'll just use this as an example. Salt Lake multifamily has felt very overpriced, uh, relative to the where we believe things exist. You know, we've seen some oversupply in that market. Meanwhile, we've seen oversupply in the Denver market, and that market is starting to express pricing that is reflective of the distress in the market.
Um, but the Salt Lake market, not so much on multifamily. So it is interesting to see where, uh, you know, or where certain markets have a better opportunity from a multi-tenant industrial versus others not. Um, but that, that definitely is more kind of micro market, not, not regional.
Mike Consol: Now you guys have been invested in retail.
Uh, you had retail properties. Yeah. Have you decided retail is not- And office ... where you, uh, wanna... Do you still, um-
Ryan Swehla: Yeah ...
Mike Consol: have retail properties? Would you continue to invest in retail, or have you decided that that's not a great category for you guys?
Ryan Swehla: Yeah. We, we started out really as property type agnostic, and we were really focused on the opportunities in the regions that we invested in.
But over time, uh, we just, uh, found that with multi-tenant industrial and multifamily, the dynamics are, are more interesting. We're... Not to go too deep here, but, um, you know, we're-- when you're in a market, when you're in the Inland West, for instance, where more of the real estate is owned by private capital than by institutional, because obviously there's the same amount of real estate here as there is in any other region.
But, uh, if there's less institutional interest, that means more of the capital is private capital. Um, so when we're buying properties, uh, typically we're buying properties where the in-place rent might be, you know, 10% to 40% below current market. And what we found with multifamily and multi-tenant industrial is just an easier ability to grow net operating income.
So it wasn't as much characteristics of supply and demand, although those have been favorable. It was really more driven around kind of the asset level, uh, ability to execute. And so to your question about retail and office, been there, done that. Uh, and because of the dynamics we've talked about, uh, on the asset level, I don't see us ever going back.
It's not, again, as much about the supply-demand dynamics as it is about we like multi-tenant industrial. We like, uh, multifamily. We call multi-tenant industrial apartments for industrial because it really is, uh, every s- unit is very fungible. One tenant moves out, y- another tenant moves in. It's, it's a, it's a very, uh, durable asset type.
Mike Consol: Do you also feel the property type expertise, uh, it works better that way when you're focused on- Yeah ... just a couple property types so you're not spreading yourselves too thin? Not to mention hunting down properties. It's kind of like if you've got every property type- Yeah ... available, boy, that's, uh, now we're sifting through a lot of different properties and it gets to be exhausting.
You have so much bandwidth. So, so- Yeah ... expertise is, uh, you, you guys feel like you have strong expertise in the residential and in industrial?
Ryan Swehla: Yeah. Yeah, exactly, and better to build on that strength. Absolutely.
Mike Consol: So, uh, years ago, back when John Madden was still alive, I was interviewing his son Mike Madden, and he told me...
And they, they own a lot of property, as, as you probably know. Mm. And it's all local. And he said, "If I have to drive more than 30 minutes to see one of my properties-" Okay ... "I have no business owning it." Yeah. Any truth? Obviously you don't ascribe to that. Yeah. You and Joe, uh, have, uh, are, are, uh, cultivating properties from, uh, far and wide.
Uh, west of the- Yeah ... Mississippi anyway. So, uh, what, what about that? Do you... Is there something lost, uh, um, when you can't be- Yeah ... at a place that quickly?
Ryan Swehla: That we do, you know, we do ascribe to that in a different way, which is, uh, we're vertically integrated, so we have our, our people, our boots on the ground at every property.
We don't rely on third-party property managers. We've found that especially in markets where we operate, you know, the sophistication and caliber is not the same as, as we provide. And so, you know, I'll, I would rhyme with that statement in that if, you know, our people, our, our boots on the ground are not at the property, then, uh, we don't wanna be there.
Mm. So yeah.
Mike Consol: Um, how do you feel about the real estate business these days? Real estate has not, it's not been a great run for real estate entirely. Uh, certain categories are blazing hot, like data centers, but you can see that- Yeah ... they're, they're taking it in the face right now. Um, w- Yeah ... how do you feel about j- real estate generally and how you see it trending right now?
Ryan Swehla: Yeah. Re- uh, I mean, real estate, it's kind of interesting because the broader market has continued to be on a bull run until maybe more recently, for years. Uh, and meanwhile, real estate, as soon as interest rates went up, went through a decline, and it's gone through this slow-motion decline. And so, uh, we are squarely at the bottom or, you know, bumping toward the bottom of the real estate market.
And so, y- you know, on the one hand, that, that sounds like, you know, bad idea, but, um, it's exactly the opposite because, of course, the best opportunities to buy are when the market is down and when capital is scarce. And I will say in real time today, uh, without giving too, you know, too much, uh, you know, granular examples, uh, we, we, we definitely are seeing some of the most fruitful investing environment we've seen in 15 years, and that is because the real estate market absolutely has gone through a, the, the largest decline it's been in in 15 years.
Mike Consol: Well, you know, it's Warren Buffett who said, uh, "The only, the only time you want a high stock market is when you're selling stock." Uh, otherwise not. Same as with real estate. Yep. I mean, you only want- Yep ... the market to be high when you're, when you're selling, not when you're trying to acquire properties.
Then you want some real nice discounts there. Yeah. Lots of meat on the bone and all that. Once again, our guest has been Ryan Swehla. He's president and co-founder of Graceda Partners. Uh, thanks for, uh, coming on the program and sharing the data.
Ryan Swehla: Thank you for taking-
Everyone in institutional real estate knows the Southeast story. Almost nobody has run the same numbers on the Inland West.
In episode 100 of Durable Value, Ryan Swehla joins Mike Consol on Institutional Real Estate, Inc.'s podcast to walk through Graceada's white paper "Equal Footing," which puts the two regions side by side using 21 years of federal data from the Census Bureau, the Bureau of Labor Statistics, and the Bureau of Economic Analysis.
The Inland West is 47 million people strung along three north-south interstates: I-5, I-15, and I-25. It is larger than any single state, and it keeps disappearing from the research because inland California and Washington get averaged into their coastal halves. Measured on its own, it outgrew the Southeast on population, per capita income, real GDP, and employment across the full period.
Ryan is direct about where the Southeast actually wins, what pushback allocators give him, and why he thinks state lines are a poor way to understand an economy.
Timestamps:
0:00 - Introduction: a crossover with IREI's Mike Consol
2:30 - What the Inland West actually is: 47 million people along three interstates
6:33 - Building a fair comparison: why the Southeast, and which states made the cut
9:56 - The findings: population, income, GDP, and job growth across 21 years
15:46 - Where the Southeast wins
20:31 - Allocator pushback, and why state lines are the wrong lens
26:08 - Property focus, boots on the ground, and the best buying window in 15 years