Off-Market Industrial Deals: The Building Trade-In Play

Genuinely off-market industrial deals come from one place: being the person who already talks to the tenant, the landowner and the building owner every week. They are not sitting on a list, and they are almost never in an email blast labeled “off-market” by another broker. The highest-return version of this is the trade-in — you build a company its new facility, price that building aggressively, and buy their existing building at appraised value as part of the same closing.

Josh Lipoff and Joe Hills left JLL after a combined 40 years in industrial brokerage to run HLI Partners in Orlando. In three years they have built or bought roughly 200,000 square feet — a 116,000-square-foot building, a 60,000, and a 20,000-square-foot warehouse purchased from a client whose new building they developed.

Below: how the trade-in structure actually gets papered, the tenant database that produces the calls, how to read the industrial tenant market before you underwrite, and the real cost of running this model — they cut from about 100 transactions a year to 20 clients to do it.

From the Real Estate Pros Show

This article draws on an interview with Josh Lipoff and Joe Hills of HLI Partners on the Real Estate Pros Show, hosted by Meghan Escobar.

Why Most "Off-Market" Industrial Deals Aren’t Actually Off-Market

Most deals marketed as off-market are commoditized inventory with a different label on it. Joe Hills draws the line clearly: there is a difference between buying another crowdfunded multifamily asset in a good location and buying something that does not exist on the shelf.

His test is whether the deal was available to anyone else at all. A building an owner has already decided to sell, priced by an appraisal or a broker’s opinion of value and shown to five groups, is not off-market — it is early. A building whose owner had not yet decided to sell, and only did because you solved a different problem for them, is off-market.

The mechanism that produces the second kind is unglamorous. HLI’s advantage is that its brokerage arm is calling tenants, landowners and building owners all day, every day. That call volume means they learn about a company’s space problem before the company has hired anyone to solve it — and a company that needs to move is a company with a building to dispose of.

The practical implication for an investor: if your acquisition strategy is shopping other brokers’ inventory, you are competing on price with everyone else who got the same email. If your strategy is carrying relationships with 20 operating companies in your market, you are competing with nobody. Hills’ framing is that they are “putting tenants and land and buildings together in a unique way,” and the uniqueness comes entirely from owning the tenant relationship first.

The Trade-In: Build Their New Building, Buy Their Old One

The structure works like a used car trade-in. HLI built a new facility for a company called PhD, gave them a genuinely good deal on that new building, and bought their existing building at appraised value in the same transaction.

Why the seller takes it: the two questions that keep an owner-user awake are who is going to buy my building and at what price. A conventional sale answers neither until you are months into marketing, and a failed buyer can string you out for six months before admitting they never did the work. The trade-in answers both on day one, at a defensible number, with a counterparty who is already contractually committed to delivering their new home.

Why the buyer takes it: the old building never hits the market. There is no competitive bid, no best-and-final, no institutional capital bidding it up. In exchange for absorbing the disposition risk and sharpening the price on the new build, HLI acquires an asset at appraised value — and as Hills puts it, captured a “hellacious return” for their investors on that older building.

They ran the same play again on a 20,000-square-foot warehouse bought from a client they had just built for, part of the roughly 200,000 square feet (116,000 plus 60,000 plus 20,000) they have built or purchased in three years.

Two things make this executable. First, you have to be able to actually deliver the new building — land, entitlements, capital, construction. Second, you have to already be the tenant’s representative. A stranger offering to buy your building while also selling you a new one is a conflict. Your broker of ten years offering the same thing is a solution.

We were able to build them a new building and give them a great deal on the new building, and then buy their old building at a used car trade-in sort of thing. We took a burden off their plate, which was who’s going to buy my building at what price. We did it at appraised value. It was a great deal for us, it was a great deal for them.

— Joe Hills, HLI Partners

Building the Tenant Database That Produces the Deals

The sourcing engine is a maintained list, not a purchased one. HLI mined every industrial tenant within roughly an hour of its Orlando office, down to 10,000-square-foot users, and captured three contacts per company: CEO, CFO and operations manager.

The maintenance is the whole asset. Interns call monthly to verify that the person in the file still works there and still makes the decision. Hills is blunt about why vendors’ lists fail: people will sell you 100,000 companies, but when you dig in, they don’t have the right contact person, because keeping it current takes more effort than anyone wants to spend.

On top of that list, Lipoff sent roughly 100,000 emails in a single year. Several real opportunities came directly out of them.

What goes in the email matters as much as the volume. Hills describes the approach as fishing with bait: you lead with a good, well-located property, not a pitch for your services. Commercial real estate cannot be advertised like a consumer service — a company might sign a ten-year lease, and the person who signed it may be gone by renewal. Nobody is in the market until they are. But a specific building gets forwarded internally, and then the operations manager who has been handed the space problem calls you.

Note the asymmetry in who responds. Lipoff and Hills expect the CEO in Seattle to be the one who ultimately decides on Orlando space, but the ops manager on the ground is the one who reaches out. That is why all three titles are in the file.

Reading the Industrial Tenant Market Before You Underwrite

Industrial swung to a tenant’s market and, in Hills’ and Lipoff’s read, is at the end of that swing. Their sequence: roughly 13 to 14 years of landlord-dominated conditions, a brief wobble during COVID, then the e-commerce bubble bursting a few years ago.

Development had been built to serve demand that reshuffled. Tenants went “smaller and smarter” across both office and industrial, right-sizing footprints and reshaping portfolios. The result was a glut of space built in many cases for tenants that no longer exist, which took two to three years to chew through. Landlords who had never needed tenant-rep brokers started calling them and offering fees to fill space faster.

The important point for acquisitions is that a tenant’s market manufactures inventory. When free rent and concessions are available, a company sitting in a building it owns will move into a new Class A facility because the economics and the recruiting benefit both improve. That single move produces three distinct opportunities:

• An owner-user building or land parcel available for purchase from the company that is leaving
• Sublease space in the building the expanding tenant is vacating
• A development or build-to-suit assignment for the new facility

Hills notes those spaces have largely been absorbed now and the pendulum is probably swinging back — tenants should enjoy the concessions while they last, because that likely changes within about 24 months. Underwrite accordingly: rent growth assumptions that work today on a vacant building will not hold if you are buying into a submarket that is already tight. Read the submarket, not the metro; real estate is micro.

What It Costs to Run This Model: Fewer Clients, One Project a Year

HLI went from roughly 100 transactions a year to about 20 clients. That was deliberate, and it is the price of the trade-in model.

The reason is attention. Hills describes one assignment from the past year: a client consolidating from four buildings into one. That required subleasing all the other space, putting the client into a new building, developing it for them, then buying their existing building and filling it back up. Those transactions have too many moving parts to hand to a junior broker, and one of them ran to $3 million. At 100 transactions, nobody has the hours to do that work.

Their honest capacity on the development side is one project a year. Beyond that, the underwriting gets sloppy and buildings coming out of the ground do not get the attention they need.

They also put their own money in front of the client’s. HLI will put its commissions at risk and pay for due diligence on buildings and land — the point being to prove they are a partner rather than a commodity, and to make sure the party going under contract will actually perform. Clients who had worked with other brokers for 10 or 15 years told them they were the first to take that risk.

The cost shows up on the back end. Hills and Lipoff acknowledge they have no SOPs and almost no automation: if both partners left for 30 days with no contact, in Hills’ words, everything would implode. A development shop is not a laundromat you hand to a manager. That is a real constraint to price in before you pivot your brokerage into development.

Why They Chose a Second-Tier Market and Let Staff Invest

Lipoff and Hills came from Philadelphia and Atlanta and deliberately applied those lessons in Central Florida, on the logic that it is better to be a big fish in a small pond.

The economics are the real reason. In New Jersey, a small developer competes with institutions on every land parcel. In Orlando, land still prices at numbers where deals pencil, and there are fewer brokers, so you can take market position faster. Lipoff’s framing is the Gretzky line — go where the puck is headed — and their view was that Central Florida had second-tier market pricing with first-tier infrastructure signals and runway.

The career math follows the same pattern. In D.C. or L.A., a sharp broker can sit behind 15 senior people for 15 years. In a smaller market, you get larger transactions earlier. That is how HLI recruits: they hire young, often with no experience, and train them, which Lipoff calls playing moneyball on people the rest of the market won’t give a shot.

Their retention mechanic is worth copying. HLI invites employees to invest in its deals, so staff can physically walk up and touch a building they own a piece of. For a young broker making cold calls all day, that is a more durable motivator than a bonus.

They use the same logic externally. HLI brings a tax advisor into client meetings to walk business owners through cost segregation — accelerated depreciation that can mean six or seven figures of savings in a calendar year, and something an owner planning a sale three to five years out needs to understand now. Lipoff says having that person in the room has directly produced multiple deals.

Frequently asked questions

What makes an industrial deal genuinely off-market versus just unlisted?

A genuinely off-market deal is one the owner had not yet decided to sell. An unlisted deal is one the owner has decided to sell and simply hasn’t put on CoStar or LoopNet yet — it will still get shown to multiple buyers, and you will still be bidding against them.

Joe Hills’ test is whether the opportunity exists on the shelf at all. If another broker emailed it to you, it exists on the shelf. The way to get the other kind is to be in contact with tenants, landowners and building owners constantly, so you hear about a company’s space problem before anyone has been hired to solve it.

How does the owner-user building trade-in structure work, and who does it benefit?

You develop the company’s new facility, price that building favorably to them, and buy their existing building at appraised value as part of the same transaction. HLI Partners did exactly this with a company called PhD, and ran the same play on a 20,000-square-foot warehouse bought from another client.

The seller gets certainty — both questions of who buys the building and at what price are answered at signing, with no risk of a buyer stringing them out for six months. The buyer gets an asset that never went to market and therefore never got bid up. It only works if you already hold the tenant relationship; a stranger proposing both sides of that trade reads as a conflict.

Is industrial still a tenant’s market, and how long do they expect that to last?

It has been a tenant’s market in many submarkets after roughly 13 to 14 years of landlord control, but Hills and Lipoff believe it is at the end of that swing. Much of the oversupply built for e-commerce demand that no longer exists has now been absorbed.

Their expectation is that the free rent, concessions and softer rental rates tenants are enjoying change within about 24 months. They also stress that this is submarket-specific, not metro-wide — conditions vary section to section within the same city.

How many development projects can a small brokerage-turned-developer realistically handle in a year?

One. That is HLI’s stated bandwidth with two experienced principals, four full-time brokers and a support team of ten people total.

The constraint is not capital, it is partner attention. Buildings coming out of the ground constantly require decisions only the principals can make, because it is their money at risk. Adding a second project means either the underwriting on new land sites gets rushed or an existing project gets neglected.

What breaks first when brokers move from brokerage into development?

Operations and systems. Lipoff and Hills describe themselves as deal guys — excellent at sourcing and structuring, and openly weak on SOPs, CRM hygiene and automation. Asked what would happen if both left the business for 30 days with no contact, Hills said everything would implode.

The second thing that breaks is client capacity. Development-adjacent assignments are complex enough that they cannot be handed to a junior broker, which is why HLI went from about 100 transactions a year to 20 clients. Plan for your transaction count to fall before your revenue rises.

The bottom line

If you want off-market industrial inventory, stop shopping other people’s deals and start building the tenant list — every user above 10,000 square feet within an hour of your office, three decision-maker contacts each, re-verified monthly. That file is what makes the trade-in possible, and the trade-in is where the outsized returns are.