George Iliff had built a career in commercial real estate when he bought the Colliers International office in Boise in 2001.
After earning a degree in marketing at San Diego State University, Iliff climbed the ranks for a decade at Grubb & Ellis. starting as a salesman in San Diego before managing the Phoenix office, then running 12 offices in California and Arizona.
He co-founded his own commercial real estate office, Iliff, Thorn & Co., in 1980. He sold his share in 1994 to Colliers Macauley Nicolls International and served as its U.S. president before moving to Boise.
Here, Iliff served stints as chairman of both the Boise Metro Chamber of Commerce and its economic-development arm, the Boise Valley Economic Partnership. In 2013, he and other local business figures founded Boise Elevated, a nonprofit intended to give the business community a more prominent voice in public policy.
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Iliff, 71, and his wife, Cathy, live in a condo on Crescent Rim Drive south of Downtown. He enjoys golfing and backpacking and spends much of his free time in Sun Valley, where he bought a home before moving to Boise.
Q: You grew up and started your career in California. What brought you to Boise?
A: I got here basically because of what was going on in California at the time. After 2000, the economy really retracted based on the dot-com implosion. I was in San Francisco. The market dynamics shut down in the Bay Area. There was hardly any activity.
I was commuting to a house in Sun Valley two or three weekends a month. I thought if I did something in Boise, I’d at least shorten my commute. That was more the driver than my great foresight or strategic planning.
I bought this business in 2001 from the corporate Colliers, which had purchased it three years earlier. It wasn’t doing well. It was losing money. They were amenable to my interest in purchasing it. I did that with a partner whom I’ve since bought out.
Q: How was 2016 for Colliers?
A: Great. We’re going to get right where we were [in 2015], which was our best year since I’ve been here, up about 30 percent over 2014. The indications are that  will be equally as strong.
Q: What trends are you seeing?
A: The biggest trend is the change in the market relative to in-migration, both for individuals and for businesses coming into the community. In October, it cost $2,500 to rent a U-Haul truck in Los Angeles and drive it one-way to Boise. It would cost $450 to rent the same truck in Boise and drive to L.A. That gives you an idea of the demand and the activity we’re seeing.
Q: What kind of mix of businesses are you working with?
A: We’re seeing internal growth of existing businesses, based on population increase. And we’re seeing external businesses coming in. Some are small tech firms, midsize manufacturing firms, growth and distribution. There’s growth in the office sector as well. We see that continuing.
The other strong trend is from the investment community. This market has really caught fire in terms of people from outside the area looking for investment properties to purchase. Our cap rates have compressed from 8 to 10 percent to some now trading for under 6. It’s the strongest I’ve seen since I’ve been here. [A capitalization rate, or cap rate, is an expected return on a real estate investment based on the property’s expected income. It is net operating income divided by current market value.]
Q: What markets are most similar to Boise?
A: I hear from my Colliers peers that all markets are growing across the country. Even in California, markets are growing pretty rapidly. Tucson might be analogous to Boise or Colorado Springs. But Boise is the darling of the tertiary markets in the West.
Q: Did you expect that when you bought this business?
A: I did, but it’s not that I forecast the future particularly well. This is such a great place that my expectation in 2002 was the market would begin to behave then as it is now. It’s taken that long for the market to mature enough, get discovered enough, and the cycle to be such that home values in other markets rose above water so they can sell and move, as opposed to being stuck where they are.
There’s enough regulation and taxes on the coast that we are a real draw.
Q: You’ve played this game for a while. How did the Great Recession compare to other low points in commercial real estate?
A: I’ve been through seven recessions in my career. Each one was different in character and the causes. The last recession, the Great Recession, was bad. Our firm made money throughout the recession, but obviously not as much.
The recession I thought was worse was in the late ’80s and early ’90s, which was more of a commercial recession than residential — the savings-and-loan crisis. There was so much overdevelopment. Fifty or 60 percent of projects went back to the lenders. There was a glut of product on the market. For a period, there were no deals done.
Our business is like the securities business: We make money when we trade. During the last recession, there was enough to sustain.
Q: Commercial projects are springing up around the Valley. Are we at risk of overdeveloping?
A: Today there’s very little supply of office, retail and industrial space. Industrial has a vacancy under 3 percent. In a stabilized market, you want that rate to be 7 or 8 percent so there’s room for firms to expand. Office vacancies are a little higher, but we’re seeing those get absorbed. Retail is around 5 percent.
In terms of looking at the future, certainly business could get slower. But it isn’t going to be overbuilt anytime soon. The reason is demand is high, but not high enough to push rents to the level that will enable development at a profitable level.
Industrial rates are 50 to 58 cents per square foot. To justify new developments, those rates would have to be 70 cents per square foot. Just like in home building market, if it costs $250,000 for a 2,500-square-foot house, and it costs a residential developer $300,000 to turn a profit, they aren’t going to build. That’s where we are now on the commercial side.
Q: How long will it take for that to come into equilibrium to spur development?
A: Labor will have to come down in cost, which is right now over the top relative to demand. I just heard that the cost of concrete doubled over the last three years. Rents haven’t doubled over that time, so the cost of construction will have to slow down. As the market gets more pressure in terms of vacancy or demand relative to new space, rents will have to come up. Both will have to adjust for development to make sense.
Q: How do you describe Colliers’ services to folks who aren’t familiar with commercial real estate?
A: We help clients understand the market, where comparable facilities and rents are located, and help them negotiate a deal. We do that for buyers, sellers, tenants and landlords.
As a landlord representative, we market the property to a targeted set of tenants. When representing a tenant, you want to show tenants all possibilities in the market and help evaluate which works best for them. Their decision may not necessarily be price driven. It may be location driven, or on need for a specific facility. A lot of times we’ll do studies for tenants in terms of where their employers live or where their customers come from.
Q: How much research goes into that?
A: This firm has a really strong research component to it. We have eight people devoted to marketing and research that support our brokerage and management operation. When somebody wants to know what their building is worth, or what they should pay in rent, we have that data.
Q: Commercial real estate pros surely run in the same circles. What’s the tenor of relationships between agents and brokers with their competitors here in the Valley?
A: There’s competition, but there’s also enough collaboration to work on deals together. It’s a long-term business.
You develop a reputation as a firm and an individual who is either positive and collaborative, who gets deals done, or who is difficult to deal with.
Q: Boise Elevated has seemed quiet since its creation. What’s the group up to?
A: There are a number of focus areas and initiatives in which Boise Elevated has been engaged, both behind the scenes and in the media. Those include supporting the St. Luke’s master plan and the 2015 Boise open-space levy.
We’ve streamlined the final plat process and surety requirements with Ada County, the highway district, cities and developers that will reduce development costs. Those savings need to be passed on to customers.
Boise Elevated also initiated the Front and Myrtle Alternative Study now underway. That will re-imagine the corridor to improve pedestrian connectivity and enhance development.
We’ve examined highway district policies for local street widths to improve safety and reduce future costs. We’ve supported political candidates we think will improve relationships between public agencies.
Q: What’s one lesson you’ve learned?
A: One mistake I made early in my career as an owner was not paying enough attention to expenses. Today, we are very careful about how we manage how much money we spend, and where we spend it. I’m a better businessman today than I was 15 or 20 years ago.
Zach Kyle: 208-377-6464, @ZachKyleNews. This story appears in the January 18-February 14, 2017, edition of the Idaho Statesman’s Business Insider magazine as part of a special section on commercial real estate. Click here for the Statesman’s e-edition, which includes Business Insider (subscription required).