Metro-East News

Johnson Properties owner reflects on three decades in local commercial real estate

Terry Johnson loves when a deal comes together. This month marks Johnson’s 30th year of orchestrating commercial real estate sales in the metro-east.

In his time, he has put many office and retail building and land sales together. Eleven years after joining the Kenneth Johnson Agency, a commercial real estate company named for his father, Johnson launched his own company, Johnson Properties Inc., in 1996.

His business purchased the Kenneth Johnson Agency in 2008. Johnson sold Johnson Properties in January of last year and joined BarberMurphy Group in Shiloh.

He has worked with clients and led notable projects, such as the Memorial Hospital-East satellite hospital under construction in Shiloh, the Fountains at Fairview office park in Fairview Heights and one of his largest deals — the $8.25 million, 7.5-acre The Shoppes at St. Clair shopping center adjacent to St. Clair Square in Fairview Heights.

Johnson estimates that he has completed $300 million in real estate sales and about 600 transactions in the last three decades. As his work has evolved with the industry, Johnson’s love for putting commercial real estate deals together has remained.

Johnson recently sat down with business writer Will Buss to recall and reflect on his time in the business and the current state of local economic development:

How did you get started in the business?

“In April of 1985, I started my real estate career at the Kenneth Johnson agency, which was run by my brother Phil. My first listing was a vacant parcel of land on (Illinois) 159 in Swansea, which is now home to four office buildings, Outback Steakhouse, a credit union and Charter Communications. That was one of the first projects I did to subdivide land, which kind of spurred my love of taking a parcel of land and helping the seller subdivide.”

How has the business changed in your time?

“Over the years, I have seen a lot of changes in office space. When I first got in, most companies wanted to own their space. Today, they want to lease their space. And with the advent of high-speed Internet, more and more people are working from home, such as myself, which is allowing corporations to have fewer people in the office and for companies to actually lease less office space. And even when they’re in the office, they’re using less office space because cubes are smaller and they don’t have the storage needs. So that’s been a big change over the years. The great recession has caused companies that use office space to preserve their capital. They want to lease their space, but they are signing shorter lease terms because they don’t know where the company will be in five to 10 years.”

How has office development changed?

“When I started, everyone wore suits and ties. Today it’s much more casual, and as an example, I’m working with a company that allows employees to bring their dogs to work. Not all office buildings will allow that, but it just shows the changes in the office environment. Right now, Swansea has a glut of office space that we’re trying to fill up, which drives down rates. In the Fairview Heights and O’Fallon area and the Glen Carbon and Edwardsville area, office space has tightened up.”

How has retail development changed in that time?

“Retail space has evolved over those 30 years from the downtown area versus the interstate area and big boxes versus mom and pops. Mom and pops fill up the small strip centers and both are competing with the Internet, which is growing at an enormous rate. I think about 15 to 17 percent a year annual growth come from Internet sales, which affects retailers, car dealers and the whole gamut of retail.”

What have you noticed about the local home building market over the years?

“If you look at the list of home builders, prior to the recession, of the top 25 in the St. Louis area, only five are left. That’s pretty alarming. Those companies used to look for parcels of land of 50 to 100 acres, and now they’re looking for 20- to 30-acre tracts to reduce their risk. That’s been a big change. Land sales have slowed, in general, because no longer will an office park just buy land for an office park. They’ll buy land for that one specific building project. When I first started, they would just buy 12 or 20 acres for an office park. So really land sales are more about what they need right now without any thought of speculating. They are only buying land for what they need immediately.”

What kind of housing developments are being built today?

“We have seen some really nice multi-family projects built over the last 10 years. It is a sign to me that more and more people, after seeing what happened to their housing values, are content with renting. In case they do have to move, whether it is from a military standpoint or a job standpoint, more and more young people want the flexibility. So there’s been some really nice multi-family apartment communities built, which has kind of eased the fears that some municipalities have about multi-family developments.”

Are you planning for retirement?

“This look at the last 30 years is not a reflection that now I’m done. It is 30 years down, 10 to go. I plan on staying active for another 10 years before I slow down. I don’t know if I will ever retire because putting deals together is fun. But in 10 years from now, I’ll probably slow down and do fewer deals. After 30 years of doing this, I still love going to work every day and putting deals together.”

What do you see as the future of economic development in the metro-east?

“The one thing, looking forward, is that our side of the river needs something to really boost job growth, wage growth and population growth. And that game changer might be the NGA project, the National Geospatial Agency, which is projected to add 3,000 jobs and an 800,000-square-foot building next to Scott Air Force Base. I think we have about a 75 percent chance of getting that project versus it staying in Missouri. If that happens, that will be a game changer for almost all sectors, including residential housing and office space. Commercial real estate follows residential growth. So anytime you start adding possibly 2,000 residents, who might move from Missouri over here over the next 10 years if that is built, that’s going to be good for our area. We need a game changer because basically our population has been flat in St. Clair County, relatively flat. If you look at the St. Louis market, we are a feeder of that St. Louis market. We are a bedroom community to St. Louis. St. Louis has struggled to keep up with other Midwest cities, such as Milwaukee and Cincinnati, in job and wage growth. So for our side of the river, to prosper, we need St. Louis to do well, and we need Scott Air Force Base to continue to grow.”