Gunnar Branson:

There is a real purpose to us, and that is that stitching together of people that might be competitors from time to time, might also be allies, might work on deals together, et cetera, but we learn from each other and we need to have a safe space where we can talk through and think out loud what's going on. 

Nancy Lashine:

Hello, and thanks for tuning into Real Estate Capital. I'm your host, Nancy Lashine, of Park Madison Partners. Capital is a lifeblood of the real estate industry, but the decisions on where and how it's allocated are driven by people and personalities. Who are they? What motivates them? What can we learn from their experiences? On this show, we introduce you to some of the real estate industry's most influential thought leaders and decision makers, and we talk about what is important to them, how they make critical decisions, who has influenced them, and a lot more. Our guest on today's episode is Gunnar Branson, the CEO of AFIRE. 

AFIRE is a global trade association for international investors investing in US real estate. The organization has over 180 members from 25 countries, representing approximately $3 trillion in assets under management in the US. This is the second real estate industry association Gunnar has run, the first being NAREIM, the National Association for Real Estate Investment Managers. He knows the landscape and has the benefit of 35 years in the business and the 30,000-foot purview of the real estate markets. A natural storyteller, Gunnar shares his perspectives and some career and life lessons as we talk about his upbringing in Alaska, his love of cities, real estate, and books. 

Gunnar shares some of the pivotal experiences in his career and a few book recommendations along the way. I hope you enjoy our conversation. It's such a pleasure to have you on, Gunnar. I remember the first time we met in Chicago in your office at the time you were with NAREIM, And I was like, "You were such a breath of fresh air." I was like, "Who are you?" And we had such a great conversation and I was delighted to meet you. Frankly, it gave me a whole different perception of NAREIM as well, that you were the man at the helm. So, delighted to have you on and that we're going to talk more about AFIRE, which is the organization you're running today, but let's roll it back a little bit and start at the beginning. Tell us and our audience where you grew up and a little bit about your background. 

Gunnar Branson:

Sure. Well, I grew up mostly in Alaska, Anchorage, Alaska actually. We had a place in the bush as well that we'd go to in the summers. There's not a lot of real estate up there. So, when I was 17 years old, I was fortunate enough to spend a summer in Chicago and discovered real estate and found it to be fascinating, to see buildings like that, to see so many people on the street, to see a built environment that was very social, where people were all around you speaking different languages, different cultures, different smells of food. When you're out, I guess, on the frontier is the more romantic way to talk about a place like Alaska, you don't see a lot of people. It's not very interactive. 

So, it was a revelation for me and I wasn't sure what it was that I found so exciting, if it was the streets themselves or the buildings or just how everything came together. It was mind blowing, and to a certain extent, it was almost too much for me to take in at that point. I was that rub on the street looking up at all the buildings with my mouth wide open and just bumping into things because I couldn't believe what I was seeing, but it blew my mind. I think to a certain extent that was probably the beginning of the seduction process of real estate and me and how I got into it. After I finished college, I ended up in Chicago again and took- 

Nancy Lashine:

Wait, can I stop you for one sec? 

Gunnar Branson:

Yeah, sure. 

Nancy Lashine:

Where in Alaska did you grow up? Were you in Anchorage? 

Gunnar Branson:

Anchorage. 

Nancy Lashine:

And what'd your folks do? 

Gunnar Branson:

My father was a federal judge in Alaska and my mother was a fiber artist. 

Nancy Lashine:

Fiber artist.

Gunnar Branson:

That's right. 

Nancy Lashine:

Wow. 

Gunnar Branson:

She would weave and knit and she actually had her own shop for a while and everything else, but did beautiful work. 

Nancy Lashine:

Did they make you do the summer job of working on the line in a salmon factory? 

Gunnar Branson:

They really didn't want me to do that because people tended to come back with missing fingers and things like that. But I did one summer spend most of the summer working in a salmon processing plant. So, I spent an entire summer in below zero temperatures in a freezer, basically moving fish from their freezing shelves into baskets and that thing. It was amazing work. It was 12 hours a day, seven days a week, but the overtime was very nice and it helped pay for bits of college. So, that was an important experience.

Nancy Lashine:

It gives you great appreciation for what that work involves, right? 

Gunnar Branson:

It's brutal work. It does put you in a completely different frame of mind. Basically anytime that you're not working, you're trying to get rest because it's physically exhausting. What I loved about it, there was a Zen to it to a certain extent because I love reading for pleasure, always have, and it's hard to do in college because there's a lot of reading that you have to do. So, it was a summer where every break you'd basically go and try to warm up and you'd sit there and stare into space or you'd read. So, I found myself reading all these classic books in literature, but living in them for the two hours afterwards that I was doing physical labor and everything else in the freezer. 

It was an amazing way to enter into a mindset as I was reading some of the books of Hemingway or I was reading Moby Dick or something along those lines to just be in it and to be reflective on it after you read it because I tend to read rather voraciously. I read very quickly and a lot of times you miss the poetry. You miss the nuance if you read that quickly. For me, it was these interruptions instead of me gulping down a book as fast as I could. It was interrupted by the work and gave me time to reflect on it. So, I think that was a way to keep myself from going mad just with the repetitive nature of it and the physical hardship that it was. It was very, very difficult to do and physically very difficult, but I could live in fiction in my mind as I was... Actually, my job was described as a stripper, which is not what it sounds like, what I had- 

Nancy Lashine:

Damn.

Gunnar Branson:

I know, it wasn't that. It wasn't that. I wore these strange rubber coated suits, but it had nothing to do with what you're thinking. We would have these ice chippers like you used to chip off ice on your driveway and we had to somehow get the frozen fish off of a metal plate that it had frozen on. So, we spent the entire 12 hours a day doing this, and by the end of the season, I had these incredibly muscular hands because of the grip as you were doing all that. But it was an amazing job and it was an amazing job to also look around and realize I'm in a freezer the entire time. 

So, when you go out after 12 hours and Alaskan summers are not very warm, a very hot day would be 75 degrees Fahrenheit, but man, it feels hot when you've been in below zero weather the entire time. Then of course, all the frost that is settling on you is actually frozen fish slime. So, when you walk out, you then melt and basically I would leave. 

Nancy Lashine:

You must smell like something else. 

Gunnar Branson:

Oh, it's awful. I would leave my clothes or my outer clothes in the garage. They would just stand up on their own in the garage, so the outerwear, and then I'd immediately scrub myself as clean as I could so that I didn't offend the family and everything else and then go back into the smell the next morning. But it was an amazing experience. 

Nancy Lashine:

We have a client who also grew up in Alaska and worked on the line and he described the fact that... He worked the night shift. It was summer job that sometimes he had to walk home because who's going to let you sit in their car? 

Gunnar Branson:

Oh god, you'd ruin it. Yeah. Fortunately, I had an old junker of a car that I was using and no one cared at that point, but yeah, it was fragrant. It was absolutely fragrant. 

Nancy Lashine:

Right. Well, you learn from every experience. Sorry, I did interrupt you. So, now you're finished with college and you're living in Chicago. Did you start out in real estate after college? 

Gunnar Branson:

No, actually, I studied the theater in college and was working as an actor and a playwright and had six of my plays produced in the Chicago area in very small theaters, storefront theaters and that thing. 

Nancy Lashine:

Right. That's impressive. Not an easy feat. 

Gunnar Branson:

No, and certainly not one that's remunerative. I didn't make a lot of money, let's put it that way. So I worked a lot in things like restaurant work and was a bartender and a cook and at times a waiter, but I was able to do some interesting work with some amazingly talented, intelligent actors and directors. I also worked as an actor and was on television a couple of times and also worked as a radio disc jockey and helped with setting up the lights for different shows. So, I learned a little bit of basic electrician work, did some very bad carpentry work. I had a lot of entry level jobs. 

Nancy Lashine:

Why would you ever leave such a fun life, Gunnar, for something as pedantic as real estate honestly?

Gunnar Branson:

Because real estate is awesome. It's fascinating and it's so much more interesting than people realize. It was an interesting time. I certainly learned a lot. It's very hard to make much money doing it.

Nancy Lashine:

Sure.

Gunnar Branson:

You are constantly applying for work. You're constantly auditioning, so it does take a toll on you. I met someone and we decided to get married. I was not making any money, so I decided to work in a different field. I had long believed that the skills that I had picked up as an actor, the ability to communicate, the ability to tell a story, the ability to construct a narrative was valuable in other disciplines and was something that was very much lacking. I was fortunate in that I was working at the time as an assistant and a marketing assistant, and I also did a bad job of building models for an architecture firm and a wonderful one in Chicago. Through that architecture firm, I was able to learn a lot about the built environment in Chicago. 

I started asking myself the question, "Why is real estate mostly ugly? Why are these buildings so ugly?" All these brilliant people are working on it. They care about how beautiful they are. All the old stuff seems to be a lot prettier than what is the new stuff. Why is there so many ugly buildings? I thought, "Well, it must be terrible architects." But I learned, no, not really, because all the architects I met were brilliant, interesting, really talking about what the lived experience was inside these buildings. They were talking about art, aspiration, these things and their designs were gorgeous. 

So, I figured it must be the egomaniacs that own the buildings. They must not understand how to make something beautiful. My next job, and this was in the middle of a pretty bad real estate recession in the early '90s, was working for GE Capital Real Estate. That was the debt division at that time at GE Capital. I started realizing the very structure of how buildings are financed had more to do with what they looked like than probably any one person. 

Nancy Lashine:

Sure.

Gunnar Branson:

I was at GE Capital for about eight years, started as a temporary assistant, started working with the executives there in terms of their presentation skills, started realizing that I became the person who helped people build out their presentations and then started getting involved in marketing for GE Capital. By the time I left there, eight years later, I was the global director of marketing communications for GE Capital Real Estate. So, it was an amazing opportunity, amazing education, learned so much about the debt business, learned so much about how things work, but somehow, and this is a theme throughout my career, I have never done a deal in commercial real estate. I have always been the observer. 

I've always been the storyteller. I've sometimes been an analyst. I've sometimes helped figure out due diligence, but for the most part, I am not the guy that goes in and gets all the glory, which is fine by me because this gives me a position where, A, I am non-threatening to everyone. I'm not competing with anyone for a deal, which means they're willing to talk to me and they're willing to explain to me what's going on, what they're thinking, where they're going, which gives me, I think, a very lucky, very fortunate seat, if you will, within commercial real estate where I'm able to see a lot and hear a lot about how it works. I think part of the problem you have with any industry is understanding how the whole thing works. You become a specialist. You focus in on one aspect or another. 

So, it becomes very, very difficult to think outside of your individual box. It becomes very difficult to see perhaps the longer view. Where is this going and how could it change or how could it be improved? So the GE education, which is graduate school for a lot of people, was amazing. I learned so many things from there. It was not always fun, it was not always easy, but I did learn quite a bit from it. After I left GE in the beginning of 2000 in order to take a job as the chief marketing officer at Heller Financial, by that time, I was really getting a grip of basically how financial services, investing, debt, all these components that are very much an important part of real estate. After we sold Heller to GE a couple of years later, which it was like I felt like they pulled me back in. 

Nancy Lashine:

Full circle.

Gunnar Branson:

It was full circle, but they stripped us out, which was classic for GE in terms of the senior executives at that point. That's when I started really consulting more than anything else. I ended up running my own consulting practice that was focused in on innovation market, business development, product development for a wide range of companies, mostly B2B, ranging from real estate and finance and banking to... I even worked for a publicly traded prison company and a lobster fishery in Nova Scotia. Long story, but it smelled even worse than the salmon processing plant in Alaska. 

So, I mean really looking at innovation and how markets change and how opinions of markets can change when they look at whatever it's that you're offering and how the product design itself is really probably the first place you start with marketing. By product, it can be a service, but it's how you design it. So, that was where I ended up starting at GE Capital and part of what I learned at GE Capital that made that happen when I was doing marketing there. 

Now think back to the RTC days, which is really the beginning of my real estate experience was in that, where GE was one of the first companies to really realize, "Oh, my gosh, all this real estate is being given away. These are problematic portfolios that was savings and loan portfolios that were essentially being sold off at 5 cents on the dollar." It was 5 cents on the dollar. So, we started gobbling it up and it was the only time when looking at due diligence that we would actually have to have police reports and look at how many murders occurred on the property in the last 10 years, things like that, because it was some pretty awful multifamily in these portfolios. But we were acquiring them, learning about them, and we were really the only folks active early in that recovery. 

But all these other lenders started coming in once we had reestablished in say about 1995 or so, and they were very effective at getting a new business and our origination's efforts at GE Capital. Suddenly, we had a lot of new competition and we were positioned in that market. Someone jokingly said this, that at GE Capital were slow but expensive, very difficult position to defend from a value proposition standpoint. We were very, very difficult to work with. We had a very aggressive due diligence process. There was a lot of uncertainty around that, and we were not the cheapest. The Nomura was coming in with CMBS. Ethan Penner was just killing us. He was giving away free credit to brokers, things like that, and we had to sell against that. 

So, part of what was interesting to me is that I started asking the sales force, "Well, how are you selling?" And they would talk about how they would protect the borrower from our credit committee, that they were the ones that were going to make sure that they got what they wanted and they got what they expected. A terrible way to sell, I think, terrible way to say, "Well, I'm going to protect you from my own company." Didn't work. We talked a lot about when I was coming into the marketing function about how well we're working with Six Sigma, we're making the process easier and faster, and we're really focused on relationships. We're really going to work on making it better. Again, not a great way to sell. We know we're bad, but we're getting better. 

It's like saying we're number two, it didn't really resonate. So, I started talking to our customers, the people that have borrowed from us repeatedly over time to try to figure out why on earth do you keep borrowing money from us when we're slow but expensive? Part of what was interesting, we'd have these big marketing events or sales events where we'd bring all our customers together, sometimes on a yacht or a boat, sometimes at a country club, and they'd spend the entire time complaining about us, about how awful we work. So, I would sit down with them. I'd go, "Okay, fine. Why is it that you work with us?" And the first thing that someone said that really resonated, he said, "When I walk around this town, people know I'm with the General." 

That somehow being able to work with the toughest lender gave him some level of prestige in the markets that he turned around. Now I thought that was the weirdest thing in the world and something I really couldn't sell, but that got me closer to understanding something different. At the time, the internet was still a new idea, and we were working with this project that would help anyone who wanted to borrow money put together the package that they spent, the deck that would explain what they wanted to borrow the money for, what the asset was like and everything else. There were these thick decks where people would put together maps that they usually would copy from the rental car place and put stamps on it and talk about what the comps were, et cetera, et cetera. 

They would then come into our originators and they would have a pile on their desk of these and it would take them weeks to get back to someone to say whether or not we're interested in it. It was a laborious and painful process and we figured out a way to make it much faster. We were actually giving digital cameras to repeat customers so that they could feed it right into the system and push a button and it would send it directly into the inbox of our originators. Because it was done in a certain format, we were able to give them an answer right away. This is something that's going to fit, this is not going to fit. That was an interesting idea. 

It has evolved since then and things have gotten a lot better for a lot of people, but at the time, it seemed somewhat revolutionary. So, I sat down with this group that I was working with and I said, "All right, we're experimenting with this idea. We've done a lot of deals with you guys. We know the kinds of work you do. What would happen if we could essentially give you a green light and be ready to write the check, not in 30 days, but within a day, within a certain parameter?" Everyone at the table would say, "Yeah, sure, that'd be great. That'd be a lot easier." Then a few moments later and this happened more than once, they'd stop and they go, "No, I don't think so," which was really confusing to me. It was like, "I'm giving you candy and you don't want it." 

They said, "Well, wait a minute. I don't use you just for your money. I use you for your due diligence. I know more about real estate than GE does. That's not why I'm coming to you, but you have rabid dogs for underwriters that will find all the problems, will find all the issues that I can't see." In other words, they were outsourcing some of their due diligence to us. That was the insight for me. I went, "Wait a minute. What happens if we tell the truth? What happens if we start by telling people that working with us is going to be harder than working for anyone else? And that is why you want to work with us, that with that, you're going to learn more. With that, you're going to have better deals." 

So I went out to all our salespeople all over the world and I said, "Start by talking about how much it sucks and talk about why that's a good thing." Our advertising at that point started talking about how we were just obsessed with making the deal right, to understanding it better than anyone else. We had a record year that year. Now I'd love to claim it was all because of our brilliant marketing at that point, but there were a lot of reasons and we had some amazing people and we had a good market at that point. But I do think that that was for me, the beginning of this idea that if you tell the truth, if you tell the negative, if you're the one who expresses it to someone, that that can become the proof point for what you're actually good at. 

Nancy Lashine:

Sure, sure. It's like the Woody Allen method of it's why Woody Allen makes people laugh. He says what everybody's thinking but is afraid to say. 

Gunnar Branson:

Right. Oh, by the way, if I tell you how brilliant I am at something, even if it's true, you're not going to believe me. I mean, why would I believe you? Because you're puffing yourself up. 

Nancy Lashine:

Well, it's like every deal book should have a deal in it that failed. You talk about why and all of a sudden you've increased your credibility enormously. Yeah.

Gunnar Branson:

Absolutely. By the way, I could lie to you about what sucks about me and you'd probably believe me, which that's the dark side of this method, is that you can create credibility and get people to believe you by being the first person to talk about where your weaknesses are. But the flip side of every weakness is your strength. 

Nancy Lashine:

Sure.

Gunnar Branson:

That was the insight for me that has driven everything I've done since GE, which is here's a stupid example. When I was a consultant, there was a way that I would sometimes talk about it from the standpoint of I'd start by saying, "You never want to hire me as an accountant. I'd be a terrible accountant." Because accountants are really good at going step by step by step, following the rules, making sure that everything lines up the way that it's supposed to. 

I love working with accountants because they'll keep me to that, but at the same time, what I'm always trying to do is figure out a way to not do that. I'm always trying to figure out how to skip ahead and find an advantage by going outside of the lines. That's something that I've done since I was a kid in great part because I was trying to avoid doing the hard work and it was really boring to me. 

Nancy Lashine:

I can empathize with that by way. 

Gunnar Branson:

I think a lot of people can actually. We're not all accountants. That's the reason why CPAs are so valuable. But that's why you want to hire me as an innovation consultant and as a marketing consultant because I'm going to try to figure out how to change the rules to benefit you versus how do I make sure you are in compliance with every rule. I'm trying to figure out how to get above compliance as quickly as possible, and that's why I am able to do the things that I do. 

Now, that's a broad brush, grotesque explanation of how this works, but my weakness is my strength. That is true at a company level that every company's strength can also be expressed through its weakness. That to me is the magic pixie dust of good marketing strategy is understanding that your limitations are actually the key to understanding your power. That was what I learned from GE. 

Nancy Lashine:

Yeah, no, that's a fantastic lesson and it makes a ton of sense. Obviously, you were very successful in your ability to transition, figure that out at GE, make it work, and then transition. You said something earlier that struck a chord. You said because of where you sit, you see a lot. So, when you think about that ability to leapfrog and figure out what's not happening as opposed to just seeing what is, what are the strengths and the weaknesses in the real estate investment business today in a big picture as you think about them? 

Gunnar Branson:

I think the real estate business for the last 70 years has been remarkably consistent. It's been very boring and to a certain extent we've ridden the wave of demographic change since the post-war period. There's been a steady expansion of demand that looks pretty much the same between 1955 and 2005. 

Nancy Lashine:

Sorry, I know you're talking about in the US because you're global. Are you thinking globally? 

Gunnar Branson:

I'm talking mostly in the US, but you could say the same of any western advanced economy. It was very much consistent. You could see exactly where it was going. One, we were moving towards a model where the downtown was primarily office for white collar workers. There was a growing expansion of demand for white collar space. At the same time, as you had a wealthier population of service workers in countries like the United States, you also developed more and more square footage per person on the residential side. So, you had a suburban out spring and you had larger and larger spaces. In 1950s, you had about 200 to 300 square feet per person for their residential space. 

You fast forward to 10 years ago and it was 900 on average square feet per person residential. We went from 500 to 600 square feet per person office down to 200 or 300 square feet per person in an office depending on what industry you're in. So, it's interesting how those things have changed, but they've been very predictable. They've been very consistent. Most of the work in real estate, especially as interest rates dropped and continue to drop over the last 20, 25 years, has been financial engineering and real estate became brilliant at financial engineering. Now the reason is the real estate itself is very consistent. It's very dull. It's not that volatile. So, you can leverage it up and still be responsible as an investor. Things move a little bit more in slow motion. 

We have problems, but the only reason why we can lever things up to an extent that any other asset class can't is because it's remarkably consistent and we can see the growth happening. That has changed, that environment has changed, not the least of which we've flatlined in terms of the growth of the working age population in many countries around the world. So, what happens with an aging population and with what could potentially be a shrinking population, real estate changes and the value of real estate. You have to be a lot smarter about the actual property itself than what happens at the tenant level. 

So, part of what we've been evolving or having to adjust to over the last 10 years is a changed environment where financial engineering alone will not save the day, where operations and the tenant experience and your ability to have a unique value proposition building by building by building is essential. The people that are winning are the people that understand that. I love how everyone is now starting to wake up and go, "Hey, wait a minute. Office is not completely dead yet." It's almost like retail about two or three years ago where people went, "Hey, we didn't die. Retail's coming back. It's fine." The same thing is happening with office, but it's happening unevenly. So, there's office that's doing extraordinarily well. 

We have records setting rents in some office buildings and great lease up times and then we have everyone else. But you look at the buildings that are succeeding, the office buildings that are succeeding now, they have a clear advantage over the rest. They have a clear value proposition and they have a clear connection to the users of that office space. They also tend to be much more operational than traditional office buildings that were a very passive investment. You get the right building in the right location. You get a bunch of long-term leases and you're good to go. It is now a trophy, class A, office space, part of your core portfolio, and you could depend on that forever. 

Nancy Lashine:

How important do you think politics plays in the value and the value proposition of real estate? 

Gunnar Branson:

It's not an easy question to answer. 

Nancy Lashine:

Of course, I wouldn't ask you easy questions, Gunnar. 

Gunnar Branson:

I know. I think we were able to blissfully ignore politics for a long period of time in this business or think less of it. Obviously, we've always been the beneficiary of different kinds of tax policy and we've been driven by it, good and bad tax policy. So, depending on what period of time you're looking at, it has meant a lot to us, both positive and negative. I think we're entering one of those times when politics and frankly geopolitics are having an amazing impact on us. 

So, from a global standpoint, right now, as we stand here in June of 2025, most non US investors are pencils down and not because they don't want to buy US real estate, but because they don't know what's going to happen in terms of the trade war, in terms of the Big Beautiful Bill, in terms of revenge taxation, in terms of a lot of different policies that are moving around right now.

Nancy Lashine:

Can they be that reactive in their policies? I mean, most big organizations that you deal with, their foreign pension funds, their sovereigns, their big insurance companies, they set policy maybe once a year and then they review it and set their policy at the end of that year. Have they been that reactive to be pencils down within a couple of months? 

Gunnar Branson:

I'd say yes, they have been. In great part, it's not they're saying we're out. They're saying we don't know what we're getting into. I think the concern is, and a lot of the things that are being proposed right now would eliminate any money you might make out of an investment at this point. Now that is changing. It's evolving day to day, but the investors I talk to from allies such as Canada, most of Western Europe are really hesitant to make a move at this point. At the same time though, they look at the foundations. They look at real estate itself, the fundamentals, and where we are in the cycle, and they're like, "Gee, this would be a great time." 

Nancy Lashine:

Is there anyone who's active? 

Gunnar Branson:

Yes, but again, it's not what it should be at this point. 

Nancy Lashine:

Right. Are there parts of the world that are less concerned than others about US politics? 

Gunnar Branson:

It's a range. I think the Middle East, parts of Asia are less concerned perhaps. Again, all of the above are looking at the real estate itself. The real estate brain is saying 2025 may very well be a good vintage. This is a good time for us to be active or at least ready to invest at this point. However, there's concern about, "All right, where does this go? Am I suddenly going to get stuck?" But consider, say a Canadian pension plan. There's a headline risk. So, if the pensioners, right now, you're facing a lot of rooms of angry Canadians, which is a strange place to be at this point.

Nancy Lashine:

Right, that's an oxymoron. 

Gunnar Branson:

It is. It seems that way, the nicest country in the world. But what's happening right now is that if for example, I'm a Canadian pension plan and they find out that I'm actively engaged in some new acquisition of a billion dollar portfolio in the United States, even though it might make sense financially, it may make absolute sense strategically, it certainly doesn't look good as people are feeling very uncomfortable about the relationship with the United States. Now that is calming with the new Prime Minister and there's new directions that's going, but there's still a lot of concern. There's this sense when you think about institutional money, it's not your money. It's a large group's money, and even a sovereign wealth group, you're essentially a pension plan for the country. 

So, there's a lot of different constituencies, many of them political and socially focused, not purely financial. That is very much a concern. I think family offices have a little bit more freedom to work. Anyone that already has their money in the US that might be trading in out of positions, I think they're in a better position because they're less concerned about currency fluctuations and we're seeing a lot more currency fluctuations than we've seen in a while. I mean, we've seen an erosion of the US dollar strength that is impacting things. 

Nancy Lashine:

Are you seeing those same foreign investors more focused on other parts of the world for investment? 

Gunnar Branson:

That's what their talk is right now. I was talking with someone just last week that was saying, "I've never seen so many Asian investors in Western Europe." So I do think that people are looking for alternatives. Now realize of course, that probably the largest, deepest, broadest market in the world for commercial real estate is the United States. It's pretty hard to replace the United States if you have a global portfolio. However, if you have the ability to do so, it probably makes sense to be careful at this point not knowing what the US government is ultimately going to end up doing. 

I think the bill is where most people's focus is right now because I think it's 899 is the provision where it's pretty draconian in terms of the tax that they want to put on foreign investors. I think that's a real concern. I mean, why make an investment if you'll lose money? It just doesn't make any sense. 

Nancy Lashine:

No, it certainly doesn't. 

Gunnar Branson:

By the way, there are some investors that that would not stop them necessarily for a couple of reasons. One, they believe that over the term of the investment, that will not be an issue, or two, you do have capital that's simply trying to get out of the country that it's in. 

Nancy Lashine:

Sure. 

Gunnar Branson:

So acquiring a US asset, even if you're going to lose some money, perhaps maybe is more attractive than the alternative. So, there's a wide variety of reasons why you would cross a border. Most institutional investors are looking at it as a portfolio strategy and looking across the globe and trying to make sure they're placing in different places and evening out their bets, if you will, but there are others that are simply trying to get out of country. 

Nancy Lashine:

What property types right now are most interesting to those investors who are focused on the US? 

Gunnar Branson:

Well, this has been a broken record for about 10 years, beds and sheds. Certainly, that's where the demand seems to be in terms of the users of the assets. Even though we've had a bit of mismatch in the residential sector in the United States, there's no doubt that we're four to six million depending on who's counting units under at this point in the US. 

Nancy Lashine:

Although it's interesting because we obviously work with global investors and the non-US investors are the most willing to look at office perhaps because office has a different role in their own communities or own cities. So, I thought you were going to say something along those lines that they are more often than not the buyer of office today, not distressed office, not conversion office, but actual operating office.

Gunnar Branson:

Good quality office in the right locations. Absolutely. What was interesting to me is I've started to see a change just in the last six months where maybe six months ago you'd have one voice going, "Well, wait a minute. What about office? There's some interesting things there." Maybe you can get a good deal. Now it's more mainstream thinking I think amongst the institutional investor class where they're going-

Nancy Lashine:

Well, you've certainly heard major investors start to, right? 

Gunnar Branson:

Absolutely. 

Nancy Lashine:

Especially one that started the role. 

Gunnar Branson:

They're still saying, "Be careful," but I think office is not dead and nor will it be. I do think that investors are continuing to look at other alternative alternatives. Cold storage is something that people are looking for, but those aren't very deep markets. There's not a lot of it. Everyone wants the next data center play. That has been an incredible run over the last 10 years. The smart operators in that realm I think are going to continue to do well. But in the United States, not everyone should jump in it right now. I think data centers outside the US, great opportunity. They're far behind the US in terms of data center capacity in Asia and in Europe. 

So, I think there's a lot more growth to come there, and I think some people are looking at that pretty seriously. I do think that housing is an important one. We got ahead of our skis a little bit a couple of years ago, but there's nothing being built right now, which means we're absorbing any capacity that might be there. I think we're going to continue to see difficult markets in terms of multifamily, but I think a lot of our investors are continuing to see that as the place to be. You saw a shifting over the last 10 years where institutional investors seem to be almost all office all the time, and over the last 10 years, they've been saying, "I want more of my portfolio to be in residential." It makes sense. They're staying there and I think that makes sense to them. 

Nancy Lashine:

Let me shift gears for a second and talk about the role of industry organizations for real estate. So, real estate is an enormous industry and covers so many different aspects from construction to investment to architecture to service to leasing service providers and finance. You've run two industry organizations now. You've been head of two associations both on the investment side. When you think about your peer group, who do you think about? 

Gunnar Branson:

Oh, I mean it's the usual suspects, not just the investor side, but BOMA or ULI, which includes a lot of development work, Real Estate Roundtable, National Multi-Housing Council. You could go on and on. I feel like real estate has more associations than we probably warrant, but we are a fifth of the economy. People spend 87% of their life indoors. We are the economy. We are civilization. Everything goes through us. So, it makes sense that there are these networks that we rely on, I think all of us, to just figure out what's going on, to be able to network, to be able to learn what's new, what are the new challenges. Tocqueville talked about associations being a key part of why the American democratic experiment worked. 

He saw professional organizations as the glue that keeps the society working together where not everything has to be mandated by a king. I think associations forget that sometimes because I think we get obsessed with, "All right, where's the event going to be? And let's make sure the hotel venue is okay and let's make sure that everyone shows up. Is there enough stuff at the bar and everything else?" But there is a real purpose to us, and that is that stitching together of people that might be competitors from time to time, might also be allies, might work on deals together, et cetera, but we learn from each other and we need to have a safe space where we can talk through and think out loud what's going on. 

Nancy Lashine:

To what end is the stitching together really important? What are the desired outcomes of associations? 

Gunnar Branson:

Well, I think it's a calming of society. So, we're not all pirates, out for ourselves. You start to see people as people that you work with. I work for a global organization. So, I think one of the key components to this... Let me back up just a little bit. 

Nancy Lashine:

Sure. 

Gunnar Branson:

People often ask, "Why would we want foreigners to buy our buildings?" And we've even had strange regulatory and legislative outcomes from that question. People worried about our enemies owning our valuable buildings, buying us.

Nancy Lashine:

Like buying US steel. It's not just the real estate business, but yes. 

Gunnar Branson:

Absolutely. So, the question becomes, "Why do we want all these foreigners to own real estate?" AFIRE is all about facilitating the investment from 25 different countries around the world into the US property markets. There's a very simple reason for that. If you own a building in my city, you are less likely to vomit. 

Nancy Lashine:

Right, right. Yeah. 

Gunnar Branson:

We are creating peace to a certain extent by stitching together both financial, economic, and social fabric together because we own each other. We all have skin in the game. I think associations can serve the same purpose. 

Nancy Lashine:

That's a political statement because you could say the same thing about why would you want foreigners to go to university in the United States? Obviously, it builds a huge affiliation, it builds a network, it builds people who are then in that country, and you would think it's a promoter of peace. But needless to say, our government doesn't necessarily see it that way.

Gunnar Branson:

At the moment, I think people are more frightened than they are looking at this from a historical perspective in terms of what benefit having foreign students has been. A member of mine once pointed out, he said, "It's interesting where institutional investors invest in the world is highly dependent on where they went to college because that's where their network is." He was using that as an explanation for why we don't see more investment from Malaysia where they have considerable amount of aggregated capital and they're investing all of it in England. Where did they go to college? 

Now, obviously, I'm simplifying to a great extent, but I do think that when making investment decisions, the more of a network you can have in those places, the more comfortable you're going to be with the risk, more comfortable you're going to be with those kinds of decisions. Let's put it this way. Do you feel better about investing in a city where maybe you feel comfortable sending your kids to college? It also helps augment that global investing portfolio. Again, it is somewhat political, but it's political just from the economic standpoint of we all benefit from this. This is something that makes sense for all of us, both from an economic perspective and from a safety and security perspective. 

Nancy Lashine:

You're preaching to the choir. Just for our audience who may not be as familiar with capital flows, where is most of the foreign capital coming from at least up until this more recent point in the last year or two to the United States? 

Gunnar Branson:

Well, over the last couple of decades, it's been one country. Whenever I ask audiences what country that is, they usually say things like, I don't know, China or the Middle East, which is not the case. It's Canada. The Canadian pension plans have been a significant investor in the commercial real estate market in the United States for a lot of reasons. They've dominated investing in the US, which is why some of the political posturing of the last few months has been particularly alarming, I think, in the commercial real estate market. 

But certainly in the United States, we see investment from around the world. Canada has been slowing down, especially over the last six months, but last year wasn't great either and in great part, I think because the deals weren't there and there was a lot of uncertainty. Generally speaking, over the last couple of decades, non-US capital in US real estate acquisitions has been somewhere around 10 to 15% in terms of the total amount. I think that's the official counting. I think it's a lot higher than that, but I don't have the absolute numbers on that. But last year, it was around 4% on already slower- 

Nancy Lashine:

Last year being 2024. 

Gunnar Branson:

2024. So, we were already in a slow period. People were trying to anticipate what might happen, I guess, with the elections, but it was also just very difficult in a suddenly high interest environment, high interest rate environment to make the deals work the way they had worked before and no one was selling. So, it was a difficult market to begin with. 

I don't know what 2025 is going to look like yet. Although what you're seeing in some of the data right now is not promising for the first half. We'll see, it's difficult, but it's a reason why you want Canadians to be your friend in terms of they're foundational to a great extent for a lot of commercial real estate in the United States, but you really want everyone to be your friend when it comes to this. I think Europe, Germany has long been a significant investor in the commercial real estate market in the United States, really foundational in terms of what they do. Even Donald Trump knows that because it was German banks that were funding a lot of his properties when he was in the real estate market. There, it also pencils down. 

You are seeing more interest in the last couple of years, and this has been something that's been a long time coming. The Japanese institutional investors, the Korean institutional investors, they're trying to find the right time, the right assets, when to come in and different from the way they behaved in the '80s. They're being very careful. I like to think that they actually are returning to their roots as Japanese investors. They're thinking the way Japanese investors do, which is very careful, really looking through every angle, sometimes to a US investor frustratingly slow perhaps as they're trying to reach their conclusions, but that is what they're good at. 

That is how their finance culture works well when they're thinking that way. I think back in the '80s, maybe they tried to behave more like what they imagined an American investor would behave, and they made some mistakes that they regretted through the '90s. 

Nancy Lashine:

Well, and some of them are now figuring out that it pays to use gatekeepers who are local and you can take some time learning from them. 

Gunnar Branson:

Well, also, a lot of the more significant investors have had offices in the US for the last 30 years. They've rotated their senior executives through those positions to learn the market, to understand it in a comprehensive way. So, I think you're going to see more interest and more activity coming from Asian investors generally and Japanese investors specifically. I think they're starting to make some interesting movements in terms of investing in the US, more so perhaps than they did before. The Australian investors are also starting to come back and look at things in a different way. 

The Middle East continues to be a player, I think, in US real estate markets. However, they've got a lot of investing to do when it comes to real estate in their own backyard when you think about what's happening in Saudi Arabia. I don't think there's enough concrete in the world to build everything that they have planned, but they are still committed to a global portfolio approach to their sovereign wealth groups and their pension plans. So, I think we'll see more there. It's always moving. It always has been historically. 

Nancy Lashine:

Right. Are any of these investors more inclined to invest in funds versus directly? 

Gunnar Branson:

That's an excellent question and there's a wonderful- 

Nancy Lashine:

I finally got one. It took me a while. 

Gunnar Branson:

You're all excellent. You ask good ones. I think it's excellent because it's almost impossible to answer because the rhetoric for the last 20 years has always been, "Oh, we're going to become more direct. We're going to go more towards funds." There are problems with both approaches, challenges to both. There are advantages to both as well. Fund investing is not the most efficient form of investing possible. You're going to have going to have fees. You're going to have less control. But going into separate accounts, doing direct investing in LP also comes with its constraints. You've got to build out, more infrastructure. It's a lot of time. It's a lot of energy, and you really have to understand your market. So, it depends and I think it depends on the investor. 

It depends on how big their operation is and how committed they are to that. I think fund investing continues to be a viable way to approach it, but there are concerns around efficiency. There are also concerns around performance. Fund one, fund two tend to do really well with an organization, but three, four, or five, you do have a circumstance of diminishing returns quite often. So, there is concern about that. They're looking at the same numbers that everyone else is looking at. So, there is concern about that, and I think anyone who is a fund manager has to be cognizant of that and be able to make a strong case for their own efficiency and how they're working. 

But again, I don't think it's a binary thing yet, if it ever will be. I also think that there's a great attempt to figure out the new structure, whatever that is. Much of the regime that we have right now in terms of how we've structured institutional investing across the world was created in the '90s. So, maybe we're due for a little bit of a re-engineering at this point, but if I knew exactly what that would look like, I probably wouldn't be doing association work. But I think there's a lot to- 

Nancy Lashine:

Well, we have been every 10 years or so we've been re-engineering. So, obviously the growth of non-traded REITs, the proliferation of open-ended funds in the last several years, all of that is new and makes sense for a variety of reasons. As you say, nothing is perfect. Everything has its pros and its cons. 

Gunnar Branson:

I do feel like, I mean, non-traded REITs and open-ended funds have really proliferated in the last 10 years. I think we've been learning through that process and learning how to mitigate whatever the negatives might be for those structures as we've learned what works and what doesn't in that environment. But I think we're getting better at it, and we always are. We're always learning from whatever went wrong the last time as we work through it, but I think they're very viable and great structures. I think the key is not to get too attached to the structure, but instead to think about it, what is an institutional investor need? What are they looking for? 

They're looking for a certain consistency of returns, reliability. There is an aversion to undue risk. I think a lot of people when they enter into the institutional marketplace, they think, "Oh, it's all about how can I get the highest yield for the investment?" Yeah, it's important to be able to make a lot of money off of something, but more important that is how do you protect your downside and how do you think through risk? Because you really are thinking long-term and capital preservation as much as increasing it. So, I think you have to be an adult. When you're an adult- 

Nancy Lashine:

Darn, I hate that. 

Gunnar Branson:

I know. When you're an adult, it's not about what can I get? It's all right. How do I work through these very real challenges? How do I realize that whatever it is that I'm going to end up with is not going to be everything I ever wanted it to be? How do I speak openly and honestly and transparently with all the constituents? So they know what's going on. I think the great fund managers are the ones that are the first to say to their investors and their constituents, here's what's not working, here's what we're doing, here's where we think the risks are going to be. The ones that don't last as long are the ones that somehow try to fix it before they talk about it. So, communication is more essential than ever. Transparency is.

Nancy Lashine:

Performance is good, but communication is number one. That's true. 

Gunnar Branson:

It's an emotional intelligence. Frankly, It's this ability, I'm not the master of the universe. I don't have all the answers. I'm going to make mistakes and I'm going to sit here and take it when you're telling me what an idiot I am. Here's what we're going to do as we move through this. That's what an adult does. 

Nancy Lashine:

One of the great privileges I've had is going to the Berkshire Hathaway annual meeting and listening to someone like Warren Buffett and when he was alive, Charlie Munger, just talk about how they invest and incredible humility and just a great structure. I know we are going to have to start wrapping up. I wanted to ask you a question, from your perspective, Gunnar, who's had the greatest influence on you personally? 

Gunnar Branson:

Well, it may sound a bit hackneyed, but it's probably my parents and their unique take on how the world works and putting me as a child in circumstances that were normal to me, but extraordinary to I think most people. I was very fortunate to have the experiences I had. I was also, I think, so influenced by writers, Gabriel García Márquez. 

Nancy Lashine:

Ah, One Hundred Years of Solitude. 

Gunnar Branson:

Absolutely, blew my mind. 

Nancy Lashine:

Blew my mind too. That may be generational though. I don't know. 

Gunnar Branson:

It could be. It could be, but I think the way he looks at time and the way he looks multigenerational I think is important. If anyone is thinking as an institutional investor, you have to think beyond the immediate.

Nancy Lashine:

So my children, which they weren't thrilled about, had to withstand having my maiden name as their middle name, all of them. I did that because Gabriel García Márquez just made clear that why that was so important in life. 

Gunnar Branson:

It's very cool. Yeah, absolutely. The connection to everyone in the generational connection. I think Kurt Vonnegut was very influential, and I read him probably way too young and managed to really screw my head up. But I think I've returned to him at different times in my life in great part because what he had was a humility and radical honesty about the foolishness of life. 

Nancy Lashine:

A little depressing for a young person. 

Gunnar Branson:

Very, but certainly eye-opening. I think to counteract that would probably be Gene Roddenberry and what he did with what is now the-five years of Star Trek and this idea of how working together we can get beyond some of the foolishness that Kurt Vonnegut so well noted and wrote about. But this idea of there is value in thinking about a better world, there is value in thinking about how people can work together better way. 

It is the dream that has not always been well-executed, in fact, probably has never been well-executed of things like the United Nations, which is the ultimate association. It's the dream of how we can come together and it's not about one person having all the answers, but it's about what happens when we mix it up with each other and how compromise doesn't have to be a negative. It can be how we find truth. 

Nancy Lashine:

Right, right. So, I ask you this with a little trepidation. As a man who runs a global organization, you don't want to offend anybody, but do you have a favorite city? 

Gunnar Branson:

Oh, favorite city. Well, I have a number of them. I am an absolute city lover in great part because still I feel a foreigner to cities in so many ways because of the way I grew up. It is impossible not to love London. It is absolutely true that when you tire of London, you tire of life. It is just such an amazing place. I love Chicago. There is so much about that city that it hits above its weight. I love New York. I love San Francisco just because it's so darn pretty. I love the way that these German cities like Munich and Frankfurt are so quiet even at rush hour. I don't know how they do it. It's amazing what they do. 

Nancy Lashine:

They're on the train. They're not in the car.

Gunnar Branson:

But they're so quiet. It's wonderful. How can you not love Paris? I love the way that everyone, if you're an American, treats you like you're dirt on their shoe. It's almost part of the value proposition. I'm going to be amongst people that are so much cooler than I am, and they know it. The food isn't bad either. I love the Italian cities and how it seems like, let's just let it, let's be stylish above all else. I love small towns. I love villages. I think that cities are us. I think our greatest accomplishment as human beings is the creation of cities. 

Can you walk away from Tokyo and not marvel at how we figure out how to live a good life right on top of each other? How can you not respect this entity that no one controls? No king, no mayor, no president actually controls the growth of a city. It happens organically. It's something that's beyond us, and I think to a certain extent, cities have their own life. We are just blood cells in this creature that is-

Nancy Lashine:

As you said about associations, they are connectors. So, with that incredible parting thoughts and so many pearls of wisdom, Gunnar, thank you so much for joining us today. Really, really appreciate it. I always learn from listening to you. So, thanks for coming. 

Gunnar Branson:

Thank you, Nancy. It was really fun. 

Nancy Lashine:

I hope you enjoyed this episode of Real Estate Capital. Before you go, I have a quick favor to ask. We put a lot of thought and effort into this show and making sure we bring you insights from real estate leaders that you don't normally find in the mainstream media. So, if you're enjoying the show, please remember to follow it on your favorite podcasting app. So, you never miss an episode. We'd also love for you to share it with others or give us a review on Apple Podcasts so others can find us. Thanks again for tuning in. For more information about our firm, please visit our website at parkmadisonpartners.com.