Commercial Brokers & Property Managers
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 143,000 commercial real estate brokers in the US help clients purchase, sell, and lease commercial real estate by acting as middlemen between buyers and sellers. Commercial real estate (CRE) is property that is used for income-generating and/or price-appreciation purposes. A broker may be an independent agent, serve as an employer of commercial real estate agents, or work as part of a CRE brokerage company.
Rising Interest Rates
CRE transactions typically involve third-party financing, so when interest rates rise, investors are forced to pay more to borrow money.
Shifting Demand for Commercial Space
Technology and COVID created fundamental shifts in demand for commercial real estate.
Industry size & Structure
The typical real estate office that employs brokers and/or agents operates out of a single location, generates about $1 million annually, and employs about 3 workers.
- The total real estate agent/broker industry, which includes residential and commercial offices, consists of over 143,000 firms that generate over $170 billion and employ over 406,000 workers.
- The real estate agent/broker industry is fragmented. The top 50 firms account for less than 30% of revenue, and many agents/brokers work as independent contractors. About 40,000 commercial and residential brokers either operate out of a real estate office or work for a real estate firm.
- Over 80% of total US commercial property transactions are in the $1 million to $10 million range, according to Marcus & Millichap. The National Association of Realtors has approximately 80,000 members that operate in the “small” commercial real estate market, which consists of transactions that involve less than $2.5 million. The US commercial real estate (CRE) market was valued at $22.5 trillion in 2023, according to the Federal Reserve.
- According to a National Association of Realtors (NAR) commercial membership survey, the typical CRE agent has 25 years of real estate experience and 20 years of CRE experience. Within the NAR CRE membership, 51% worked in sales and 49% were brokers. Almost half of agents owned commercial real estate personally.
- Large firms with CRE brokerage operations include CBRE, JLL, Cushman & Wakefield, and Marcus & Millichap. Large firms often have global operations.
Industry Forecast
Commercial Brokers & Property Managers Industry Growth
Recent Developments
Nov 22, 2024 - Office Market Shows Signs of Improvement
- The US office market posted higher net absorption in the third quarter, and vacancy rates remained steady, perhaps signaling that demand for office space has hit bottom and is back on the upswing, according to a recent report by the real estate firm CBRE. Net absorption in Q3 hit 4.3 million square feet – up about 87% from Q2 2024 – which marked the second consecutive quarter of increasing office space demand. Absorption also exceeded the 3.5 million square feet of new office space that came online in Q3 2024. The office vacancy rate in Q3 2024 was unchanged at 19%, a positive signal after nine quarters of rising vacancies. Third-quarter leasing activity decreased slightly from Q2 2024 but rose more than 11% over Q3 2023.
- The troubled office space market may be turning a corner as major companies require workers to spend more time in the office, according to The Wall Street Journal. Amazon, Dell, and 3M have recently issued requirements for more office time for some of their teams. In the third quarter of 2024, a third of all firms required workers to be in the office five days per week, according to workplace strategy tracking firm Flex Index. The push for more in-office time comes amid a cooling of the US white-collar jobs market, which has shifted the balance of power back to companies. While industry observers doubt if workplace occupancies will ever return to pre-pandemic levels, some believe the market may have finally hit bottom. In the second and third quarters of 2024, the amount of occupied office space has remained stable after eight consecutive quarters of contractions, according to data firm CoStar.
- A lack of retail real estate construction in recent years and rising demand for space by expanding large retail chains is putting the squeeze on some small businesses, according to The Wall Street Journal. The tight retail space market advantages larger chain stores that can afford higher rents and have more access to credit. According to a recent survey by Alignable - a social media outlet for small business owners - nearly 60% of small businesses reported their rent had gone up in the last six months and more than half of independent retailers said they were unable to pay their full rent in September.
- While the Federal Reserve’s half-point rate cut in September was welcome news to many commercial property owners, lower rates may not be enough to save building owners who are highly leveraged, according to The Wall Street Journal. Some property owners took on high levels of debt when rates were low just a few years ago. However, when rates began climbing in 2022, some building owners missed payments, betting their creditors would extend loan deadlines. In some cases, banks have lost patience with highly leveraged owners and have opted to take control of properties instead of allowing borrowers to continue missing payments. Commercial real estate observers expect most borrowers and their lenders will be able to weather the current market then refinance once rates drop further.
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