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
Dec 20, 2024 - Employers Try to Strike Balance Between In-Office and WFH
- While most employers are implementing return-to-office requirements, they realize the need to balance in-office work with the value that employees place on working from home, according to a recent survey by advisory firm WTW. About 61% of US companies surveyed said they had implemented a formal policy requiring employees to be in the office for a minimum number of days per week. The most cited reasons for in-office requirements included better engagement within teams (84% of respondents), reinforcing corporate culture (71%), and increasing productivity through better collaboration (64%). However, firms recognize that many workers value remote work. When asked about the leading benefit of remote work, 84% of those surveyed said attracting and retaining talent for roles that would go unfilled without remote work options, 78% said better work-life balance improved engagement, and 76% said remote work improved retention.
- A glut of life sciences real estate that took hold in 2024 is likely to persist in 2025, according to real estate firm JLL. The surplus of life science and lab space is putting downward pressure on rents and slamming the brakes on new construction. Historically, life sciences property rents start to move upward during periods of increased construction activity, and JLL doesn’t expect that to happen for another four to five years. Rent growth in secondary life sciences markets will be challenging to the point that some properties – even ones that have yet to come online – may be converted to office or tech-focused space.
- High office vacancies have pushed down property valuations, making office to residential conversions more economical, according to The Wall Street Journal. A housing shortage and a glut of office supply made conversions seem like an obvious solution to both problems. However, until recently, conversion project economics were challenging to pencil out, even for an aging office building. That is changing as plummeting values for older office buildings in second-tier locations are prompting owners to take what they can get, making conversions more economically viable. According to real estate firm CBRE, there have been 73 US conversion projects so far in 2024, up from 63 in all of 2023. There are about 309 office conversions in the planning stages, and about 75% of them are office to residential. In all, about 38,000 housing units are in the pipeline.
- 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.
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