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
Oct 22, 2024 - Tight Market for Retail Space Squeezes Smaller Stores
- 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.
- Fitch Ratings’ US CMBS delinquency rate rose by 35 basis points to 2.89% in September 2024 from 2.54% in August. The September rise was driven by a spate of office, regional mall, and multifamily defaults which offset strong new issuance activity. Commercial mortgage-backed securities (CMBS) are fixed-income investment products backed by mortgages on commercial properties rather than residential real estate. The delinquency rate is the percentage of commercial real estate loans that were 30 or more days past due or in foreclosure. A rising delinquency rate indicates that an increasing number of commercial property owners cannot pay the mortgages on those properties. Current and prior-month delinquency rates for September and August were: Office: 5.85% (from 5.31% in August); Retail: 5.03% (from 4.15%); Hotel: 3.35% (from 3.34%); Multifamily: 0.85% (from 0.47%); Industrial: 0.41% (from 0.55%); Mixed Use: 4.23% (from 3.85%); Self-storage: 0.01% (from 0.01%); and Other: 1.05% (from 1.68%).
- Developers who were bullish on lab space real estate projects during the pandemic are finding the market is oversaturated, according to The Wall Street Journal. Early in the pandemic, developers moved quickly to build lab space with special climate control, anti-vibration, ventilation, power, and fire safety features. But the market for such spaces has become bloated by a glut of new properties coming online. More than 59 million square feet of new lab space has been built since the first quarter of 2020, and there’s another 19.1 million square feet in development, according to real estate services firm JLL. Compounding the issue is a drop in demand. Many life-sciences, biotech, and pharmaceutical firms have pulled back on investments amid high interest rates, tight lending standards, and economic uncertainty. Lab space properties that cannot find tenants are being marketed as offices in some markets.
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