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 130,000 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 130,000 firms that generate over $170 billion and employ over 410,000 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 over $20 trillion in 2021, according to Nareit.
- 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
Apr 19, 2024 - Industry to Return to Steady Growth
- The commercial real estate broker industry is expected to see weaker sales growth this year, but demand is projected to improve in the following four years. The industry’s year-over-year sales increased by 7.8% in 2022 before dropping to 6.1% in 2023, according to Inforum and the Interindustry Economic Research Fund, Inc. Sales growth is projected to moderate further to about 3.8% in 2024, then rise to 6.2% in 2025. The industry will then see steady but mostly flat average annual growth of about 6% through 2028, according to Inforum and the Interindustry Economic Research Fund, Inc.
- In a late March report, Moody said commercial real estate (CRE) values will likely drop by 10% over the next 18 months. The office subsector will suffer the most, with a 26% decline in values by the end of 2025, as hybrid work models prompt businesses to downsize to smaller spaces or move to less expensive properties. By the end of 2025, multifamily CRE value will drop by 5% amid a robust influx of new supply. Over the next six quarters, oversupply will also reduce industrial CRE value by 5.7, and warehousing by 6.6%. As shopping continues to move online, retail CRE prices are expected to decline 8% by the end of next year. A higher-than-usual amount of CRE will mature by the end of 2025, and many loans will have large balloon payments in need of refinancing. Cash flow will be at greater risk if property owners refinance when interest rates are higher than they’ve been in more than 20 years.
- A rise in application fraud is starting to hurt multifamily property managers’ bottom lines, according to a recent survey by multifamily software provider RealPage and reporting by Multifamily Dive. About 75% of multifamily managers report that rental fraud has increased over the last 12 months. The leading types of application fraud include false or manipulated identities, income misrepresentation, and identity theft. More than 70% of survey respondents said that most instances of fraud go undetected until after the tenant has moved in. Property managers surveyed said some of the most damaging impacts of fraud included reduced income/higher costs of 10-20% (77% of respondents), property damage (55%), harm to business reputation (51%), criminal activity in fraudulently rented units (49%), added costs from early lease termination/eviction (47%), and loss of good tenants due to bad behavior by fraudulent ones (42%).
- Despite record levels of office vacancies, rents are unchanged or, in some cases, even going up, according to The Wall Street Journal. The average asking rent for office space is $35.24, up from $34.92 in the fourth quarter of 2019, according to property data firm CoStar. Office rents have remained high due to a peculiar function of the commercial real estate market. Rents are a key metric used to measure property value, so owners are reluctant to reduce rents, which would lead to lower building value. In some cases, office owners would rather space stay empty than reduce the rent. A reduction in value also makes it more difficult for landlords to refinance. Industry watchers suggest office rents will eventually fall back to Earth when owners are forced to restructure their mortgages or sell off distressed properties.
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