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 Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 100,000 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 real estate broker industry consists of about 40,000 commercial and residential brokers that either operate out of a real estate office or work for a real estate firm.

    • The total real estate agent/broker industry, which includes residential and commercial offices, consists of over 100,000 firms that generate over $100 billion and employ over 300,000 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.
    • 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 and Wakefield, and Marcus & Millichap. Large firms often have global operations.
                                  Industry Forecast
                                  Commercial Brokers & Property Managers Industry Growth
                                  Source: Vertical IQ and Inforum

                                  Coronavirus Update

                                  May 9, 2022 - Workers Slow to Return to Offices
                                  • The pandemic reduced office space utilization as many white-collar workers shifted to working remotely. As of February 23, the average workplace occupancy was 36.8%, according to data gathered from the top 10 ten cities monitored by security firm Kastle Systems. By April 27, the average workplace occupancy rate was 43.4%. US airport screenings, movie ticket sales, and dining out were all near or above 90% of pre-pandemic levels in April 2022. If hybrid work persists and becomes the norm, it could have significant ripple effects on commercial real estate markets in business districts as other businesses such as restaurants, bars, and stores see less traffic.
                                  • The pandemic also reduced public sector demand for office space. At the end of 2019, state and local governments leased about 22.6 million square feet of corporate-grade office space, according to commercial real estate firm JLL. At the end of 2021, state and local governments across the US shed about two million square feet of space, a drop of 10%. As state and local government agencies fully embrace hybrid work models to attract and keep workers and save taxpayer money, JLL estimates state and local government office space demand could fall by 30% over time.
                                  • Fitch Ratings’ US CMBS delinquency rate fell six basis points to 2.32% in April 2022 from 2.38% in March 2022, driven by stronger hotel and mixed use resolution volume and fewer new delinquencies. 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 are as follows: Hotel: 6.75% (from 7.37% in March). Retail: 6.76% (from 6.74%); Mixed Use: 2.5% (from 2.53%); Office: 1.31% (from 1.3%); Multifamily: 0.33% (from 0.37%); Industrial: 0.2% (from 0.22%); Other: 0.77% (from 0.78%).
                                  • As warehouse space has tightened due to solid consumer spending and e-commerce growth during the pandemic, warehouse asking rents are rising. Industrial property asking rents rose 3.7% in Q1 2022 over Q4 2021 and were up 11.8% year-over-year, according to an April report by real estate firm CBRE. The national vacancy rate for industrial property dropped to 3.1% in the first quarter of 2022, according to CBRE.
                                  • As the pandemic has persisted, some retailers, including smaller ones, are finding they can negotiate for better lease terms, according to The New York Times. Depending on location, rental tenants may push for lower rent, shorter lease terms, or more generous tenant improvement allowances.
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