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
Sep 23, 2024 - Developers Rethink Plans Amid Lab Space Glut
- 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.
- The effort to reshore strategic segments of the US manufacturing sector is attracting investors who hope to cash in on the resurgence, according to The Wall Street Journal. US and foreign firms have earmarked nearly half a trillion dollars to construct new factories to build semiconductors, electric cars, and other products, according to real estate data analytics firm Green Street. Property developers are flocking to the Sunbelt and Rustbelt where the new manufacturing projects are springing up. Developers are betting that manufacturing investments will have knock-on effects for housing, shopping centers, and other development opportunities. The manufacturing boom is a welcome turn of fortune for developers as the office sector languishes due to hybrid work, and the retail real estate market has been lackluster in recent years.
- According to The Wall Street Journal, Freddie Mac and Fannie Mae are expected to soon roll out stricter rules for commercial property lenders and brokers amid a crackdown on fraud by federal regulators. Before the Federal Reserve began raising interest rates to curb inflation, commercial property values surged, which led to an increase in the number of loans with fraudulent financials and inflated property valuations. Under the tighter rules, lenders would need to independently verify the multifamily borrowers’ financial information, ensure borrowers have sufficient cash, and verify funding sources. Current requirements allow lenders more leeway to trust the financial data provided by borrowers, but the new rules might require lenders to do their own due diligence on property values and financial performance.
- According to a recent survey by the US Bureau of Labor Statistics (BLS), the percentage of workers who work from home has increased over the last year. In June 2024, 22.3% of the US workforce teleworked on a non-seasonally adjusted basis, up from 19% in June 2023. The share of workers who teleworked increased even though the total number of workers remained essentially unchanged. However, over the same period, the average weekly hours for remote work fell from 28.7 to 27. The BLS attributed the drop in weekly hours spent working from home to wider adoption of hybrid models where workers divide work between the office and home. Between June 2023 and June 2024, the percentage of workers who telework full-time fell from 53.2% to 48.4%. Remote work can put downward pressure on office space demand.
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