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 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
Recent Developments
Mar 17, 2023 - Banking Woes Weigh on Commercial Real Estate
- The collapse of Silicon Valley Bank and Signature Bank is expected to put downward pressure on commercial real estate values and stifle dealmaking activity as credit tightens, according to Biznow. Even before the banking crisis, commercial property values were down 15% in February 2023 from their high point in March 2022, according to Green Street. By mid-March, the FTSE NAREIT Equity Index, which includes all US REITS, had fallen about 4.6% since the news of the crisis, while the S&P 500 was only off 3% over the same period. Some industry watchers expect the office market to be hit especially hard as it has still not recovered from the pandemic-related drop in occupancies. CBRE Global chief economist Richard Barkham said, “Real estate capital values, which had already been falling, will be further pressured by an even more tightly constrained credit market."
- Even before turmoil emerged in the US banking sector, The Wall Street Journal reported on several high-profile office landlords that had defaulted on their loans, suggesting the pandemic’s effect on office occupancy may be permanent. In late February, The Wall Street Journal cited data firm Trepp Inc, reporting that five to 10 office properties per month are at risk of defaulting due to low occupancy rates, maturing debt, or expiring leases. While there is still demand for high-quality office space in desirable locations, overall occupancy rates have stalled at around 50% of pre-pandemic levels.
- The rising frequency of natural disasters due to climate change is pushing up insurance costs for commercial property owners, according to Yardi Matrix. While the issue is most pronounced in states that are experiencing extreme weather events – such as wildfires, hurricanes, and severe winter storms – insurance rates are rising nationwide. In states with high climate-related risks, including Florida and Texas, insurance rates are rising by 50% or more and threaten to stifle property sales and new development. Property insurers that use reinsurance policies to assuage some of their risk are finding reinsurance rates rising by 45-100%, and some reinsurance firms are ceasing to offer services in high-risk states.
- Retail, particularly shopping centers anchored by grocery stores, is proving to be a resilient segment of the commercial real estate sector, according to The Wall Street Journal. Grocery stores are attractive investments as consumers continue to flock back to in-person retail as the pandemic has subsided. Among specific real estate segments, retail is the only one that saw sales increase in 2022 over 2021, according to data firm MSCI. However, retail-based real estate sales of $85.7 billion were mainly in the first half of 2022 before rising interest rates began to slow the market.
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