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 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
                                  Source: Vertical IQ and Inforum

                                  Recent Developments

                                  May 20, 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.
                                  • Fitch Ratings’ US CMBS delinquency rate rose by 14 basis points to 2.33% in April 2024 from 2.19 in March. A rise in office maturity delinquencies drove the April rise, as several large office properties defaulted at maturity. 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 April and March were: Retail: 3.96% (from 9.92% in March); Hotel: 3.36% (from 3.31%); Office: 4.27% (from 3.66%); Multifamily: 0.39% (from 0.33%); Industrial: 0.49% (from 0.53%); Mixed Use: 4.00% (from 3.99%); Self-storage: 0.00% (from 0.00%); and Other: 1.83% (from 2.04%).
                                  • As hopes that the Federal Reserve will cut interest rates before the end of the year dwindle, some commercial real estate owners may decide it’s time to sell and move on, according to The Wall Street Journal. About $929 billion in outstanding property loans is set to mature in 2024, up 41% compared to an earlier estimate by the Mortgage Bankers Association. The increase is due to many of the loans that were due in 2023 being extended into this year. Extending loans further could be costly for some property owners. To secure additional loan extensions, lenders are requiring owners to put in additional cash as a show of faith in their properties. Some commercial real estate owners may decide to turn the keys over to lenders and deploy their cash elsewhere.
                                  • Some commercial real estate insiders suggest the office market is staring down a coming wave of defaults, according to The Wall Street Journal. About $38 billion of US office buildings are under pressure of foreclosure, default, or other types of distress, according to financial data analysis firm MSCI. Amid weak demand due to the pandemic and the shift to hybrid working, office building owners are taking longer to pay back their loans. According to Moody’s, in 2021, about 90% of office loans that had been converted into commercial-mortgage-backed securities were paid when they were due. In 2023, the on-time office payoff rate dropped to 35%. Over the next 12 months, about $18 billion in office loans that have been converted into securities will mature, more than double the amount seen in 2023. Moody’s estimates that weaker property incomes, reduced occupancies, and high debt levels will make it difficult to refinance nearly three-quarters of the office properties that will mature over the next year.
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