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
                                  Source: Vertical IQ and Inforum

                                  Recent Developments

                                  Nov 16, 2022 - Office Leases Drop
                                  • The long-term impact of the pandemic on office demand is becoming clearer, according to reporting by Biznow. The number of new office leases in the third quarter of 2022 was down 18% compared to Q3 2021 and was off 15% from Q3 2019, according to commercial real estate data firm CoStar. The square footage of office leases is also dropping. In the first three quarters of 2019, the average office lease was about 4,500 square feet. In the first nine months of 2022, the average lease fell to 3,800 square feet, according to CoStar. In Q3 2022, the average office lease term fell to 6.2 years after rising for the previous 12 months to 9.1 years, according to real estate firm JLL’s Q3 Office Outlook report.
                                  • Warehouse operators are enjoying strong demand as industrial vacancies keep shrinking, rents keep rising, and new capacity is slow to come online, according to an October report by CommercialEdge. The average national in-place rent for industrial property was up 5.8% in September compared to a year earlier. The national vacancy rate remained at 4.1%. At the end of September, more than 700 million square feet of new industrial space were under construction. Warehouse rent growth is strongest near busy ports. The Phoenix area has seen explosive growth due to spillover from the coastal region of Southern California.
                                  • Fitch Ratings’ US CMBS delinquency rate fell six basis points to 1.89% in October 2022 from 1.95% in September 2022, driven by few new delinquencies and stronger resolution volume. 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 October and September were: Hotel: 4.86% (from 5.36% in September); Retail: 5.68% (from 5.88%); Mixed Use: 2.15% (from 2.15%); Office: 1.23% (from 1.19%); Multifamily: 0.33% (from 0.33%); Industrial: 0.4% (from 0.13%); Other: 0.55% (from 0.56%).
                                  • Some real estate developers are holding off on new office projects as remote work has eroded demand for new office space, and rising interest rates make projects more expensive, according to The Wall Street Journal. Office occupancy is only about half of what it was before the pandemic, which has prompted some major real estate firms, including Varnado Realty Trust; Hines, Kilroy Realty Corp.; and Brookfield Asset Management, to tap the breaks on new office development projects. The national office vacancy rate is 12.5%, up from 9.6% in 2019, according to commercial real estate data firm CoStar Group. About 37% of the office space currently under development remains available, double what it was in 2019, according to CoStar.
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