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
Recent Developments
Jul 22, 2024 - CRE Market Mixed
- The health of the US commercial real estate (CRE) market is mostly solid, except for the beleaguered office sector and a minor slowdown in industrial property demand, according to a July report by Moody’s. The office sector continues to face significant headwinds as hybrid work models weigh on demand. Office vacancies in Q2 2024 hit a record-setting 20.1%, marking the third consecutive quarter that vacancies hit new all-time highs. Despite signs that consumers may be pulling back on spending, the retail vacancy rate in Q2 held steady compared to the same period in 2023, and asking rents saw a slight increase. The market for industrial space has softened compared to the pandemic years when warehouse construction boomed. Industrial vacancies increased about 1.2% in Q2 2024 compared to Q2 2023, but asking rents have remained steady. In multifamily, a large wave of new supply cooled rent growth in the second quarter, but demand seems to be catching up to the flush of fresh inventory while vacancy rates remained mostly unchanged year-over-year.
- Since Q4 2022, weekly US in-person office occupancy has remained a stubbornly low 50%, according to a June 2024 report by The Conference Board. In the wake of the pandemic, employers have found that offering hybrid work schedules is an effective way to attract and retain workers constrained by long commutes and higher costs of living. Nearly 70% of US firms offer their employees hybrid or remote flexibility, up from about 51% in Q1 2023. According to data firm CoStar, when companies sign new leases they are reducing their office footprints by about 19%. Low office occupancy brings risks for the commercial real estate sector and cities’ central business districts that depend on office worker spending.
- Amid a recent uptick in retail bankruptcies, retail space landlords don’t expect their properties to stay vacant for long, according to The Wall Street Journal. In 2023, 26 large retailers declared bankruptcy, marking the highest number since 2020. So far this year, more than a dozen other retailers have announced store closures as part of their bankruptcy restructurings. However, some building owners see opportunity in financially distressed tenants breaking leases. Some industry insiders suggest that recently vacated spaces can often be leased at higher rents to higher-quality tenants. Despite increased economic uncertainty and signs of weaker consumer spending, demand for retail space remains steady, primarily due to a chronic lack of new retail construction. Investments in retail construction have been weak since the recession of the late 2000s, and conditions were made worse by the pandemic. In the first quarter of 2008, before the financial crisis, contractors built 80 million square feet of new retail space, according to data firm CoStar Group and JLL research. In the first quarter of 2024, only 9.5 million square feet of retail construction was completed.
- Once considered a risky bet by some commercial property landlords, restaurants have become one of the fastest-rising segments of the retail real estate market, according to The Wall Street Journal. Several factors are helping to drive the trend, including wage growth, low unemployment, the popularity of foodie culture, and Millennials’ tendency to marry later and eat out more. In 2023, food service establishments accounted for 19% of total retail leases, the largest share held by any single retail category, according to data firm CoStar. Landlords have traditionally been suspicious of restaurants because they are costly to build out and have a high business failure rate. However, property owners are warming up to credit-worthy restaurant chains because they can help attract foot traffic to other businesses nearby.
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