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 130,000 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 130,000 firms that generate over $170 billion and employ over 410,000 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

                                  Feb 16, 2024 - Wage Growth Outpaces Price Increases
                                  • Producer prices charged by nonresidential real estate agents and brokers fell slightly in the fourth quarter of 2023 compared to Q4 2022, according to the BLS. BLS data also shows that wage growth in the real estate agent and broker industry in Q4 2023 increased sharply. Reduced pricing power amid significant wage growth may suggest that margins for nonresidential real estate agents and brokers are being pressured. In Q4 2023, real estate agent and broker employment was flat compared to a year earlier, according to the BLS.
                                  • US commercial real estate transactions were down sharply in 2023, but that hasn’t yet translated into significantly lower prices, according to The Wall Street Journal. In 2023, there were only $374 billion in commercial real estate deals, down 51% from 2022, according to MSCI. The value of 2023 deals was also 14% lower than in 2020, when many deals were scuttled because lockdowns prevented property viewings. Overall, US commercial real estate values have decreased about 11% compared to the highs seen in early 2022 when the Federal Reserve began raising rates, according to the RCA CPPI National All-Property Index. However, price drops have been mostly confined to certain property types including offices in oversupplied business districts and apartments. Other property classes, including ecommerce warehouses, self-storage facilities, and hotels, have seen fewer price drops.
                                  • Higher-end office properties have been largely unscathed by the downturn in demand, but the market for high-quality office space is beginning to show signs of weakness, according to The Wall Street Journal. As the pandemic subsided, owners of properties even more luxurious than Class A offices marketed their spaces as lures that would attract workers back to in-person work with amenities like gyms, rooftop decks, and high-end dining options. However, the market for luxury offices is losing steam as companies resign themselves to hybrid work models and concerns about the possibility of a slower economy take center stage. On average, new leases of five-star office properties are 43% lower than they were in 2019, according to CoStar.
                                  • The commercial real estate loan refinancing environment is expected to worsen in 2025, leading to an increase in commercial mortgage-backed security (CMBS) delinquency rates, according to a recent report by Fitch Ratings. High interest rates and tightening lending standards are expected to push the US CMBS delinquency rate in 2024 to 4.5%, compared to about 2.25% in November 2023. In 2025, the CMBS delinquency rate will increase to 4.9%. About $31.2 billion in Fitch-rated US CMBS multiborrower transactions are scheduled to mature in 2024, and only about half, or $15.6 billion, are projected to be unable to refinance. In 2025, the refinancing rate will improve to about 51%-75% amid lower interest rates and improving economic conditions. Retail, office, and multifamily properties account for the highest concentration of maturing loans.
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