Commercial 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 16,000 commercial property management companies in the US maintain and manage real estate assets, such as office buildings, industrial buildings, warehouses, and other nonresidential buildings. Firms generate the majority of revenue from property management services, which include general maintenance, engineering, operations, landscaping, janitorial, and sustainability services.
Dependence on Subcontractors
Commercial property managers typically rely on subcontractors for certain types of services, such as plumbing and electrical repair, HVAC maintenance, or waste pick-up.
Competition from Property Tech
Advances in real estate and property tech have made property self-management less complex and more feasible for commercial real estate (CRE) owners.
Industry size & Structure
The average commercial property management firm operates out of a single location, employs about 11 workers, and generates between $1 million and $2 million annually.
- The commercial property management industry consists of more than 16,000 firms that employ about 172,000 workers and generate about $27 billion annually.
- The industry is concentrated at the top and fragmented at the bottom; the top 50 companies account for over 40% of industry revenue. About half of all firms generate less than $500,000 annually.
- Large firms with commercial property management operations include CBRE, JLL, and Cushman and Wakefield. Large firms often have global operations.
Industry Forecast
Commercial Property Managers Industry Growth
Recent Developments
Oct 22, 2024 - Tight Market for Retail Space Squeezes Smaller Stores
- A lack of retail real estate construction in recent years and rising demand for space by expanding large retail chains is putting the squeeze on some small businesses, according to The Wall Street Journal. The tight retail space market advantages larger chain stores that can afford higher rents and have more access to credit. According to a recent survey by Alignable - a social media outlet for small business owners - nearly 60% of small businesses reported their rent had gone up in the last six months and more than half of independent retailers said they were unable to pay their full rent in September.
- While the Federal Reserve’s half-point rate cut in September was welcome news to many commercial property owners, lower rates may not be enough to save building owners who are highly leveraged, according to The Wall Street Journal. Some property owners took on high levels of debt when rates were low just a few years ago. However, when rates began climbing in 2022, some building owners missed payments, betting their creditors would extend loan deadlines. In some cases, banks have lost patience with highly leveraged owners and have opted to take control of properties instead of allowing borrowers to continue missing payments. Commercial real estate observers expect most borrowers and their lenders will be able to weather the current market then refinance once rates drop further.
- Fitch Ratings’ US CMBS delinquency rate rose by 35 basis points to 2.89% in September 2024 from 2.54% in August. The September rise was driven by a spate of office, regional mall, and multifamily defaults which offset strong new issuance activity. 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 September and August were: Office: 5.85% (from 5.31% in August); Retail: 5.03% (from 4.15%); Hotel: 3.35% (from 3.34%); Multifamily: 0.85% (from 0.47%); Industrial: 0.41% (from 0.55%); Mixed Use: 4.23% (from 3.85%); Self-storage: 0.01% (from 0.01%); and Other: 1.05% (from 1.68%).
- Building owners and operators are facing a period of cyclical elevator replacement, according to Bisnow. Elevator equipment manufacturers estimate that of the 23 million elevators in service globally, 7 million are 20 years old or older. The useful life of an elevator is between 20 and 25 years. The number of elevators that are ripe for replacement is expected to accelerate in the coming years. In 2023, Otis Elevator saw replacement demand rise 17%. Hybrid work has also contributed to demand for elevator replacement amid the so-called flight to quality in the office market. Demand for office space has shifted to the highest quality properties, which has forced lower tier buildings to modernize to attract and keep tenants. Similar trends are boosting demand for elevator replacements in the multifamily market.
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