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 15,700 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 15,700 firms that employ about 172,700 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
                            Source: Vertical IQ and Inforum

                            Recent Developments

                            May 20, 2024 - Industry to Return to Steady Growth
                            • The commercial property management 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 11.6% in 2022 before dropping to 6.4% in 2023, according to Inforum and the Interindustry Economic Research Fund, Inc. Sales growth is projected to moderate further to about 4.6% in 2024, then rise to 6.6% in 2025. The industry will then see steady but mostly flat average annual growth of about 6.4% 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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