Lessors of Nonresidential Buildings

The 31,300 firms in the US act as lessors of nonresidential buildings, such as office buildings, shopping centers, and retail stores. The industry includes owner-lessors and firms that rent real estate and subsequently sublet property to others. Professional and office buildings account for about 36% of sales; commercial property, which includes shopping centers and retail stores, account for about 36%; and manufacturing and industrial buildings 8%. Firms may manage properties or outsource management to a third party.

Competition for Desirable Locations

The location of properties is a primary factor that determines rental rates, and properties in sought-after areas are priced at a premium.

Capital-Intensive, Debt Heavy

The nonresidential lessor industry is capital intensive, and firms typically have sizeable investments in real estate holdings.

Oct 19, 2026 - Higher Treasury Yields Threaten Commercial Property Transactions

• Commercial real estate lenders and investors are preparing for a more difficult financing environment as Treasury yields rise, according to Bisnow. The 10-year Treasury yield reached approximately 5.3% in early October, sharply increasing the benchmark used to price many commercial mortgages. Industry executives said rapid rate changes have disrupted property valuations, financing commitments, and acquisition plans. Lenders are increasingly requiring stronger underwriting, additional borrower equity, and more conservative leverage. For commercial property lessors, the shift could make refinancing expensive or difficult, particularly for buildings carrying debt originated at substantially lower rates. Owners unable to inject additional capital may face pressure to sell properties or accept lower valuations. Well-capitalized investors and private lenders could benefit from opportunities to acquire distressed assets as borrowers confront approaching maturities.
• Rising interest rates are disrupting commercial real estate transactions and financing arrangements, according to The Wall Street Journal. The increase in borrowing costs is making previously negotiated property deals harder to complete as buyers and lenders reassess expected returns and valuations. Higher financing expenses can reduce the prices investors are willing to pay for income-producing real estate, creating friction between sellers and prospective purchasers. These conditions could complicate acquisitions, asset dispositions, and refinancing plans for lessors of nonresidential buildings. Owners facing loan maturities may need additional equity or be forced to reconsider property values established when interest rates were lower. Investors with substantial cash reserves may find opportunities to acquire properties at a discount, while highly leveraged owners could experience increasing financial pressure.
• The US commercial property market continues to experience mixed conditions as borrowing costs remain elevated, according to the National Association of Realtors (NAR). Its October commercial real estate report found that office demand continued to stabilize, supported by improving absorption and stronger leasing activity in higher-quality buildings. Multifamily properties also benefited from continued demand and a slowing construction pipeline. However, recovery conditions varied considerably among property classes. Class A office properties led leasing improvements, while Class B buildings continued to experience tenant departures. For lessors of nonresidential buildings, the divergence suggests that property quality, location, and tenant requirements will remain important determinants of performance. Owners of older office buildings may need additional investments or pricing concessions to retain tenants, while properties benefiting from improving demand could experience stronger occupancy and rental income.
• Commercial Property Executive reports that the US industrial property market is stabilizing following several years of unusually rapid development and rent growth. Yardi Matrix data showed that 230 million square feet of industrial space broke ground through August, putting 2026 on pace for the most new construction starts since 2022. Projects exceeding 1 million square feet accounted for more than 32% of construction starts by square footage. National industrial rents averaged $9.31 per square foot in August, increasing 5.4% from a year earlier. Vacancy remained at 9.3%, unchanged from July but higher than a year earlier. For industrial property lessors, resilient logistics and ecommerce demand could support occupancy and continued leasing activity. However, elevated vacancy, construction costs, and uneven regional conditions may limit rent increases and encourage more selective development.

Industry size & Structure

The average nonresidential lessor operates out of a single location, employs about 5 workers and generates about $5 million annually.

• The nonresidential lessor industry consists of about 31,300 firms that employ 159,900 workers and generate $155.1 billion annually.
• The industry is concentrated at the top and fragmented at the bottom. The 50 largest firms account for 45% of industry sales. Large firms may operate as real estate investment trusts (REIT) and have properties in foreign countries.
• While commercial space is concentrated in large buildings, large buildings account for a relatively small number of the overall stock of commercial buildings, according to the National Association of Realtors (NAR). The majority of buildings are relatively small.
• Large firms with nonresidential lessor business include Prologis, Simon Property Group, LaSalle Investment Management, and Brookfield Property Partners. The largest firms are fully integrated, own and develop land and buildings, and provide leasing, management, and construction services.