Lessors of Nonresidential Buildings
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 31,200 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.
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 31,200 firms that employ 157,000 workers and generate $155 billion annually.
- The industry is concentrated at the top and fragmented at the bottom. The 50 largest firms account for 42% 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.
Industry Forecast
Lessors of Nonresidential Buildings Industry Growth
Recent Developments
Mar 18, 2025 - Commercial Real Estate Loan Delinquencies Rise
- At the end of 2024, US commercial real estate (CRE) loan delinquencies hit a record high, according to the Federal Reserve. By the end of last year's fourth quarter, 1.57% of the $3 trillion in outstanding CRE loans were delinquent – or about $25 billion. That’s up about 88% compared to the amount of CRE loan delinquencies a decade ago. The Fed noted that most delinquencies were in the troubled office sector, but multifamily delinquencies have also recently increased.
- Amid a spate of retailer bankruptcies, retail vacancies may be poised to rise in 2025 after they fell to record lows during the post-Covid reopening, according to Bisnow. High-profile retailer bankruptcies – including Party City, Joann, Big Lots, and Rite Aid – have forced landlords to try to backfill empty space or negotiate with lenders. In 2024, 7,325 retail storefronts closed shop, and about 15,000 more are expected to shutter in 2025, according to Coresight Research. That surpasses the 10,000 store closures in the first year of the pandemic. Retail space is also under pressure from some large firms downsizing their footprints, including Macy’s. In the fourth quarter of 2024, the national retail vacancy rate was just 4.1%, according to real estate firm JLL, but vacancies are expected to increase this year.
- Some investors are warming up to US office real estate after souring on the market for five years, according to The Wall Street Journal. Buyers are scooping up properties with high vacancies for bargain prices, and others are buying premium properties saddled with high debt. Investors are also purchasing older properties to convert them into apartments. According to data firm MSCI, office building sales volumes rose 20% in 2024, reaching $63.6 billion. However, 2024 activity is still well below the average annual volume of $142.9 billion from 2015 to 2019. Industry watchers suggest that leasing activity is picking up as more companies require workers to be in the office. While the office market is showing signs of improvement, it still faces high vacancy rates and loan delinquencies, leading many investors to prefer other real estate types, such as warehouses and apartments.
- The industrial real estate market continues to undergo significant change as demand downshifts compared to the frenzy for industrial space during the pandemic, according to CommercialEdge. In 2022 and 2023, more than 1.1 billion square feet of industrial space came online. In 2024, only 358 million square feet were added. While that is a significant drop from the pandemic-era boom, it was still high compared to historical norms. Construction starts for industrial properties slowed to 236 million square feet in 2024, and the downward trend is projected to continue in 2025. The market is shifting in other ways, as demand moves from warehousing and distribution hubs to manufacturing facilities and data centers.
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