US Real Estate Sector
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 414,970 establishments in the real estate sector are involved in the purchase, sale, rental, leasing, and management of properties. Establishments typically specialize in a particular type of property, such as residential, commercial, or industrial.
Dependence on Credit
The real estate sector is capital-intensive and highly dependent on credit.
Maintaining Occupancy
For commercial and residential lessors, maintaining occupancy is critical to generating steady streams of rental income, which are necessary to cover operating expenses and debt costs.
Industry size & Structure
The real estate sector is comprised of 414,970 establishments that employ more than 1.9 million workers and generate $690 billion in annual revenue, according to government sources.
- The real estate sector represents 10% of the nation's Gross Domestic Product (GDP). The real estate sector employs 1.2% of the country's workers.
- The sector is fragmented with the 20 largest firms representing 13% of revenue.
- In addition to employer establishments, the real estate sector has 2.9 million owner-operated establishments with no employees. Subsectors with the highest numbers of nonemployer establishments are lessors of real estate (43%) and offices of real estate agents and brokers (30%). The owners of nonemployer establishments typically perform the work and may outsource support functions like marketing and accounting.
- The real estate sector has shed about 27,000 establishments annually, which equals about 9.6% of existing establishments. However, the sector has added about 36,000 new establishments annually, which is equivalent to 12.7% of existing establishments. As a result, the sector has an average growth rate of 3.1%.
- The real estate sector is forecast to grow its employment base by 4% overall in 2023-2033, which is the same as the national average for all jobs, according to the Bureau of Labor Statistics.
Industry Forecast
US Real Estate Sector Industry Growth
Recent Developments
Dec 13, 2024 - Office Conversions Gain Traction
- High office vacancies have pushed down property valuations, making office to residential conversions more economical, according to The Wall Street Journal. A housing shortage and a glut of office supply made conversions seem like an obvious solution to both problems. However, until recently, conversion project economics were challenging to pencil out, even for an aging office building. That is changing as plummeting values for older office buildings in second-tier locations are prompting owners to take what they can get, making conversions more economically viable. According to real estate firm CBRE, there have been 73 US conversion projects so far in 2024, up from 63 in all of 2023. There are about 309 office conversions in the planning stages, and about 75% of them are office to residential. In all, about 38,000 housing units are in the pipeline.
- While most employers are implementing return-to-office requirements, they realize the need to balance in-office work with the value that employees place on working from home, according to a recent survey by advisory firm WTW. About 61% of US companies surveyed said they had implemented a formal policy requiring employees to be in the office for a minimum number of days per week. The most cited reasons for in-office requirements included better engagement within teams (84% of respondents), reinforcing corporate culture (71%), and increasing productivity through better collaboration (64%). However, firms recognize that many workers value remote work. When asked about the leading benefit of remote work, 84% of those surveyed said attracting and retaining talent for roles that would go unfilled without remote work options, 78% said better work-life balance improved engagement, and 76% said remote work improved retention.
- The 2024 housing market is on track to be the slowest in nearly 30 years as high mortgage rates and home prices combined with extremely low housing inventories have kept homeowners locked in place and would-be homebuyers priced out of the market, according to The New York Times. The National Association of Realtors estimates that four million homes will be sold in 2024, marking the second straight year of historically weak activity and the slowest home sales since 1995. Market observers note that the housing crisis is a product of weak supply. Builders have struggled amid lingering pandemic-era problems, including high borrowing, labor, and materials costs. Freddie Mac estimates the housing shortage equals about 3.7 million homes. The outlook for 2025 remains uncertain as home prices and mortgage rates are expected to remain stubbornly high.
- In the third quarter of 2024, there were about 24,000 single-family built-for-rent (SFBFR) housing starts in the US, up 41% from the same period in 2023, according to National Association of Home Builders analysis of US Census Bureau data. During the four most recent quarters, 92,000 SFBFR homes began construction, which is up 31% compared to how many were built in the previous four-quarter period. While the historical four-quarter moving average market share for SFBFR is about 2.7% (1992-2012), SFBFR’s current four-quarter moving average market share is about 7.5%. Single-family built-for-rent homes provide an alternative for consumers who want more space but are challenged by a lack of affordable housing inventory, high interest rates, and downpayment requirements in the for-sale market.
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