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 12% of the nation's Gross Domestic Product (GDP) and 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 2.8 million owner-operated establishments with no employees. Subsectors with the highest numbers of nonemployer establishments are lessors of real estate (44%) and offices of real estate agents and brokers (28%). 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 2.1% overall in 2021-2031, which is much lower than the national average of 5.3% for all jobs, according to the Bureau of Labor Statistics.
Industry Forecast
US Real Estate Sector Industry Growth
Recent Developments
Aug 16, 2024 - Big Changes for Residential Agent Commissions
- The residential agent compensation model is changing. Typically, the home seller pays a commission of about 5% to 6% of the sale price to the selling agent, who then splits it with the buyer’s agent. In 2024, the National Association of Realtors (NAR) reached a nationwide settlement of claims that the home sales industry artificially inflated agent commissions. As part of the settlement, most NAR members are subject to new listing and compensation rules. Listings in local multiple listing services (MLS) no longer include whether a seller is offering to pay a buyer’s agent. Buyers are required to sign pre-negotiated compensation agreements with their agents before starting their home search. The new rules - which kicked in on August 17 - affect most of the US, but not all MLS services have adopted the rule changes. It’s not yet known how the new rules will impact agent and broker revenue.
- According to a recent survey by the US Bureau of Labor Statistics (BLS), the percentage of workers who work from home has increased over the last year. In June 2024, 22.3% of the US workforce teleworked on a non-seasonally adjusted basis, up from 19% in June 2023. The share of workers who teleworked increased even though the total number of workers remained essentially unchanged. However, over the same period, the average weekly hours for remote work fell from 28.7 to 27. The BLS attributed the drop in weekly hours spent working from home to wider adoption of hybrid models where workers divide work between the office and home. Between June 2023 and June 2024, the percentage of workers who telework full-time fell from 53.2% to 48.4%. Remote work can put downward pressure on office space demand.
- Department stores have struggled to regain their footing in the wake of the pandemic and are losing customers to discounters, specialty stores, and luxury retailers, according to The Wall Street Journal. There are currently about 500 vacant department store locations throughout the US, and that number is poised to rise amid Macy’s plan to close 150 underperforming stores over the next three years. Other legacy department store brands are plotting strategies to remain viable, including the parent company of Saks Fifth Avenue buying Neiman Marcus, and Nordstrom’s possible bid to go private. The hollowing out of department store space comes as retail, more generally, is experiencing record-low vacancy rates.
- Multifamily developers’ confidence declined in the second quarter of 2024, according to the National Association of Home Builders (NAHB) latest Multifamily Market Survey. The Multifamily Production Index (MPI) fell twelve points in Q2 2024 to 44 compared to the second quarter of 2023. The Multifamily Occupancy Index decreased by eight points to 81 over the same period. An MPI or MOI reading of 50 or more indicates that multifamily production or occupancy, respectively, is growing. Multifamily developers’ headwinds include a tight lending environment, higher borrowing costs, and difficulties with getting projects approved. However, increasing signs of a weakening US economy may prompt the Federal Reserve to begin cutting interest rates before the end of the year.
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