Commercial Real Estate Brokerage and Management
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Industry Overview
The US commercial real estate service industry includes about 25,000 companies with combined annual revenue of about $30 billion. Major companies include CB Richard Ellis, Jones Lang LaSalle, and Cushman & Wakefield. The industry is fragmented: the 50 largest companies account for one-third of industry revenue.
The industry includes sales and leasing brokers and agents for commercial property - including apartment buildings - and property managers. Many companies combine these functions. Many owners of commercial property perform their own leasing and property management, and aren't included in this industry. Commercial real estate financing is not included in this industry.
Competitive Landscape
Demand, which is driven by the volume of commercial real estate transactions, is heavily influenced by real estate vacancy rates. The profitability of individual companies depends on efficient operations. Large companies have advantages in performing a full range of services in multiple markets. Small companies can compete effectively by specializing in local markets. Average annual revenue per worker is about $200,000 for brokers and agents, but around $100,000 for property managers, reflecting the more labor-intensive nature of the work.
Products, Operations & Technology
Commercial real estate brokers and agents buy and sell commercial real estate property and lease space within commercial buildings. Most owners of commercial real estate property, including individuals, companies, and REITs, don't occupy their property but instead lease space to others.
Property managers are typically involved in the day-to-day operations of a commercial property, such as rent collection, maintenance and repair, security, cleaning, trash disposal, providing activities for tenants in common areas, and providing special items such as telecommunications, Internet access, cable, office and food services, and landscaping. The services depend on the type of property being managed. While some services are performed by the property manager's employees, many are contracted out to specialists.
Brokerage, leasing, and property management operations vary according to the type of property. Major types of commercial property are apartment buildings, office buildings, retail space and shopping centers, and warehouses and industrial buildings. Buildings that mix apartments, offices, and retail space are typically more difficult to manage.
Brokers and agents are typically paid a commission that's a percentage of the sales price of a property or of the leasing amount. Property managers are paid a fee that depends on the level of service they provide, but is also related to the amount of space they manage. A large company may have 50 million square feet under management.
Computer technology is used to list available properties and commercial space on the Internet, and is used by property managers to monitor individual leases and manage services.