Realtors® Report Finds 11 Percent Increase in Commercial Member Income, 19 Percent Increase in Sales Transaction Volume

Washington, D.C. – August 2, 2017 (nar.realtor) Commercial real estate markets continue to improve, with Realtors® specializing in commercial real estate reporting both an increase in member’s gross income and sales volume, according to the National Association of Realtors® 2017 Commercial Member Profile.

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The annual study’s results represent Realtors®, members of NAR, who conduct all or part of their business in commercial sales, leasing, brokerage and development for land, office and industrial space, multifamily and retail buildings, as well as property management.

“There has been an uptick in Realtor® members who choose to specialize in commercial real estate at the same time as commercial professionals report improvements in the market and their business activity,” said 2017 NAR President William E. Brown, a Realtor® from Alamo, California. “A stronger commercial market is a good indicator of a growing economy, so the outlook is positive for commercial members in the year ahead.”

The median gross annual income for commercial members in 2016 was $120,800, an increase from $108,800 in 2015. Brokers and appraisers tend to report the highest median annual incomes, while sales agents report the lowest among licensees. Those with less than two years of experience reported a median annual income of $31,500 in 2016, down from $43,400 in 2015; members with more than 26 years of experience reported a median annual income of $162,200 in 2016, down from $165,400 in 2015.

Commercial members completed a median of eight sales transactions in 2016, a decrease of one since 2015. A quarter of commercial members reported having one to four transactions, and 27 percent reported having more than 20 transactions.

While the number of transactions decreased slightly in 2016, the sales volume increased again this year. The median sales transaction volume in 2016 among members who had a transaction was $3,500,000, an increase from $2,931,000 in 2015. Only 7 percent of commercial members reported not having a transaction at all, which decreased from 8 percent in 2015.

The median years of experience in real estate increased to 24 years in 2017, up from 20 years in 2016, as did the median years of experience of members in commercial real estate – up from 15 years in 2016 to 19 years in 2017.

Forty-seven percent of NAR’s commercial members are brokers, and 30 percent are licensed sales agents, consistent with last year. Seventeen percent of commercial members have a broker-associate license while appraisal license holders account for 5 percent, also consistent with last year.

The median age of commercial members remained the same as last year, at 60 years old. Almost three out of four commercial members are male, identical to last year’s results. Men reported being active in any real estate capacity for a median of 25 years and in commercial real estate for a median of 20 years, the same as last year. Women have been active in real estate for a median of 19 years (up from 14 years last year) and in commercial real estate for a median of 15 years (up from 11 years last year).

Commercial members who manage properties typically managed 82,000 total square feet, representing 15 total spaces, up from 50,000 square feet and 17 spaces in 2015. Those who manage offices typically managed 25,000 total office square feet, representing seven total offices, up from 20,000 office square feet and five offices last year.

Thirty-three percent of commercial members were involved in international transactions in 2016, down 2 percent from 2015. Eighteen percent of commercial members reported an increase in international transactions, while only 1 percent had a decrease.

Sixty-five percent (up from 60 percent in 2016) of respondents are members of any of several commercial affiliated institutes, councils, or societies. These commercial organizations include the CCIM Institute, the Institute of Real Estate Management, the Counselors of Real Estate, the Realtors® Land Institute and the Society of Industrial and Office Realtors®.

In June 2017, NAR invited a random sample of 64,147 Realtors® with an interest in commercial real estate to fill out an on-line survey. A total of 1,926 responses were received for an overall response rate of 3.0 percent. All information in this report is representative of member characteristics in 2017 while sales and lease transaction values and income are characteristic of calendar year 2016.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

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Cole Henry
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Realtors® Survey: Led By China, Foreign Investment in U.S. Commercial Real Estate on the Rise

Washington, D.C. – June 6, 2017 (nar.realtor) One-fifth of surveyed Realtors® practicing in commercial real estate closed a sale with an international client in 2016, and as foreign investors flock to smaller-sized commercial properties in secondary and tertiary markets, many Realtors® are confident that increased sales and leasing activity will occur in 2017.

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This is according to the 2017 Commercial Real Estate International Business Trends survey released today by the National Association of Realtors®, which analyzed cross-border commercial real estate transactions made by Realtors® during 2016. Most Realtors® who specialize in commercial real estate reside in smaller commercial markets where the typical deal is less than $2.5 million.

Similar to NAR survey findings on foreign purchases of residential real estate in recent years, China was the top country of origin in both buying and selling commercial real estate in 2016, and Florida was the top destination of choice for international clients. NAR’s 2017 Profile of International Activity in U.S. Residential Real Estate is scheduled for release this summer.

Lawrence Yun

Lawrence Yun

Lawrence Yun, NAR chief economist, says the appetite for U.S. commercial real estate property was strong from foreigners last year and shows little signs of slowing in 2017.

“Multiple years of steady job growth and the strengthening U.S. economy – albeit at a modest pace – makes commercial property a safe bet for global investors looking to diversify their portfolios and generate returns outside their country of origin,” he said. “While Class A asset prices in many large markets have surpassed pre-crisis levels, Realtors® in many middle-tier and smaller markets stand to benefit from the increased interest from foreign and domestic commercial property investors.”

Added Yun, “Forty percent of Realtors® expect an increase in foreign buying clients this year. The healthy labor markets and lower property prices in smaller markets are poised to make up a larger share of activity.”

Of the 69 percent of Realtors® who indicated they completed a commercial real estate transaction last year, 20 percent reported closing a deal for an international client. Realtors® completed a median of one buyer-side international deal and two seller-side international transactions. The typical buyer-side sales price was $1,000,000, and the median seller-side price was $550,000.

Additionally, 22 percent of Realtors® said they completed a lease agreement on behalf of a foreign client. The median gross lease value for international lease transactions was $105,000, with most space typically under 2,500-square-feet.

Nearly two-thirds of commercial foreign buyer and seller clients were non-resident foreigners. The top countries of origin for buyers were China (17 percent), Mexico (14 percent) and the United Kingdom and Venezuela (both at 7 percent), while sellers were typically from China (17 percent) or Brazil, Canada, France and Mexico (all at 10 percent).

Florida and Texas were the top two states where foreigners purchased and sold commercial property last year, with California being the third most popular buyer destination and Michigan ranking as the third top state where foreigners sold real estate.

The survey also found that foreign buyers of commercial property typically bring more cash to the table than those purchasing residential real estate. Sixty percent of international transactions were closed with cash, while NAR’s 2016 residential survey found that exactly half of buyers paid in cash. For those not using all cash, 34 percent of commercial deals involved debt financing from U.S. sources. An overwhelming majority of buyers either purchased commercial space for investment purposes or acquired it for business use.

“Nearly half of Realtors® reported that they experienced a greater number of international clients looking to buy commercial space over the past five years,” said Yun. “Economic expansion has slowly chugged along since the downturn, but in comparison to the rest of the world, the U.S. remains one of the most attractive and safest bets for investors. There’s little evidence this will change anytime soon.”

NAR’s second quarter Commercial Real Estate Outlook, released last month, offers overall projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets.

The NAR commercial community includes commercial members, real estate boards, committees, subcommittees and forums; and NAR commercial affiliate organizations – CCIM Institute, Institute of Real Estate Management, Realtors® Land Institute, Society of Industrial and Office Realtors®, and Counselors of Real Estate.

Approximately 70,000 NAR members specialize in commercial real estate brokerage and related services including property management, counseling and appraisal. In addition, more than 200,000 members are involved in commercial transactions as a secondary business.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.

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Media Contact:

Adam DeSanctis
(202) 383-1178
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Realtors® Have a Positive Outlook for Commercial Markets in 2017

Washington, D.C. – May 19, 2017 (nar.realtor) While challenges face commercial real estate markets, Realtors® specializing in the sector should have confidence that growth will continue. That’s according to speakers at a commercial economic issues and trends forum at the REALTORS® Legislative Meetings & Trade Expo.

NAR Chief Economist Lawrence Yun led a panel discussion about the economic forces shaping commercial real estate markets; the panelists agreed that the market has improved and that continued growth in the economy will further drive activity, but difficulties remain regarding availability of financing for smaller commercial properties.

George Ratiu, NAR director of quantitative and commercial research, said that increased trade and the rise of e-commerce has boosted rents in the industrial and warehouse sector. “During a time of transformation in consumer shopping habit, vacancy rates will still continue to see a gradual decline in warehousing and strong rent growth will continue,” he said.

Unemployment has declined to 4.4 percent and consumer confidence is at its highest point in 15 years. As the economy improves, the commercial real estate market has continued to improve as well, said Yun. “A rising interest rate environment is likely to halt commercial price growth or even cause a minor decline; that outlook is supported by the expanding economy and the over 2 million jobs gained in the past year,” he said.

Looking at the global market, Ratiu explained that global commercial investors have hit the pause button on investments, which in the first quarter of 2017 decreased nearly 20 percent year-over-year; however, certain U.S. markets are seeing good global cash flow with $76 billion flowing to the U.S. “Overall global investments are down, while the San Francisco, Dallas, Charlotte, Houston and Baltimore markets have experienced large sales volume gains,” he said.

With the blip in overall global investments in the first quarter, international buyers are likely to play a greater role in the U.S. market this year. “Over the past five years, a near majority of Realtors® experienced an increase in the number of international clients. We expect international buying activity to grow in 2017, which will have an overall positive impact on the commercial market’s gradual recovery,” said Yun.

One major hurdle that continues to affect the market is the lack of available financing to small commercial real estate investors, due in large part to regulatory uncertainty.

“Realtors® are seeing evidence of markets being impacted by regulators’ increased scrutiny of banks’ balance sheet allocations to commercial real estate loans,” said Ratiu. “Considering that 64 percent of Realtor® clients get their financing from banks, this is likely to impact deal flow as lending conditions tightened in 37 percent of Realtors®’ markets, a four percent increase from last year.”

John Worth, senior vice president of research and investor outreach at the National Association of Real Estate Investment Trusts, discussed the performance of commercial real estate investment and its status among other investment sectors. “Real estate investment is currently the best performing asset class. Strong returns and the level of new commercial supply we are seeing today is making up for a lot of missing sectors, following the economic downturn. The first quarter of this year saw a slight decrease, but 2017 is experiencing an overall healthy trend,” he said.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.

Stable Growth Expected for Commercial Real Estate in 2017

Washington, D.C. – February 23, 2017 (nar.realtor) Steered ahead by strengthening demand in smaller markets, the commercial real estate sector should remain on stable ground in 2017 and offer decent returns for investors, according to the latest National Association of Realtors® quarterly commercial real estate forecast.

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National office vacancy rates are forecast by Realtors® to retreat 1.1 percent to 12.1 percent over the coming year as job growth in business and professional services brings increased need for office space. The vacancy rate for industrial space is expected to decline 1.3 percent to 7.1 percent, and retail availability to decrease 0.7 percent to 11.2 percent. Only the multifamily sector is predicted to have little change to its vacancy rate over the next year as new apartment completions keep openings mostly flat at 6.5 percent.

Lawrence Yun

Lawrence Yun

Lawrence Yun, NAR chief economist, says the U.S. economy is poised for slight improvement in 2017. “Last year was the 11th year in a row of subpar GDP growth, but renewed corporate optimism leading to a focus on investment and a desperately needed boost in residential construction should pave the way for modest expansion this year of around 2.4 percent,” he said. “Steady hiring and low local unemployment levels are finally supporting higher wages and increased spending, which in turn bodes well for sustained demand for all commercial property types.”

The apartment sector is expected to preserve its status as a top performer this year simply because ongoing supply and affordability challenges are keeping the nation’s low homeownership rate from seeing meaningful improvement. Even with a small uptick in the vacancy rate as new building completions catch up with demand, rents will likely maintain their solid growth in most of the country.

“Especially in the costliest metro areas, higher home prices and mortgage rates are squeezing the budget for many renters looking to buy and inevitably forcing them to sign a lease for at least another year,” said Yun.

According to Yun, commercial property prices — especially in Class A assets in larger markets — surpassed pre-crisis levels last year because of aggressive bidding and lower inventory levels. However, with the Federal Reserve expected to raise short-term rates three times in 2017, a minor price correction may be in store this year as cap rates move higher.

“Similar to the biggest ongoing challenges in the residential market, supply and demand imbalances continue to put upward pressure on commercial property prices as investors search for yield in smaller markets,” said Yun. “Realtors® are increasingly citing inventory shortages as their top concern as the pace of new projects slows in large cities and middle-tier and smaller markets see a growing appetite for space.”

The latest Realtors® Commercial Real Estate Market Survey highlighted the strong underlying demand for commercial properties up to $2.5 million, where most transactions from NAR’s commercial members reside. Compared to a year ago, sales volume rose 12.9 percent, prices increased 5.5 percent and the average transaction value equaled $1.1 million.

NAR’s most recent Business Creation Index (BCI) also showed a positive trend for smaller commercial businesses. Created to monitor local economic conditions from the perspective of NAR’s commercial members, December’s BCI found that Realtors® reported more business openings and fewer closings over the past year in their market.

Yun says at least in the short term, the possibility of a more tax-friendly business environment combined with the positive benefits of 1031 exchanges could quicken the pace of economic growth and support stronger commercial market fundamentals. The industrial sector — already enjoying increased demand from the soaring popularity of e-commerce — could see a further decline in vacancy rates if increased manufacturing comes to fruition and accelerates the need for more warehouse space.

“The positive direction for commercial real estate this year will be guided by the steadily expanding U.S. economy, which has legs to grow and continues to be one of the top economic performers and safest bets in the world,” concluded Yun.

NAR’s latest Commercial Real Estate Outlook 1 offers overall projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets.

The NAR commercial community includes commercial members, real estate boards, committees, subcommittees and forums; and NAR commercial affiliate organizations — CCIM Institute, Institute of Real Estate Management, Realtors® Land Institute, Society of Industrial and Office Realtors®, and Counselors of Real Estate.

Approximately 70,000 NAR members specialize in commercial real estate brokerage and related services including property management, counseling and appraisal. In addition, more than 200,000 members are involved in commercial transactions as a secondary business.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.1 million members involved in all aspects of the residential and commercial real estate industries.

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1. Additional analysis will be posted under Economists’ Outlook in the Research blog section of Realtor.org in coming days at: economistsoutlook.blogs.realtor.org.

The next commercial forecast and quarterly market report will be released May 30 at 10:00 a.m. ET.

Media Contact:

Adam DeSanctis
(202) 383-1178
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