Property Management ? Industry Report
Property Management ? Before the subprime crisis, revenue was increasing as the real estate boom benefited the industry. Real estate owners began to outsource property management services at higher rates to reduce operational costs and liabilities. But outsourcing failed to save the industry during the Great Recession between 2007 and 2009, largely because the recession and credit crunch originated within the real estate sector. On a positive note, the US homeownership rate has steadily declined, thus increasing the number of renters. Declining homeownership should support industry growth through 2017. For this reason, industry research firm IBISWorld has added a report on the Property Management industry to its growing industry report collection.
Historically, the Property Management industry has been immune to economic downturns. During such times, industry clients often outsource property management duties to industry operators to lower costs. ?But outsourcing failed to save the industry during the Great Recession in 2008 and 2009,? says IBISWorld industry analyst Dale Schmidt, ?largely because the recession and credit crunch originated within the real estate sector.? According to a report from the Urban Land Institute and PricewaterhouseCoopers, commercial real estate values have fallen 40.0% since their mid-2007 peaks. This dramatic decline represents the worst drop in values since the Great Depression, even eclipsing the 1990s savings-and-loans crisis. As a result, industry revenue is expected to decline at an average annual rate of 3.5% to $48.3 billion in the five years to 2012. In addition to revenue, the number of firms has been declining as operators consolidate operations to improve margins and diversify risk. Companies have also been consolidating to accommodate the non-residential market, which is increasingly looking for property management firms that offer a full range of services across a wide geographic area. As a result, a number of large mergers, acquisitions and strategic alliances have taken place. Major companies include CB Richard Ellis Group Inc., Jones Lang LaSalle Inc., Cushman & Wakefield Inc., Grubb & Ellis Company Inc. and Colliers International Property Inc.
Before the subprime crisis, Property Management industry revenue was increasing as the industry benefited from the real estate boom, and revenue reached $56.2 billion in 2007. According to Schmidt, at that time, residential and commercial lessors raised construction levels to cash in on the dramatic rise in property values. The rise in construction supported industry growth as more real estate became available that required property management services. Real estate owners also began to outsource property management services at higher rates to reduce operational costs and liabilities of property management.
On a positive note, the US homeownership rate has steadily declined, thus increasing the number of renters. Declining homeownership should support industry growth, since about two-thirds of revenue is associated with residential rental-property management. Also, as the economy recovers, unemployment will decline, discretionary spending will increase and demand for residential and commercial real estate leasing will improve. Given these positive conditions, industry revenue is expected to rise in the coming years. For more information, visit IBISWorld?s Property Management report in the US industry page.
Source: IBISWorld , March 05, 2012
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