Real Estate Sales & Brokerage in The US Industry Report

WWW.IBISWORLD.
COM Real Estate Sales & Brokerage in the USMarch 2016 1
Open house: Low interest rates and improved

incomes have fueled industry rebound
IBISWorld Industry Report 53121

Real Estate Sales &
Brokerage in the US
March 2016 Stephen Morea
2 About this Industry 16 International Trade 31 Key Statistics

2 Industry Definition 17 Business Locations 31 Industry Data
2 Main Activities 31 Annual Change
2 Similar Industries 19 Competitive Landscape 31 Key Ratios
2 Additional Resources 19 Market Share Concentration
19 Key Success Factors 32 Jargon & Glossary
3 Industry at a Glance 19 Cost Structure Benchmarks
21 Basis of Competition
4 Industry Performance 22 Barriers to Entry
4 Executive Summary 22 Industry Globalization
4 Key External Drivers
6 Current Performance 24 Major Companies
8 Industry Outlook
10 Industry Life Cycle 27 Operating Conditions
27 Capital Intensity
12 Products & Markets 28 Technology & Systems
12 Supply Chains 28 Revenue Volatility
12 Products & Services 29 Regulation & Policy
14 Demand Determinants 30 Industry Assistance
14 Major Markets
www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

WWW.IBISWORLD.COM Real Estate Sales & Brokerage in the USMarch 2016 2
About this Industry
Industry Definition This industry comprises brokers and own these properties but act as
agents who sell, buy or rent real estate intermediaries between owners or
for others. Industry operators do not sellers and buyers or tenants.
Main Activities The primary activities of this industry are

Selling residential or commercial real estate for others
Buying residential or commercial real estate for others
Renting residential or commercial real estate for others
The major products and services in this industry are

Commercial rentals
Commercial sales
Residential sales
Residential rentals
Other services
Similar Industries 52231 Loan Brokers in the US

Operators in this industry assist represent potential real estate purchasers through the mortgage application
process.
53132 Real Estate Appraisal in the US

Operators in this industry assess the value of real estate and prepare appraisal reports for creditors,
insurance companies, courts, buyers and sellers.
53139 Real Estate Asset Management & Consulting in the US

Operators in this industry provide real estate-related services, including escrow, fiduciary, consultancy,
research, listings, tenant representation and other miscellaneous activities.
54119 Conveyancing Services in the US

Operators in this industry represent buyers, sellers and mortgage holders during the conveyance or transfer
of real estate.
Additional Resources For additional information on this industry

www.fhfa.gov
Federal Housing Finance Agency
www.realtor.org
National Association of Realtors
www.census.gov
US Census Bureau
WWW.IBISWORLD.COM Real Estate Sales & Brokerage in the US March 2016 3
Industry at a Glance
Real Estate Sales & Brokerage in 2016
Key Statistics Revenue Annual Growth 11-16 Annual Growth 16-21

Snapshot
$122.5bn 5.6% 3.3%
Profit Wages Businesses
$19.0bn $43.4bn 784,479

Revenue vs. employment growth 30-year conventional mortgage rate
Market Share
There are no major 12 7
players in this 6
industry 6
0
% change
-6 5
%
-12
4
-18
-24 3
Year 08 10 12 14 16 18 20 22 Year 07 09 11 13 15 17 19 21
Revenue Employment
SOURCE: WWW.IBISWORLD.COM
p. 24
Products and services segmentation (2016)
Key External Drivers 4.6%

Residential rentals
30-year conventional 8.4%
Commercial sales
mortgage rate
Existing home sales
House price index 11.1%
Corporate profit Other services
Per capita disposable

income
11.4%
Commercial rentals
64.5%
Residential sales
p. 4
SOURCE:
WWW.IBISWORLD.COM
Industry Structure Life Cycle Stage Mature Regulation Level Heavy

Revenue Volatility Low Technology Change Medium
Capital Intensity Low Barriers to Entry Low
Industry Assistance Medium Industry Globalization Low
Concentration Level Low Competition Level High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 31
Industry Performance
Executive Summary | Key External Drivers | Current Performance
Industry Outlook | Life Cycle Stage
Executive The Real Estate Sales and Brokerage markets rebounded after the recession,
Summary industry is closely aligned with the health the Real Estate Sales and Brokerage
of the residential and commercial real industry steadily expanded.
estate markets in the United States. Consequently, over the five years to 2016,
Industry revenue is directly correlated revenue in the Real Estate Sales and
with property prices and real estate Brokerage industry is expected to
transaction volumes because agents are increase at an annualized rate of 5.6% to
typically paid completely on a $122.5 billion, which includes 4.9%
commission basis and receive their fee projected growth in 2016 alone.
only when they close a deal. Additionally, IBISWorld expects industry revenue to
the residential market represents more continue to improve in the five years to
2021. However, anticipated gains in US
employment will force the Federal
Increasingdisposable incomes and Reserve to raise interest rates over the
historically low interest rates helped increase next few years. In turn, higher interest
rates will increase borrowing costs and
home affordability temper demand for homeownership.
These factors have the potential to limit
than two-thirds of industry revenue, Real Estate Sales and Brokerage industry
making the industry especially growth over the next five years.
sensitive to housing prices and existing Nevertheless, general economic
home sales. improvements and strong corporate
Starting in 2011, increasing per capita profit reserves will help improve the
disposable income and historically low commercial real estate market. In
interest rates helped increase home addition, restrained but expanding new
affordability, which bolstered demand for real estate construction will lift industry
real estate brokerage services. sales volumes and commissions. These
Furthermore, rising house prices paved positive drivers will help industry
the way for steady gains in industry revenue rise at an annualized rate of 3.3%
revenue. As the industry’s primary to $144.0 billion in the five years to 2021.
Key External Drivers 30-year conventional mortgage rate Existing home sales
Buyer demand for single-family homes Brokering single-family home sales is a
is influenced by the prevailing primary industry service. As a result,
mortgage rate that borrowers receive. when the number of existing home sales
Lower mortgage rates typically increase rises, industry revenue also increases.
home affordability and encourage Over the past five years, improving
home purchases, thereby raising economic conditions have led to an
demand for real estate agents and increase in home sales. This trend is
brokers. Conversely, rising mortgage expected to continue as existing home
rates increase buyers’ borrowing costs, sales are forecast to increase in 2016.
having an adverse effect on the
industry. The 30-year conventional House price index
mortgage rate is expected to increase in Housing prices typically reflect the health
2016, representing a potential threat to of the residential real estate market.
the industry. Rising home prices indicate growing
Key External Drivers demand for single-family homes and a facilities. As business investments in real
continued consequent increase in commission fees estate grow, demand for agents and
received by real estate agents and brokers that service the commercial
brokers. Home prices have demonstrated sector also increases. Corporate profit is
strong growth from 2012 onward, expected to rise slightly in 2016.
indicating recovering consumer demand
for houses. The house price index is Per capita disposable income
expected to rise further in 2016, Growth in household income positively
representing a potential opportunity for affects homeownership rates, home
the industry. affordability and sales volumes. Rising
per capita disposable income also
Corporate profit heightens consumers’ ability to purchase
An increase in corporate profit generally goods and services, thereby affecting
leads to higher business confidence, businesses’ need and capacity to expand.
which bolsters demand for the purchase Therefore, an increase in per capita
and leasing of property. With wider profit disposable income has a positive effect on
margins, businesses typically expand industry agents and brokers’ residential
with new locations and higher and commercial real estate markets. Per
production, entailing the leasing or capita disposable income is expected to
construction of new properties or increase during 2016.
30-year conventional mortgage rate Existing home sales
7 7
6 6
Millions
5 5
%
4 4
3 3
Year 07 09 11 13 15 17 19 21 Year 07 09 11 13 15 17 19 21
Current After years of decline in the wake of the

subprime mortgage crisis, the credit crunch Industry revenue
Performance and the Great Recession, the Real Estate
12
Sales and Brokerage industry is finally
beginning to recover. Although revenue 6
remains below its prerecessionary peak at 0
the height of the housing bubble,
% change
industry revenue is expected to increase -6
at an annualized rate of 5.6% to reach -12
$122.5 billion over the five years to 2016,
which includes 4.9% projected growth in -18
2016 alone. -24
The industry is composed of real estate Year 08 10 12 14 16 18 20 22
agents and brokers that primarily sell within
the residential market. Industry operators SOURCE: WWW.IBISWORLD.COM
typically work on a 100.0% commission

basis and are paid only when a transaction volume and value of residential and
is completed. An agent can represent commercial real estate transactions
either side of a sale (thus, sales volumes taking place in the United States. These
are measured in terms of “sides” transactions depend on a web of factors,
completed) and commission fees are including existing home sales, housing
usually about 5.0% of the final transaction prices, office vacancy rates, mortgage
value. In light of the real estate market’s rates, corporate profit and overall
recent downturn, however, agents have interest rates. Since 2011, an expansion
become increasingly willing to accept in most of these drivers has helped
lower fees. Industry revenue relies on the bolster industry revenue.
Back from the brink Most operators in the Real Estate Sales and homebuyers; however, the boost only
Brokerage industry help consumers buy and encouraged consumers already planning to
sell homes. As a result, residential real estate buy and did little to animate other potential
is estimated to account for more than homebuyers. Another bright spot for the
two-thirds of industry revenue. Existing housing market has been the drop in
home sales, or the volume of home mortgage interest rates, which sharply fell in
transactions that take place in a year, response to lower consumer demand and
along with the house price index and actions taken by the Federal Reserve to
prevailing 30-year mortgage rates, heavily reduce overall interest rates.
influence the residential real estate To encourage lending and consumer
market. Additionally, home sales and spending, the US government has kept the
housing prices directly determine industry federal funds rate, which influences lenders’
revenue since agents are paid on borrowing costs, between half a percentage
commission and mortgage rates influence point or near zero since December 2008.
homebuyer demand. This policy has also helped suppress the
Several positive trends have indicated a 30-year fixed mortgage rate and increase
budding recovery for the housing market home affordability for consumers. In
over the past five years. Existing home sales addition to sustained low mortgage rates
returned to growth in 2010, partially aided for homebuyers, rising US employment
by an $8,000.0 government tax credit for and disposable income levels helped
Back from the brink increase homeownership and demand for Index, have increased since 2012, with an
continued real estate brokerage services. At the same expected 3.9% increase in 2016. As prices
time, US housing prices, as measured by for existing homes increased,
the Case-Shiller National Home Price commissions for real estate agents rose.
The commercial The commercial market is estimated to

market account for roughly 20.0% of industry Profit
is rising as the
revenue in 2016 and includes sides
associated with any income-generating
volume and value of
property, such as retail centers, restaurants residential and commercial
or apartment buildings, as opposed to markets increase
individual apartment units rented by
consumers, which are a part of the
residential market. Although commercial higher levels of corporate profit encourage
transactions are far fewer than residential expansion. In the wake of the recession,
sales, average sale prices and lease contracts corporate profit levels reached historic
are higher and yield greater individual heights because companies were able to
commission fees for agents. maintain productivity levels with lower
The commercial real estate market is costs, particularly by keeping on fewer
more sensitive to general economic activity workers. Both US GDP and corporate profit
in the United States because it depends on margins are expected to continue to
the health of the overall business sector and increase in the five years to 2016. As low
its ability to expand. As a result, access to interest rates intersect with improving
credit, corporate profit levels and per capita downstream demand and high corporate
disposable income cumulatively influence profit for many companies, commercial
the market. Businesses are more likely to real estate volumes are expected to
expand with comfortable cash reserves, so improve through 2016.
Industry structure Industry agents typically work as same five-year period, the number of
independent contractors that receive industry establishments is expected to rise
support from offices or brokerages, which at an average annual rate of 2.9% to
are likely franchisees of recognizable brands 804,792, as regional companies began
such as RE/MAX or Century 21. With the opening offices due to improving
marked decrease in transaction volumes economic conditions and a strengthening
over much of the past five years, many housing market.
part-time agents essentially exited the As industry revenue and the overall real
industry, with no completed sides to record. estate market improved, average industry
However, when economic conditions and profit, measured as earnings before interest
industry demand improved, these same and taxes, gradually increased over the past
agents returned to work. As a result, five years. In 2011, average profit reached
industry employment increased from 2013 10.4% of revenue, well above recessionary
onward, and the number of industry lows. Profit is expected to return to decade-
employees is expected to rise at an highs of 15.5% in 2016, as rising transaction
annualized rate of 2.6% to total an estimated volumes and property prices outpaced
1.0 million in the five years to 2016. Over the industry wage and operating costs.
Industry The Real Estate Sales and Brokerage

industry is projected to find solid ground
expansion and ensuing investor
confidence in real estate will help raise
Outlook in the five years to 2021, as rising home commercial transaction volumes.
prices, increased sales and greater Consequently, over the next five years,
construction combine with higher industry revenue is forecast to rise at an
homebuyer demand. Furthermore, annualized rate of 3.3% to $144.0 billion
consumer spending will drive business in 2021.
Residential recovery IBISWorld expects rising home prices to

characterize industry trends over next Rising
home prices will
five years. While many metropolitan and directly benefit agent
coastal markets demonstrated rapid price
growth in recent years, median list prices commission rates,
in other markets, especially in the rural increasing industry
Midwest, continue to struggle. However,
as more leading markets experience revenue
rising prices over the next few years, the
overall US housing market will housing affordability. In late 2012, the
substantially improve. Federal Reserve instituted a policy tying
Rising home prices will directly benefit the federal funds rate, which influences
agent commission rates, thereby interest rates for mortgage loans, to the
increasing industry revenue. For unemployment rate, stating that it would
example, house prices are expected to continue to pressure the funds rate
increase an annualized 1.4% in the five downward until unemployment falls to
years to 2021. Furthermore, the 6.5% or below. This policy has since been
inventory of existing homes on the revised to become more open-ended;
market will continue to shrink over the however, a gradual expansion in US
next five years, encouraging new employment prompted the Federal
construction to meet rising homebuyer Reserve to raise short-term interest rates
demand. Home construction will drive in December 2015. The pace of future
transactions for newly built properties rate hikes will likely be measured, as
and replenish listings inventories each inflation is expected to rise modestly
year, enabling existing home sales to and employment will remain high over
steadily grow. Moreover, anticipated US the next five years. Nevertheless, an
employment and disposable income increase in short-term rates will spur
growth will continue to increase higher mortgage rates, depress demand
consumer spending power, which will for homeownership and negatively
further boost demand for real estate impact industry revenue, as a
brokerage services. substantial portion of brokers’ incomes
Conversely, a projected rise in interest are derived from commissions on sales
rates from 2016 onward will temper of residential properties.
Commercial growth Although yields on federal bonds and

conventional mortgages are forecast to A
resurgence in consumer
rise as the economy improves over the
next five years, interest rates will
spending will help make
remain far below their historical retail properties more
averages. Furthermore, corporate profit valuable
is projected to rise at an annualized rate
of 2.6% over the next five years, and
businesses will be well-positioned to top-tier markets, such as New York City
open new locations or relocate to larger and San Francisco, pushing up sale
offices. For example, in the past five prices in these locations and in
years, real estate agents have benefited similarly preferred markets.
from an expansion in key sectors, such Additionally, a resurgence in consumer
as technology and healthcare, which spending will help make retail
has driven office development and properties more valuable, while the
commercial sales growth. general economic recovery will make
Moreover, as early as 2012, investors office buildings and other business
began to earnestly pursue properties in spaces more attractive.
Online listings As real estate markets improve and consumers. Websites like Yahoo Homes,
transaction volumes rise, industry profit which caters specifically to broker
is forecast to expand as well. Average listings, are projected to become more
profit is projected to rise to 16.0% of commonplace. The proliferation of
revenue by 2021 to reflect strengthening online listings will further lower barriers
demand for agent services, although to entry.
margins will remain below those Part-time agents are projected to
recorded during the housing boom. return to the industry and bolster
One reason for this is that home sellers employee numbers in the five years to
looking to save money and increase 2021. The number of industry employees
their profit from sales have become is forecast to rise at an annualized rate
more comfortable listing properties on of 2.1% to reach 1.1 million over the
their own using websites like Zillow five-year period, while the number of
and LoopNet, which enable industry establishments is expected to
homeowners to market their homes to increase at an annualized rate of 1.1% to
a far-reaching audience. 851,228. Increasing commercial and
The internet is expected to become an residential construction activity,
increasingly essential tool for agents and recovering consumer demand and
brokers, as the medium becomes the improving employment will also aid
primary means of communication for growth in this industry.
Life Cycle Stage Industry activity is influenced by the
health of real estate markets, which trend
in line with the overall economy
Products and services have essentially remained
the same over a long period of time
Some consolidation is occurring in this industry
20 Maturity Quality Growth

% Growth in share of economy
Key Features of a Mature Industry

Company High growth in economic
consolidation; importance; weaker companies Revenue grows at same pace as economy
level of economic close down; developed Company numbers stabilize; M&A stage
importance stable technology and markets Established technology & processes
Total market acceptance of product & brand
15 Rationalization of low margin products & brands
10
Quantity Growth
Many new companies;
minor growth in economic
importance; substantial
5 technology change
Real Estate Sales & Brokerage

Real Estate Investment Trusts
Apartment Rental
0 Real Estate Appraisal
Loan Brokers
Printing
-5 Decline
Shrinking economic
importance
-10
-10 -5 0 5 10 15 20
% Growth in number of establishments
SOURCE: WWW.IBISWORLD.COM.AU
Industry Life Cycle The Real Estate Sales and Brokerage internet fundamentally shifted the
industry is in the mature phase of its life primary means of listing properties in the
cycle. Industry value added (IVA), a early and mid-2000s, but little has
Thisindustry measure of the industry’s contribution to changed since 2010. Though private
is M
ature the overall economy, is expected to rise at listings by homebuyers have become
an annualized rate of 6.0% during the 10 more common, agents and brokers are
years to 2021, significantly above still sought after for their expertise in the
projected annualized US GDP growth of local real estate market, including zoning
2.3% during the same period. Industry ordinances, tax laws, property pricing
revenue is, however, still far below its and financing. Finally, some
2005 peak, which occurred during the consolidation is occurring in the industry,
housing boom. particularly among larger firms like
Additionally, industry services have Realogy, which already counts many of
not altered significantly, and the markets the best-known brokerage trade names
that agents serve have not change. The under its umbrella.
Products & Markets

Supply Chain | Products & Services | Demand Determinants
Major Markets | International Trade | Business Locations
Supply Chain KEY BUYING INDUSTRIES

52593 Real Estate Investment Trusts in the US
REITs generally use real estate agents to find tenants for their property. In addition, REITs use
agents to sell and buy real estate holdings.
53111 Apartment Rental in the US
Apartment complex owners use real estate agents to acquire tenants.
53112 Commercial Leasing in the US
Commercial property owners use real estate agents to acquire corporate tenants.
53113 Storage & Warehouse Leasing in the US
Warehouse and storage owners and operators use real estate agents to acquire new tenants.
KEY SELLING INDUSTRIES

32311 Printing in the US
Real estate agents often provide potential buyers marketing materials for each individual
listing. Agents also use printing services for business cards, presentations and other marketing
materials.
51111 Newspaper Publishing in the US
Real estate agents use newspapers for property listings and advertising.
51711c Wired Telecommunications Carriers in the US
The majority of operations are conducted using various communication platforms and
internet services.
51711e VoIP in the US
Voice over internet protocol providers allow users to use mobile phones, internet access and
email communications through one service provider.
51721 Wireless Telecommunications Carriers in the US
The majority of operations are conducted using various communication platforms including
cellular phones.
54185 Billboard & Outdoor Advertising in the US
Real estate agents and brokers use local signage and billboard companies for advertising.
Products & Services Real estate agents are generally paid on a Residential sales and rentals
100.0% commission basis, and Real The residential market is composed of all
Estate Sales and Brokerage industry single-family homes, attached homes for
revenue often fluctuates significantly sale or rent and individual apartments.
depending on sale volumes and prices. The residential market segment does not
The majority of commissions are related include the sale of entire multi-family
to the sale and rental of residential apartment complexes; these are included
property, with this segment generating in the commercial segment because they
about 69.1% of industry revenue. The are generally sold as income-generating
remaining portion of industry revenue properties. The majority of sales-related
is largely due to non-residential sales services are associated with single-family
and rentals, the sale and rental of land homes, as this segment accounts for the
and other ancillary services, such as majority of homes purchased in the
property management. United States. Residential sales have
Products & Markets
Products & Services Products and services segmentation (2016)

continued
4.6%
Residential rentals
8.4%
Commercial sales
11.1%
Other services
11.4%
Commercial rentals 64.5%
Residential sales
Total $122.5bn SOURCE: WWW.IBISWORLD.COM
strongly increased in the years following office space and a large number of vacant
the recession are account for an estimated commercial spaces have contributed to an
64.5% of industry revenue in 2016. expansion in the commercial rental
As more individuals and couples market. In addition, many corporations
purchased homes during the past five emerged from the recession with a
years, a diminishing share of industry heightened cost-consciousness. As a
revenue is now accounted for by result, the volume of large commercial
residential rentals. As a result, residential lease deals has increased as many cash-
rentals have declined to 4.6% of industry rich firms look to lock in favorable rental
revenue in 2016. Similar to real estate rates for the long term. Similar to agents
agents specializing in residential sales, that specialize in real estate sales, brokers
residential rental brokers are paid on a full specializing in commercial leases are
commission basis. predominantly paid on a 100.0%
commission basis. The most common
Commercial sales and rentals commission structure for commercial
Within the commercial market, industry leasing agents, used for office, industrial
revenue is generated from a variety of and retail leases is known as the ‘seven
different sectors and industries, including and two’. This structure offers an incentive
industrial buildings, apartment buildings, for a real estate broker to sign a client to a
retail space and office towers. In 2016, long term lease, as the bulk of the broker’s
commercial sales are expected to make up compensation is derived from multiplying
about 8.4% of total industry revenue. the average annual gross rent payable over
Revenue from commercial sales has grown the lease term by 7.0%.
as a total proportion of industry revenue,
as the volume of commercial property Real estate transactions
transactions and new construction has and other services
been recovering more quickly than the for- For sales services, industry operators offer
sale residential market. clients guidance through every aspect of a
Commercial rentals have also grown transaction, including determining and
quickly during the past five years, setting property prices; negotiating with
accounting for an expected 11.4% of potential buyers over price; marketing the
industry revenue in 2016. Ample available properties through word of mouth, websites
Products & Markets
Products & Services and newspaper listings; and staging, marketing of properties. However, large
continued which entails a variety of services commercial leases (for example, a
designed to increase the marketability of 10-year lease of a 400,000 square foot
a property, including rearranging industrial distribution center or a 15-year
furniture, painting walls, upgrading lease on 40,000 square feet of office
appliances and organizing properties. space in Manhattan) often require the
Within the rental market, most work same services as a sale, including price
revolves around the showing and and improvement negotiations.
Demand Demand for real estate agents and Levels of consumer disposable income
Determinants brokers is influenced by changes in directly affect demand for real estate in the
property values, lending rates and residential sector and indirectly influence
expected return on investments (ROI); demand in the commercial sector. As per
consumer trends such as changes in capita disposable income rises, more
disposable income and overall economic households become willing to consider
trends such as employment also affect buying a new home. Additionally, higher
demand for brokers. An industry incomes typically raise consumer spending,
operator’s revenue potential is which in turn raises demand for retailers
determined by the volume of and other commercial structure tenants. As
transactions, since firms generate companies seek to expand operations into
revenue on a commission basis each new spaces, they typically use agents or
time a client’s sale or purchase is brokers to help find the new location.
completed. Additionally, because Finally, demand for real estate
commissions are calculated as a purchases can be affected by the return
percentage of the property’s value, rising on investment of other kinds of
or falling property prices directly affect investments, like stocks or bonds. Low
operator revenue. In terms of demand interest rates set by the Federal Reserve
for services, however, even falling prices have kept returns for securities like
can raise the need for agents and Treasury bonds at very low levels, a trend
brokers as more owners seek to sell off that has encouraged more investors to
properties that are falling in current seek other kinds of investment, including
market value. purchasing real estate.
Major Markets IBISWorld estimates that revenue represent one of the two parties. Industry
generated from residential properties agents that work for property sellers try
accounts for an estimated 69.1%of to generate the highest possible price or
industry revenue, with the commercial rental rate during a transaction, while
and other properties representing the also minimizing the time it takes to
remaining 30.9% of revenue in 2016. complete a deal. In contrast, agents who
Every real estate transaction is work for buyers try to find a property that
composed of two parties (or “sides”), one meets the buyer’s requirements while
who is selling or leasing the property, and also negotiating for the lowest possible
one who is buying or renting the property price or rental rate. Industry operators
for use. Real estate agents and brokers provide services to two distinct markets:
act as advisors or middlemen and residential and commercial. Both sectors
Products & Markets
Major Markets Major market segmentation (2016)

continued
2.7%
Manufacturing space 4.4%
Warehousing and other
11.1% commercial space
Retail space
12.7%
Office and professional space
46.3%
Married or partnered
residential homeowners and renters
22.8%
Single residential homeowners and renters
Total $122.5bn SOURCE: WWW.IBISWORLD.COM
differ dramatically with regard to tenants, nonincome-generating residential

leasing terms and duration. As a result, transactions, which are either leased or
advisory, sales and representation sold to businesses to assist in the
services can differ dramatically between relocation of employees and new hires
the two segments. (i.e. executive packages). However, this
sub-segment accounts for a marginal
Residential properties share of industry revenue.
The residential segment dominated by
the consumer homeowner market, as Commercial properties
real estate brokers and agents The commercial market is composed of
commonly interact with couples and office, retail, manufacturing and warehouse
individuals in search of a home or facilities. In total, this segment is estimated
property to live in. Demographically, to account for 30.9% of industry revenue in
married couples and domestic 2016. Nonresidential tenants include a wide
partnerships account for an estimated variety of industries and businesses. For
46.3% of industry revenue, while single example, the office segment is mainly
individuals account for an estimated composed of financial service companies
22.8% of industry revenue in 2016. and professionals, including accountants,
Real estate agents commonly help lawyers, insurance companies and computer
consumers either buy or lease a technology firms; and, the retail segment
residential home. Residential leases are includes malls and shopping plazas, which
often shorter in duration, and most contain movie theaters, clothing stores,
properties contain more tenants per restaurants and other consumer-oriented
square foot than nonresidential building businesses. Additionally, the sale of
leases, as consumers require less space multifamily residential properties (i.e.
than businesses and other organizations. apartment buildings) to companies
As a result, brokers and agents must be intending to generate income from the
able to handle a high volume of tenant property is included in the commercial
turnover, rental payments, service property segment.
requests and tenant issues (e.g. Commercial properties have
nonpayment or security deposit claims). sophisticated clients, so brokers and
Occasionally, industry operators aid in agents are often required to have skilled
Products & Markets
Major Markets personnel to negotiate leases and deal commercial properties is generally
continued with tenant issues. Each tenant is limited to commercial space, rather
normally responsible for the build-out than office or warehouse areas, with
and maintenance of the leased space. the exception of cleaning services,
Consequently, service request and which is often supplied to most Class A
maintenance requirements for office buildings.
International Trade Real estate brokerages establish foreign large international companies, the bulk
subsidiaries to participate in cross-border of their brokerage operations are
transactions. However, firms pursuing confined to the US market. Furthermore,
opportunities abroad tend to be because this industry is service based, it
concentrated on the commercial real has no imports or exports of goods. For
estate sector. Domestic real estate more information regarding the
brokers and agents also sell US property international activities of industry
to foreign investors. While some of the operators, see the Globalization section
major players within the industry are of this report.
Products & Markets
Business Locations 2016
West
AK
0.2 New
England
ME
Great Mid- 0.6
Lakes Atlantic 1 2
NY 3
WA MT ND 5.6
5 4
2.6 0.2 MN
Rocky
0.7 2.3
WI
OR Mountains SD
0.2
Plains 1.2 MI
1.8
PA
2.1
7
6
1.7 ID IA OH 9 8
0.8 WY 2.1
0.3
NE
0.8
IL IN WV VA
3.5 1.6 2.9
West NV
0.6 0.2
KY
UT MO
0.9 NC
1.3
2.1 CO KS 1.6 3.4
4.0 0.9 TN
SC
Southeast
1.2
CA 1.7
13.4
OK AR GA
1.0 0.8 AL 3.5
AZ MS 1.0
3.3 NM
0.6 Southwest 0.5
TX LA
0.8 FL
6.1 11.5
West
HI
0.6 Additional States (as marked on map) Establishments (%)
1 VT 2 NH 3 MA 4 RI Less than 3%
0.2 0.4 1.5 0.3 3% to less than 10%
10% to less than 20%
5 CT 6 NJ 7 DE 8 MD 9 DC
20% or more
0.7 2.2 0.3 1.8 0.3
Products & Markets
Business Locations The geographical distribution of the Real

Distribution of establishments vs. population
Estate Sales and Brokerage industry is
largely reflected by the size and
30
distribution of the US population.
Economic activity is the main
determinant of population distribution 20
within the United States because
individuals tend to work and live in areas
%
with strong business activity and 10
employment prospects. Local regulations
and tax laws also play a role in
determining the location of industry 0
participants. Real estate agencies and
West
Great Lakes
Mid-Atlantic
New England
Plains
Rocky Mountains
Southeast
Southwest
brokerages tend to operate in areas with
active, price-growth housing markets.
The Southeast region is the most
heavily concentrated region for real Establishments
estate agents and brokers, with 28.4% of Population
industry establishments. The region’s SOURCE: WWW.IBISWORLD.COM
importance to the industry is grounded in

its large share of the US population Angeles, San Francisco and San Diego.
(25.4%) and the presence of Florida, the Sales prices in this region have also risen
second most concentrated state with significantly during the past five years,
11.5% of establishments. Florida is home offering higher commission revenue
to one of the most active housing markets potential for regional brokers and agents.
in the country due to its warm weather The Mid-Atlantic and Southwest
and ample coast. regions round out the top four regions
The West region holds the second- with 12.3% and 11.1%, respectively, of
highest share of industry establishments industry establishments. The Mid-Atlantic
(19.9%) and the second-highest region includes the significant markets of
proportion of the US population (17.1%). Washington, DC, New York City and
California holds the largest portion of Philadelphia. The Southwest includes the
industry establishments of any single Phoenix-Mesa, AZ market, which has
state at 13.4%, and the state boasts shown a significant jump in median sales
several hot real estate markets in Los prices during the past five years.
Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks
Basis of Competition | Barriers to Entry | Industry Globalization
Market Share The Real Estate Sales and Brokerage thousands of local and regional players
Concentration industry has a low level of market share serving the surrounding area. Many of
concentration. IBISWorld estimates that these agencies and brokerage offices are
the four largest companies in the associated with larger companies that
Level
industry, Realogy Corp., CBRE Group franchise their brand names in return for
Concentration in Inc., Cushman & Wakefield Inc. and a small royalty fee on commissions.
this industry is L ow Newmark Grubb Knight Frank, account Therefore, market share concentration by
for a combined share of less than 10.0% revenue for these larger companies is
of industry revenue. The real estate significantly lower than the percentage of
sector is highly fragmented, with transaction volume they conduct.
Key Success Factors Effective product promotion commissions. Brokers or agents generally
Brokers and agents use advertising generate business and listings through
campaigns to promote their brokerage referrals and industry contacts.
IBISWorld identifies businesses and property listings. The
250 Key Success successes of these advertisement Business expertise of operators
Factors for a campaigns are important for selling Businesses and individuals often seek the
business. The most property and attracting new clients. advice of real estate professionals to
assist them in real estate transactions
important for this
Effective cost controls because of their expertise in the local real
industry are: The majority of industry revenue is estate market, including zoning,
structured on a 100% commission basis. financing and tax structures.
Consequently, it is important to keep
costs low, due to the potential for large Proximity to key markets
fluctuations in revenue. Brokers and agents must be in markets
where there is ample demand for real
Having contacts within key markets estate services. Densely populated
A successful real estate broker or agent areas or places with strong population
needs to have a consistent level of growth tend to be key markets for
property listings to generate industry participants.
Cost Structure The Real Estate Sales and Brokerage sales, revenue and expenses on an
Benchmarks industry is composed of a number of individual basis. The parent corporation
large companies that often have a global charges royalty fees for the use of its
reach and thousands of small local trade name and for operational
agencies that operate independently and assistance, including training, advertising
serve only the local market. However, the and marketing.
majority of industry agencies and
brokerages operate as franchisees of the Profit
industry’s most recognizable trade Profit margins (measured as earnings
names, which are in turn owned by a before interest and taxes) for the average
small number of the industry’s largest industry operator are estimated at 15.5%
enterprises (e.g. Realogy and CBRE of revenue in 2016. Margins have
Group). Franchisees act as independent recovered from 2011 lows of 10.4%, as
businesses with each firm accounting for rising real estate prices and transaction
Cost Structure volumes boosted industry demand and trade name). Agent commissions
Benchmarks revenue during the past five years. typically range from 5.0% to 6.0% of the
Furthermore, the industry has been able transaction value (though negotiating
continued
to sustain relatively strong margins this rate lower has become more common
because of its commission structure, since the real estate market’s downturn).
which allows agents to easily scale their Other agents may operate wholly
costs in line with demand. independent of an office, relying on
established customers and local name
Wages recognition for business.
In 2016, employee wages are expected to
account for 35.4% of industry revenue, Purchases, depreciation and marketing
up significantly from 32.6% in 2011. Purchases of real estate analytic software
Overall labor costs also include agent licenses, office and business related
commissions, which account for more products and services account for an
than 30.0% of total industry revenue. A estimated 9.0% of industry revenue in
majority of real estate agents are paid on 2015. Reimbursing agents for expenses,
a 100% commission basis rather than as such as fuel and open houses, are
salaried employees; in fact, many agents included in the purchases segment, which
technically operate as contractors within accounts for an estimated 2.0% of
a brokerage and pay a certain fraction of revenue. Depreciation in this industry is
commissions in royalty fees to the office relatively low, estimated at 0.7% of
(which, in turn, pays royalties to its industry revenue, which includes
parent franchisor, if it uses a franchised investment in office equipment and
Sector vs. Industry Costs
Average Costs of
all Industries in Industry Costs
sector (2016) (2016)
100 n Profit
15.5 n Wages
21.9 n Purchases
80 n Depreciation
n Marketing
n Rent & Utilities
35.4 n Other
Percentage of revenue
60
43.4
9.0
40 0.7 5.4
11.0 3.9
20 7.5
2.0 30.1
4.4
9.8
0
Cost Structure building locations. Marketing expenses properties. Utilities costs are primarily
Benchmarks are an essential component of an agency’s driven by electricity expenses, which are
operating costs. Agents and brokers tied to an office’s heavy use of computers
continued
advertise heavily on billboards, and telephones for communicating with
television, radio and in newspapers and customers and organizing listings.
other publications to differentiate
themselves from rivals in the same Other costs
geographic region. Therefore, IBISWorld Other expenses include insurance costs,
estimates that marketing accounts for an outside business service fees, association
expected 5.4% of total industry revenue dues and legal fees. Interest expenses are
in 2016. also included under other costs and
include costs associated with debt
Rent and utilities including loans and bonds. The industry
IBISWorld expects that rent and utilities generally has low fixed costs due to the
costs amount to 3.9% of industry revenue commission payment structure. However,
in 2016. Real estate agencies and businesses generally take out loans for
brokerages often consider their offices various operational activity including
and buildings a representation of their business expansion, office space and
brand and invest in modern, attractive merger and acquisition activity.
Basis of Competition There is a high level of competition being spent on internet based advertising
within the industry mainly due a vast relative to print and other traditional
Level & Trend number of industry participants and low forms of advertising.
barriers to entry. Geographic markets In competing for property listings, real
ompetition
C in this create a basis to compete on. In the estate agents and brokers emphasize
industry is H
ighand residential market in particular, there has non-price aspects such quality of service.
the trend is S teady been a tendency for real estate agents and Client prospecting and networking,
brokers to concentrate on localized marketing strength, presentation and
markets. Competition in this industry marketing skills are the major tools used
results in a high level of personalized by agents to obtain property listings and
service from highly motivated staff that rental business. A good form of
tends to be managed by owners. This promotion for an agency is the
makes it difficult for firms to grow and advertising of listed properties, as
compete over a large geographic area, property sellers will perceive this as a
without the use of franchising systems or sign of a successful agency.
the use of subsidiaries/associate In some markets, it may be
companies that provide significant equity advantageous to provide a broad range of
to branch managers. services extending from property sales to
Marketing skills are important. This is rental and property management. This
a sales-based industry requiring strong diversification can help stabilize revenue,
marketing and selling skills. Close given that one type of real estate segment
attention needs to be paid to factors such like the residential market can either
as advertising, developing a referral base underperform or outperform other
and other centers of influence, shop/ segments like the commercial market.
office fit out and layout, and sales staff Providing a broader range of services can
selection, training, monitoring and also increase an agents’ customer base
motivation. More advertising dollars are and help promote a firm’s brand.
Basis of Competition While prices are negotiable and the addition, multinational companies are
continued rate of commission can be a major increasingly seeking to form a
competitive factor, in the market for relationship with one major global real
high value commercial and residential estate agency to provide real estate
property sales, the ability to attract leasing and facilities management
interest from potential interstate-based services. Firms providing services in this
and overseas-based investors (i.e., market require strong research and
through interstate and overseas marketing capabilities, and, in facilities
operations or affiliates) can be an management in particular, strong back
important competitive factor. In office functions.
Barriers to Entry The Real Estate Sales and Brokerage

industry has relatively low barriers to Barriers to Entry checklist
Level & Trend entry due to low operational expenses, Competition High
startup costs and licensing requirements. Concentration Low
arriers to Entry
B The internet has further reduced the Life Cycle Stage Mature
in this industry are barriers to entry within this industry due Capital Intensity Low
Lowand S teady to the ability for brokers and agents to Technology Change Medium
cheaply advertise their business and Regulation & Policy Heavy
property listings to large portions of Industry Assistance Medium
individuals, businesses and investors.
There are numerous federal, state and SOURCE: WWW.IBISWORLD.COM
local laws and regulations that contain

standards of conduct for real estate substantial first-hand experience and
brokers. State real estate commissions knowledge about the local real estate
usually administer state real estate market, and new entrants without a
licenses and broker licenses generally reputation for understanding a locality’s
require a combination of industry related individual market will find difficulty
experience and industry specific gaining business from existing companies
knowledge, as assessed through a formal with a portfolio of completed
testing process. transactions. On the other hand, the
The most significant barrier to volatile markets of the past five years may
entering the industry is the presence of have lowered trust in an area’s existing
existing agents and brokers in a market. real estate agencies and brokers, creating
Customers expect their brokers to have an opening for new players.
Industry The US Real Estate Sales and Brokerage involve the consulting groups and
Globalization industry globalization is low. The property management divisions within
majority of firms are US owned and these companies. Nonetheless, some of
operated. Some of the major players these firms do provide brokerage services
within the industry are large outside the US, but these services are
international companies, but the bulk of generally directed towards the
their brokerage operations are confined commercial real estate market.
to the US market. The truly international Over the five years to 2021, large firms
aspects of these brokerages tend to within the industry are expected to
Industry continue to expand global operations to potential customers. Local sales agents also
Globalization benefit from growing real estate markets are better suited for determining customer
abroad. This trend is expected to follow the demands due to their intimate knowledge
continued
overall globalization trend of the world of the local real estate. In addition, the
economy and financial markets. However, residential real estate sales business is
Level & Trend the international expansion of the traditionally dominated by small
lobalization
G in brokerage business is expected to be independently owned offices. This trend is
this industry is limited to the commercial market. expected to continue because of the low
Lowand the trend Residential sales generally benefit from startup costs and licensing requirements
personal connections among agents and associated with residential sales.
is I ncreasing
Major Companies
There are no Major Players in this industry | Other Companies
Other Companies The Real Estate Sales and Brokerage four segments: real estate franchise,
industry is made up of primarily small, company-owned real estate brokerage,
independently owned and operated relocation and title and settlement
brokerage firms and self-employed services. According to the company,
individuals. There are a number of large Realogy was involved, on either the buy
franchising operations in the United or sell sides, in more than a quarter of all
States market that are profiled below. By existing home sale transactions involving
the number of transactions and a real estate brokerage company in the
aggregated revenue of their individual United States. Realogy’s subsidiary NRT
brokerage offices, these operators would LLC is the largest operator of residential
be major players because they handle a real estate brokerages in the United
significant share of US real estate States, with operations in more than 40
transactions. However, IBISWorld does major metropolitan markets. NRT is
not classify these companies as major largely affiliated with the franchise
players because a large majority of their brands Coldwell Banker, ERA and
industry-relevant offices are Sotheby’s International Realty, and local
independently owned and operated, brands such as The Corcoran Group and
despite receiving assistance from their Citi Habitats. NRT includes about 725
respective parent organizations. company-owned offices with 45,000
Consequently, there are no companies independent sales associates.
that have more than a 5.0% share of Through 2011, lower transaction
industry revenue. Nevertheless, industry volumes and falling home prices hurt the
players, such as Realogy Holding Corp., company, which owes most of its
do compete in this industry through their business to the single-family housing
company-owned offices. market. However, in 2012, rising
household spending power and
Realogy Holding Corp. historically low mortgage rates led to
Estimated market share: 3.4% higher home sales and increased demand
Headquartered in Madison, NJ, Realogy for Realogy’s real estate services. A
Corp. is a global provider of real estate continuation in these trends combined
services, including franchising, brokerage with an increase in US home prices
and relocation and title services. The facilitated a spike in company revenue in
company counts some of the world’s 2013. In recent years, Realogy has also
most recognizable real estate expanded through a series of strategic
trademarks among its brands, including acquisitions. For example, NRT acquired
NRT LLC, Century 21 and Better Homes 30 US-based real estate brokerages and
and Gardens Real Estate. Realogy was Coldwell Banker added 60 offices in 2015
created in 2005 when its predecessor, alone. Realogy’s company-owned
Cendant Corp., split into four franchise revenue is expected to continue
companies. After two rocky years, it was to expand, reaching $4.2 billion in
taken private by Apollo Global revenue in 2016.
Management before a highly successful
initial public offering in October 2012 CBRE Group Inc.
returned it to the stock market. Estimated market share: 2.0%
Realogy is considered the leading Based in Los Angeles and operating 460
franchisor of real estate brokerages in the offices in more than 60 countries, CBRE
United States and worldwide, with about Group Inc., formerly CB Richard Ellis
13,500 offices and 251,000 agents across Group, is one of the largest commercial
104 countries. Its operations are split into real estate service operators in the world.
Major Companies
Other Companies The company was founded in 1906 and is more than 250 offices and 16,000
continued the only commercial real estate services employees operating in nearly 60
company in the Fortune 500, employing countries. However, the company has
more than 52,000 people globally. undergone a large structural change
CBRE focuses on commercial property during the past year. In May 2015, global
and corporate facilities management, commercial real estate service firm DTZ,
occupier and property or agency leasing, with the financial backing of private
property sales, valuation, real estate equity firm TPG Capital and the Ontario
investment management, commercial Teacher’s Pension Plan, agreed to
mortgage origination and servicing, purchase Cushman & Wakefield for
capital markets (equity and debt) roughly $2.0 billion. Prior to the
solutions, development services and acquisition, DTZ was similar in size to
proprietary research. Relevant to this C&W, with more than 260 offices in 50
industry, CBRE’s leasing and sales countries. Combined, these two
segments, which account for an companies will continue to operate under
estimated 38.9% of company revenue, the Cushman & Wakefield name, and will
offer real estate tenants, investors and employ more than 43,000 workers.
owners strategic advice with regards to Globally, the company’s total revenue
the leasing, disposition and acquisition of was expected to reach approximately $5.5
property. Real estate professionals within billion in 2015.
this segment are compensated primarily Relevant to this industry, C&W
through commission-based programs. provides brokerage services. However,
Additionally, CBRE offers valuation the company derives a substantial
services that include market appraisals, portion of revenue from services outside
litigation support, feasibility studies and the scope of this industry such as
discounted cash flow analysis. property and facility management,
Over the five years to 2016, CBRE’s market and submarket real estate
industry-relevant performance quickly studies, investment research and
rebounded, reflecting an expanding US economic analysis. IBISWorld expects
economy, a drop in office vacancy rates industry-specific revenue to rise to $1.2
and an increase in the value of billion in 2016.
commercial real estate, which improved
property sales. Additionally, the company Newmark Grubb Knight Frank
has expanded through a series of Estimated market share: Less than 1.0%
industry-specific acquisitions, such as Newmark Grubb Knight Frank (NGKF) is
CBRE’s purchase of The Furman a commercial real estate advisory firm
Company, a South Carolina-based employing more than 12,800
commercial real estate brokerage and professionals in approximately 370 offices
management services company, in across the globe. The company is part of
January 2014. Thus, industry-relevant BGC Partners, a global brokerage
revenue at CBRE is expected to $2.5 company primarily servicing the wholesale
billion in 2016. financial and real estate markets. BGC
Partners entered the commercial real
Cushman & Wakefield Inc. estate industry through the acquisition of
Estimated market share: 1.0% Newmark Knight Frank in October 2011
Headquartered in New York City and and further expanded when it purchased
founded in 1917, Cushman & Wakefield the remaining assets of Grubb & Ellis for
(C&W) is the largest privately held real more than $30.0 million, following its
estate services firm in the world, with bankruptcy filing in 2012.
Major Companies
Other Companies NGKF provides services ranging from company has expanded these services
continued leasing advisory and property sales to through mergers and acquisitions. In
property management and valuation and January 2014, NGKF acquired Cornish &
advisory services. According to BGC Carey Commercial, a California-based
Partners, more than 25.0% of the commercial real estate firm with more
company’s total revenue is generated by than 275 brokers. In December 2014,
real estate services. Relevant to this NGKF acquired Apartment Realty
industry are NGKF’s brokerage Advisors (ARA), a multihousing
professionals that specialize in brokerage and real estate firm.
commercial properties including office, Consequently, IBISWorld estimates
retail, industrial, hospitality and industry-relevant revenue will be $307.9
healthcare. In the past several years, the million in 2016.
Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility
Regulation & Policy | Industry Assistance
Capital Intensity The Real Estate Sales and Brokerage

industry has a low level of capital intensity. Capital intensity
Capital units per labor unit
IBISWorld estimates that the average
Level
operator spends about $0.02 in capital 0.5
The levelof capital investment for every $1.00 spent in wages.
intensity is L ow The majority of industry expenses are 0.4
related to labor; like most service 0.3

industries, real estate agencies and
brokerages rely on the knowledge and 0.2
abilities of employees (whether in-house or 0.1

contracted agents), rather than the
productive capabilities of depreciable 0.0
Economy Real Estate and Real Estate
machinery, to generate revenue. Agents are Rental and Sales &
Leasing Brokerage
typically paid on a commission basis, the Dotted line shows a high level of capital intensity
fees for which range from 2.5% to 5.0% of SOURCE: WWW.IBISWORLD.COM
the transaction value. The industry’s capital

intensity has declined marginally since The capital goods purchased by real
2011 and is not expected to shift noticeably estate offices are usually limited to
during the five years to 2021. computers, software and other office
Tools of the Trade: Growth Strategies for Success
New Age Economy Investment Economy

Recreation, Personal Services, Information, Communications,
Health and Education. Firms Mining, Finance and Real
benefit from personal wealth so Estate. To increase revenue
stable macroeconomic conditions firms need superior debt
are imperative. Brand awareness management, a stable
and niche labor skills are key to macroeconomic environment
product differentiation. and a sound investment plan.
Capital Intensive
Labor Intensive
Real Estate Sales & Brokerage Apartment Rental

Loan Brokers
Real Estate Investment Trusts
Traditional Service Economy
Printing Old Economy
Wholesale and Retail. Reliant Real Estate Appraisal Agriculture and Manufacturing.
on labor rather than capital to Traded goods can be produced
sell goods. Functions cannot using cheap labor abroad.
be outsourced therefore firms To expand firms must merge
must use new technology or acquire others to exploit
or improve staff training to economies of scale, or specialize
increase revenue growth. in niche, high-value products.
Change in Share of the Economy SOURCE: WWW.IBISWORLD.COM

Capital Intensity equipment. Some may invest in modern costs associated with these services are
continued videoconference equipment for holding relatively low. Furthermore, a large part of
meetings with important clients. industry activity is conducted out of the
Communication services including mobile office, whether in showing listed
phone and internet access are very properties to individual parties or holding
important for industry operations, but the open houses.
Technology & Systems The most significant advances in like a social security number. These
technology and systems for the industry services present a degree of competition
Level are largely associated with the internet. for real estate agents and brokers, since
The internet has revolutionized the they offer details about local markets
The level
of industry in terms of listing properties and, potentially, advice from
Technology Change and acquiring customers. The internet professionals who also use the site,
is M
edium has allowed brokers to expand services typically rendered by an agent
operations by making listings more with deep knowledge of the area.
readily available to a larger amount of However, the benefits of reaching
customers at a relatively low price. At hundreds of thousands of users through
the same time, public listing sites like purchased advertising and free listings on
Craigslist allow individuals to list their these sites outweigh the possible
homes and pursue a sale without the use drawbacks for the industry.
of an agent or broker. Technology is also used to manage
Dedicated real estate listing sites such back-office functions including
as Zillow, Yahoo! Real Estate, LoopNet accounting, bookkeeping and
and Trulia offer services for consumers operations. The industry has benefited
and businesses seeking to buy, sell or from the improvements in technology
rent a home or commercial property as associated with storing, processing and
well as for professional agents and accessing information. Automated
brokers interested in advertising their services associated with accounts
listings online. In addition to offering payable and other back office functions
listings, these sites analyze real estate have also reduced administrative costs.
market data to present consumers with The improvements in technology have
chronological trends and neighborhood also lowered costs associated with
statistics. Zillow also offers home value processing payments and analyzing
estimates and gives users a way to receive data. This trend is expected to continue,
mortgage interest rate offers without especially as technology systems
revealing sensitive personal information decrease in value.
Revenue Volatility Revenue for the Real Estate Sales and Industry revenue fluctuates with the
Brokerage industry has demonstrated a performance of the overall real estate
low level of volatility, as industry revenue sector, which has both plummeted during
Level
is expected to increase in each of the past the recession and experienced a strong
The level of five years. Consequently, revenue recovery. Home prices, in particular,
Volatility is L ow changes averaged only 1.9% annually in determine revenue for industry agents
the five years to 2016. and brokers because they are typically
Revenue Volatility paid on a high commission basis, with fees revenue volatility to continue to moderate
continued usually equal to 2.5% to 5.0% of the value during the next five years as the industry
of the transaction (i.e. the final price of a experiences steadier growth in light of the
home or property). IBISWorld expects real estate sector’s recovery.
A higher level of revenue Volatility vs Growth

volatility implies greater
industry risk. Volatility can 1000 Hazardous Rollercoaster
negatively affect long-term
Revenue volatility* (%)

strategic decisions, such as 100
the time frame for capital
investment.
10
When a firm makes poor
investment decisions it Real Estate Sales &
may face underutilized 1
capacity if demand
Brokerage
suddenly falls, or capacity 0.1 Stagnant Blue Chip
constraints if it rises –30 –10 10 30 50 70
quickly. Five year annualized revenue growth (%)
* Axis is in logarithmic scale
Regulation & Policy There are numerous federal, state and connection with the sales of residences
local laws and regulations that contain and referral of settlement services.
general standards for, and prohibition Various concerns have been raised
Level & Trend on, the conduct of real estate brokers and about the purported anti-competitiveness
he level of
T sales associates, including those relating of the real estate brokerage industry. In
Regulation is to licensing of brokers and sales early 2001, the Federal Reserve Board
Heavyand the associates, fiduciary and agency duties, and the Department of Treasury
administration of trust funds, collection published a proposed rule that would
trend is S
teady
of commissions, advertising, and permit financial subsidiaries of banks
consumer disclosures. Under state law, and financial holding companies to
real estate brokers have the duty to engage in real estate brokerage. To date,
supervise and are responsible for the the Congress has blocked issuance of the
conduct of their sales associates. final rule.
State real estate commissions usually The National Association of Realtors
represent the government agency that seeks to help its members become
administers state real estate license Acts, more profitable. It advocates property
and regulates state real estate license transactions, develops standards for
programs and the federal Fair Housing its members and provides professional
Act prohibits race discrimination in sales development, research and
and rentals of housing. communication services for its
The federal Real Estate Settlement members. The National Association of
Procedures Act and state real estate Real Estate Consultants promotes the
brokerage laws restrict payments which fee-for-service approach for real
real estate brokers may receive or pay in estate agents.
Industry Assistance There is no direct industry assistance given residential and commercial brokers,
to brokers and sales agents. Indirectly, the salespeople, property managers, appraisers
industry is assisted through the trade and counselors. The NAR provides
Level & Trend associations, such as the National professional networking, legislative
he level of Industry
T Association of Realtors (NAR), which advocacy, industry research and other
Assistance is represents 1.1 million members, including professional services.
Mediumand the
trend is D
ecreasing
Key Statistics
Industry Data Industry Existing
Revenue Value Added Establish- Wages Domestic Home Sales
($m) ($m) ments Enterprises Employment Exports Imports ($m) Demand (Mils)
2007 132,053.7 59,559.2 901,766 891,709 1,157,863 -- -- 42,656.4 N/A 5.0
2008 105,645.4 47,412.2 800,141 789,784 1,042,607 -- -- 36,530.7 N/A 4.1
2009 95,485.2 37,507.2 750,010 739,755 956,654 -- -- 30,059.3 N/A 4.3
2010 94,125.7 39,936.3 730,828 721,144 919,630 -- -- 29,864.8 N/A 4.2
2011 93,332.9 40,910.0 698,448 688,790 879,344 -- -- 30,456.7 N/A 4.3
2012 99,482.8 44,069.0 698,257 687,609 858,975 -- -- 33,026.4 N/A 4.7
2013 105,270.9 48,957.7 716,433 705,015 883,817 -- -- 35,483.1 N/A 5.1
2014 111,409.0 56,230.5 762,130 746,340 932,072 -- -- 38,516.4 N/A 4.9
2015 116,744.6 60,149.0 784,377 766,554 966,241 -- -- 41,586.6 N/A 5.3
2016 122,458.0 63,193.0 804,792 784,479 1,000,771 -- -- 43,385.3 N/A 5.4
2017 127,257.0 65,512.9 818,811 795,843 1,027,762 -- -- 44,831.5 N/A 5.6
2018 131,635.9 67,531.6 826,117 801,169 1,049,101 -- -- 46,039.0 N/A 5.6
2019 135,934.5 69,484.0 832,000 805,620 1,068,967 -- -- 47,187.4 N/A 5.8
2020 140,571.4 71,648.9 840,564 813,274 1,091,887 -- -- 48,479.7 N/A 6.0
2021 144,046.1 73,308.7 851,228 823,291 1,111,869 -- -- 49,549.0 N/A 6.0
Sector Rank 4/19 4/19 2/19 2/19 2/19 N/A N/A 2/19 N/A N/A
Economy Rank 88/1370 50/1370 9/1370 10/1370 38/1370 N/A N/A 41/1370 N/A N/A
Annual Change Industry Establish- Domestic Existing

Revenue Value Added ments Enterprises Employment Exports Imports Wages Demand Home Sales
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
2008 -20.0 -20.4 -11.3 -11.4 -10.0 N/A N/A -14.4 N/A -17.9
2009 -9.6 -20.9 -6.3 -6.3 -8.2 N/A N/A -17.7 N/A 5.1
2010 -1.4 6.5 -2.6 -2.5 -3.9 N/A N/A -0.6 N/A -3.5
2011 -0.8 2.4 -4.4 -4.5 -4.4 N/A N/A 2.0 N/A 1.9
2012 6.6 7.7 0.0 -0.2 -2.3 N/A N/A 8.4 N/A 9.2
2013 5.8 11.1 2.6 2.5 2.9 N/A N/A 7.4 N/A 9.3
2014 5.8 14.9 6.4 5.9 5.5 N/A N/A 8.5 N/A -3.0
2015 4.8 7.0 2.9 2.7 3.7 N/A N/A 8.0 N/A 7.2
2016 4.9 5.1 2.6 2.3 3.6 N/A N/A 4.3 N/A 2.6
2017 3.9 3.7 1.7 1.4 2.7 N/A N/A 3.3 N/A 2.5
2018 3.4 3.1 0.9 0.7 2.1 N/A N/A 2.7 N/A 1.3
2019 3.3 2.9 0.7 0.6 1.9 N/A N/A 2.5 N/A 3.3
2020 3.4 3.1 1.0 1.0 2.1 N/A N/A 2.7 N/A 3.1
2021 2.5 2.3 1.3 1.2 1.8 N/A N/A 2.2 N/A 0.6
Sector Rank 2/19 5/19 6/19 6/19 3/19 N/A N/A 3/19 N/A N/A
Economy Rank 292/1370 284/1370 420/1370 409/1370 315/1370 N/A N/A 296/1370 N/A N/A
Key Ratios Imports/ Exports/ Revenue per Share of the

IVA/Revenue Demand Revenue Employee Wages/Revenue Employees Average Wage Economy
(%) (%) (%) ($’000) (%) per Est. ($) (%)
2007 45.10 N/A N/A 114.05 32.30 1.28 36,840.63 0.40
2008 44.88 N/A N/A 101.33 34.58 1.30 35,037.84 0.32
2009 39.28 N/A N/A 99.81 31.48 1.28 31,421.29 0.26
2010 42.43 N/A N/A 102.35 31.73 1.26 32,474.80 0.27
2011 43.83 N/A N/A 106.14 32.63 1.26 34,635.71 0.27
2012 44.30 N/A N/A 115.82 33.20 1.23 38,448.62 0.29
2013 46.51 N/A N/A 119.11 33.71 1.23 40,147.56 0.31
2014 50.47 N/A N/A 119.53 34.57 1.22 41,323.42 0.35
2015 51.52 N/A N/A 120.82 35.62 1.23 43,039.57 0.37
2016 51.60 N/A N/A 122.36 35.43 1.24 43,351.88 0.38
2017 51.48 N/A N/A 123.82 35.23 1.26 43,620.51 0.38
2018 51.30 N/A N/A 125.47 34.97 1.27 43,884.24 0.39
2019 51.12 N/A N/A 127.16 34.71 1.28 44,142.99 0.39
2020 50.97 N/A N/A 128.74 34.49 1.30 44,399.92 0.39
2021 50.89 N/A N/A 129.55 34.40 1.31 44,563.70 0.39
Sector Rank 10/19 N/A N/A 16/19 2/19 18/19 9/19 4/19
Economy Rank 239/1370 N/A N/A 1064/1370 234/1370 1336/1370 840/1370 50/1370
Figures are in inflation-adjusted 2016 dollars. Rank refers to 2016 data. SOURCE: WWW.IBISWORLD.COM
Jargon & Glossary
Industry Jargon FORECLOSUREThe legal process in which an owner’s REAL ESTATE BROKERAn individual who runs a real
right to a property is terminated, usually because the estate office and manages agents.
owner defaulted on the property’s mortgage. WRITE-DOWNThe process of reducing the book value
FRANCHISEA form of business that operates under a of an asset because it is overvalued compared with its
contract agreement and usually pays a business current market value.
organization a fee to operate under the franchiser’s
trade name.
IBISWorld Glossary BARRIERS TO ENTRYHigh barriers to entry mean that INDUSTRY CONCENTRATIONAn indicator of the
new companies struggle to enter an industry, while low dominance of the top four players in an industry.
barriers mean it is easy for new companies to enter an Concentration is considered high if the top players
industry. account for more than 70% of industry revenue.
CAPITAL INTENSITY Compares the amount of money Medium is 40% to 70% of industry revenue. Low is less
spent on capital (plant, machinery and equipment) with than 40%.
that spent on labor. IBISWorld uses the ratio of INDUSTRY REVENUEThe total sales of industry goods
depreciation to wages as a proxy for capital intensity. and services (exclusive of excise and sales tax); subsidies
High capital intensity is more than $0.333 of capital to on production; all other operating income from outside
$1 of labor; medium is $0.125 to $0.333 of capital to $1 the firm (such as commission income, repair and service
of labor; low is less than $0.125 of capital for every $1 of income, and rent, leasing and hiring income); and
labor. capital work done by rental or lease. Receipts from
CONSTANT PRICESThe dollar figures in the Key interest royalties, dividends and the sale of fixed
Statistics table, including forecasts, are adjusted for tangible assets are excluded.
inflation using the current year (i.e. year published) as INDUSTRY VALUE ADDED (IVA)The market value of
the base year. This removes the impact of changes in goods and services produced by the industry minus the
the purchasing power of the dollar, leaving only the cost of goods and services used in production. IVA is
“real” growth or decline in industry metrics. The inflation also described as the industry’s contribution to GDP, or
adjustments in IBISWorld’s reports are made using the profit plus wages and depreciation.
US Bureau of Economic Analysis’ implicit GDP price INTERNATIONAL TRADEThe level of international
deflator. trade is determined by ratios of exports to revenue and
DOMESTIC DEMANDSpending on industry goods and imports to domestic demand. For exports/revenue: low is
services within the United States, regardless of their less than 5%, medium is 5% to 20%, and high is more
country of origin. It is derived by adding imports to than 20%. Imports/domestic demand: low is less than
industry revenue, and then subtracting exports. 5%, medium is 5% to 35%, and high is more than
EMPLOYMENTThe number of permanent, part-time, 35%.
temporary and seasonal employees, working proprietors, LIFE CYCLEAll industries go through periods of growth,
partners, managers and executives within the industry. maturity and decline. IBISWorld determines an
ENTERPRISE A division that is separately managed industry’s life cycle by considering its growth rate
and keeps management accounts. Each enterprise (measured by IVA) compared with GDP; the growth rate
consists of one or more establishments that are under of the number of establishments; the amount of change
common ownership or control. the industry’s products are undergoing; the rate of
technological change; and the level of customer
ESTABLISHMENTThe smallest type of accounting unit
acceptance of industry products and services.
within an enterprise, an establishment is a single
physical location where business is conducted or where NONEMPLOYING ESTABLISHMENT Businesses with
services or industrial operations are performed. Multiple no paid employment or payroll, also known as
establishments under common control make up an nonemployers. These are mostly set up by self-employed
enterprise. individuals.
EXPORTSTotal value of industry goods and services sold PROFITIBISWorld uses earnings before interest and tax
by US companies to customers abroad. (EBIT) as an indicator of a company’s profitability. It is
calculated as revenue minus expenses, excluding
IMPORTS Total value of industry goods and services
interest and tax.
brought in from foreign countries to be sold in the
United States.
Jargon & Glossary
IBISWorld Glossary VOLATILITYThe level of volatility is determined by WAGESThe gross total wages and salaries of all
averaging the absolute change in revenue in each of the employees in the industry. The cost of benefits is also
continued past five years. Volatility levels: very high is more than included in this figure.
±20%; high volatility is ±10% to ±20%; moderate
volatility is ±3% to ±10%; and low volatility is less than
±3%.
www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com
At IBISWorld we know that industry intelligence

is more than assembling facts
It is combining data with analysis to answer the
questions that successful businesses ask
Identify high growth, emerging & shrinking markets
Arm yourself with the latest industry intelligence
Assess competitive threats from existing & new entrants
Benchmark your performance against the competition
Make speedy market-ready, profit-maximizing decisions
Who is IBISWorld?
We are strategists, analysts, researchers, and marketers. We provide
answers to information-hungry, time-poor businesses. Our goal is to
provide real world answers that matter to your business in our 700 US
industry reports. When tough strategic, budget, sales and marketing
decisions need to be made, our suite of Industry and Risk intelligence
products give you deeply-researched answers quickly.
IBISWorld Membership
IBISWorld offers tailored membership packages to meet your needs.
Disclaimer
This product has been supplied by IBISWorld Inc. (‘IBISWorld’) solely for use of, or reliance upon, the data or information contained herein. Copyright in
by its authorized licenses strictly in accordance with their license agreements this publication is owned by IBISWorld Inc. The publication is sold on the
with IBISWorld. IBISWorld makes no representation to any other person basis that the purchaser agrees not to copy the material contained within it
with regard to the completeness or accuracy of the data or information for other than the purchasers own purposes. In the event that the purchaser
contained herein, and it accepts no responsibility and disclaims all liability uses or quotes from the material in this publication - in papers, reports, or
(save for liability which cannot be lawfully disclaimed) for loss or damage opinions prepared for any other person - it is agreed that it will be sourced to:
whatsoever suffered or incurred by any other person resulting from the use IBISWorld Inc.
Copyright 2016 IBISWorld Inc

Real Estate Sales & Brokerage in The US Industry Report

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Real Estate Sales & Brokerage in The US Industry Report

Uploaded by

Copyright:

Available Formats

WWW.IBISWORLD.

COM Real Estate Sales & Brokerage in the USMarch 2016 1

Open house: Low interest rates and improved

IBISWorld Industry Report 53121

2 About this Industry 16 International Trade 31 Key Statistics

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

About this Industry

Main Activities The primary activities of this industry are

The major products and services in this industry are

Similar Industries 52231 Loan Brokers in the US

53132 Real Estate Appraisal in the US

53139 Real Estate Asset Management & Consulting in the US

54119 Conveyancing Services in the US

Additional Resources For additional information on this industry

Key Statistics Revenue Annual Growth 11-16 Annual Growth 16-21

$19.0bn $43.4bn 784,479

Key External Drivers 4.6%

Per capita disposable

Industry Structure Life Cycle Stage Mature Regulation Level Heavy

30-year conventional mortgage rate Existing home sales

Current After years of decline in the wake of the

typically work on a 100.0% commission

The commercial The commercial market is estimated to

Industry The Real Estate Sales and Brokerage

Residential recovery IBISWorld expects rising home prices to

Commercial growth Although yields on federal bonds and

20 Maturity Quality Growth

Key Features of a Mature Industry

Real Estate Sales & Brokerage

Products & Markets

Supply Chain KEY BUYING INDUSTRIES

KEY SELLING INDUSTRIES

Products & Markets

Products & Services Products and services segmentation (2016)

Total $122.5bn SOURCE: WWW.IBISWORLD.COM

Products & Markets

Products & Markets

Major Markets Major market segmentation (2016)

Total $122.5bn SOURCE: WWW.IBISWORLD.COM

differ dramatically with regard to tenants, nonincome-generating residential

Products & Markets

Products & Markets

Business Locations 2016

Products & Markets

Business Locations The geographical distribution of the Real

importance to the industry is grounded in

Sector vs. Industry Costs

Barriers to Entry The Real Estate Sales and Brokerage

local laws and regulations that contain

Capital Intensity The Real Estate Sales and Brokerage

related to labor; like most service 0.3

abilities of employees (whether in-house or 0.1

the transaction value. The industry’s capital

Tools of the Trade: Growth Strategies for Success

New Age Economy Investment Economy

Real Estate Sales & Brokerage Apartment Rental

Change in Share of the Economy SOURCE: WWW.IBISWORLD.COM

A higher level of revenue Volatility vs Growth

Revenue volatility* (%)

Annual Change Industry Establish- Domestic Existing

Key Ratios Imports/ Exports/ Revenue per Share of the

Jargon & Glossary

Jargon & Glossary

COM Real Estate Sales & Brokerage in the USMarch 2016 1