Restrictions on lending standards will lower homeownership, raising industry demand
Los Angeles, CA (PRWEB) April 01, 2013
Historically, the Property Management industry has been resistant to economic downturns. "During such times, property owners often lower costs by outsourcing property management duties to industry operators," says IBISWorld industry analyst Matthew MacFarland. The severity of the Great Recession in 2008 and 2009 overturned this convention largely because the recession and credit crunch originated within the real estate sector. Falling property values directly reduced the fees operators charged for management services (which are calculated as a percentage of the property's value), and a slump in new construction shrank the pool of new contracts to be had. Industry revenue fell 8.2% in 2009 during the worst of the recession.
The Property Management industry was able to turn around more quickly than other real estate-related industries because it offers cost savings to property owners. "Even as property values stayed subdued through late 2011, industry revenue was able to grow as developers and owners outsourced management duties to cut their own costs," MacFarland says. With this trend underway, and with the construction sector's improvement, industry revenue grew 5.5% in 2012 and is expected to record 6.0% growth in 2013. As a result, during the five years to 2013, revenue is expected to increase at an annualized rate of 0.7% to $55.1 billion.
The US Property Management industry is mainly composed of small independent firms, and the industry has a low level of market share concentration. Currently, the industry’s only major player is CBRE Group Inc. based in Los Angeles, CA. The industry is highly fragmented because participants must have strong contacts and personal knowledge of local markets. IBISWorld estimates that industry concentration has grown somewhat during the past five years as larger companies successfully acquired midsize firms to grow market share. This trend has been limited, though, by the continued entry of nonemployers, many of whom were laid off during the recession.
As the economy recovers in earnest during the five years to 2018, outsourcing to property managers will become more common. Developers and owners seeking to run more efficient businesses will increasingly turn to well known real estate management firms with property management experience. The tight lending standards currently enforced by commercial banks will likely postpone an immediate wave of home buying, despite attractive mortgage interest rates. This trend will help keep apartments in high demand, buoying demand from the industry's residential market. Overall economic recovery will also help raise business formation, and lower the office rental vacancy rate in the process. Competition from firms outside the industry with integrated service offerings will slightly pressure margins, but the industry is still projected to grow steadily. During the five years to 2018, industry revenue is forecast to grow. For more information, visit IBISWorld’s Property Management in the US industry report page.
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IBISWorld industry Report Key Topics
Firms in this industry manage residential and nonresidential real estate for others. Property management responsibilities relate to the overall operation of a property, including maintenance, rent collection, trash removal, security and some renovation activities. Firms may also help manage a property's accounting, but operations related to the transactions of properties or real estate investments are not included in this industry.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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