Industry Description
The real estate asset management & consulting industry in the U.S. comprises providers of real estate support services such as escrow, fiduciary duties, consulting, research, listings, tenant representation, and other related activities (NAICS 53139). This industry excludes real estate agents, brokers, lessors, property managers, and appraisers.
The following are some basic characteristics of the real estate asset management & consulting industry:
- Real estate asset management & consulting industry has a combined revenue of $68.7 billion, with a growth rate of 1.0% in 2019-2024
- There are approximately 552,600 businesses as of 2019
- The real estate asset management & consulting industry employs approximately 67,100 people
Industry Trends
The real estate asset management & consulting industry is highly fragmented and has low levels of market share concentration, with the top four industry operators comprising approximately 20% of industry revenue in 2019. The largest players are corporations with numerous employees across the US, while small players are sole proprietorships or partnerships with no additional staff. Some key external factors that influence this industry are (i) housing deficit, (ii) office vacancies, and (iii) . Each of these is described in further detail below.
With an ongoing housing deficit, housing demand is high. In 2022 the housing deficit was at 4.5 million and despite 1.4 million houses being built in 2023, there has been no meaningful impact of this deficit. This lack of impact is due to an increase in the number of families who are seeking their own home and the slow pace of new houses being built. The industry is likely to grow because of this deficit’s impact on housing demand.
Projections show that office vacancy rates are expected to plateau. At the end of 2024 the national office vacancy rate was at 19.8% which was 1.5% higher than the end of 2023. With the embracing of remote and hybrid work and downsizing of office space for companies with return-to-office mandates over the years the decrease in office utilization rates is expected to now reach a plateau. This means the industry is likely to grow once vacancies are filled again.
The real estate asset management & consulting industry in the U.S. has been influenced by external factors such as housing demand, office rental vacancies, and house price index.
Key Performance Metrics
In evaluating the real estate asset management & consulting industry, the following metrics can provide useful information in comparing a subject company to guideline companies and transactions.
- Capitalization rate
- Equity multiple
- Occupancy rate
- Rent growth
- Tenancy length
- Turnover time
Industry Organizations & Publications
The following organizations publish useful information:
- Institute of Real Estate Management (IREM)
- National Association of Real Estate Investment Managers (NAIREM)
- National Council of Real Estate Investment Fiduciaries (NCREIF)
- Pension Real Estate Association (PREA)
Guideline Information: Private Purchase Transactions
Most real estate asset management & consulting companies are privately owned. While there are publicly traded companies, data regarding the sale of 100% of closely held real estate asset management & consulting companies is generally the best source of information to appraise a subject company.
The following are typical appraisal multiples from sale of real estate asset management & consulting companies:
- Revenue multiples between 0.4 and 6.4 times
- Gross Profit multiples between 0.6 and 4.6 times
- EBITDA multiples between 3.0 and 15.0 times
In selecting guideline transactions, it is of critical importance to select transactions that are similar to the subject company. Unique factors for any subject company must be considered to yield credible results. Additionally, industry economic conditions also vary over time, which must also be considered.
Guideline Information: Publicly Traded Companies
Most real estate asset management & consulting companies are privately owned; however, there are a few that are publicly traded, meaning it is possible to compare a subject company based on industry metrics and appraise using industry multiples. However, as with the guideline transactions described above, it is of critical importance to select publicly traded companies that are similar to the subject company. Also be aware that multiples of certain publicly traded companies may not accurately reflect a subject company.
The two largest publicly traded U.S. real estate asset management & consulting companies ranked by market capitalization are:
- CBRE Group, Inc. (CBRE) – $ market capitalization
- Jones Lang LaSalle Incorporated (JLL) – $ market capitalization
The Price-to-Earnings (P/E) ratios of these two companies range between 26 times and 45 times.
Appraisal Rules of Thumb
Please note you should never use a Rule of Thumb in place of a professional appraisal. You will never see a competent professional appraiser do their work using a Rule of Thumb. The professional standards that govern professional appraisal practice, which all professional appraisers should follow, specifically prohibit the use of Rules of Thumb.
Real estate asset management & consulting companies are businesses sold based on sound economics. These economic considerations can be measured using the key performance indicators described above, but such economics cannot be accurately summarized in these simple formulae.