Commercial Lease

BARRIERS TO ENTRY
High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.

CAPITAL INTENSITY
Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor.
IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.

CONSTANT PRICES
The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the "real" growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.

DOMESTIC DEMAND
Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.

CLASS A BUILDING
A commercial office building that commands the highest rent due to the attractiveness and prestige associated with its location, tenancy, amenities and overall desirability.

FUNDS FROM OPERATIONS (FFO)
A measurement used to define cash flow from operations for REITs and calculated by adding depreciation and amortization expenses to earnings.

LEADERSHIP IN ENERGY AND ENVIRONMENT DESIGN (LEED)
An environmental building certificate program established under the US Green Building Council that certifies buildings meet energy-efficiency and green requirements.

LEVERAGE
The amount of debt used to finance a firm's assets. A firm that has a higher level of debt than equity is considered to be highly leveraged.

LOAN-TO-VALUE RATIO (LTV)
A ratio used to determine how much of a property is being financed or leveraged. For example, a $100,000 house with a mortgage of $80,000 has an LTV ratio of 80.0%.

For most of the current period, industry operators benefited from the growth in the number of businesses, which increased demand for commercial spaces. However, the Commercial Leasing industry was heavily affected by the COVID-19 (coronavirus) outbreak in 2020. In response to the rapid spread of the virus, the government mandated nonessential businesses, which included industry operators' tenants, to close. Consequently, operators experienced a decline in demand in 2020. Overall, industry revenue is expected to decline at an annualized rate of 0.4% to $220.4 billion over the past five years, including an anticipated 3.3% decrease in 2022. The anticipated decrease in revenue in 2022 is due to declining economic sentiment and the continuation of employees working from home, limiting demand for retail and office space. Moreover, industry profit, measured as earnings before interest and taxes, is expected to account for 45.7% of industry revenue in 2022, representing a decline from 51.5% in 2017.