Commercial Real Estate

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.

EMPLOYMENT
The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry.

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.

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.

REAL ESTATE INVESTMENT TRUST (REIT)
A legal entity that uses pooled investor capital to purchase and manage income property or mortgage loans. To qualify as a REIT, the entity must distribute at least 90.0% of taxable income.

VACANCY RATE
The amount of real estate space unoccupied as a percentage of total available space.

Over the five years to 2022, demand for industry services fluctuated. At the beginning of the current period, operators benefited from a booming economy and high consumer spending. Since businesses principally rely on consumer incomes for revenue, increased consumer spending typically boosts demand for construction activity, in addition to leasing activity. However, the unemployment rate spiked in 2020 amid the COVID-19 (coronavirus) pandemic, leading consumer spending, corporate profit and the value of private nonresidential construction to significantly decline in 2020. However, construction activity is expected to recover by 2022. Accordingly, the industry is expected to ultimately stagnate at $1.2 trillion over the five years to 2022, including an incline of 2.8% in 2022 alone. As result of wage growth, industry profit, measured as earnings before taxes and interest, is expected to drop to 9.1% of industry revenue in 2022.