Top 10 Specialties in the Commercial Real Estate World

Posted on June 28, 2013

Today, let’s explore a ranking of the Top 10 Specialties in the Commercial Real Estate World, according to a survey of U.S. CRE professionals discussed in ULI’s 2013 Emerging Trends report. (The feature, “Real Estate Business Prospects for 2013,” is on page 4 of ULI’s report.)

Note: with each specialty, I’ve included the score of its business prospects this year (from 1-9, “abysmal” to “excellent”).

10. Homebuilders/residential land developers (4.75)

9. CMBS lenders/issuers (4.94)

8. Real estate consultants (5.17)

7. Bank real estate lenders (5.48)

5. (tie) Real estate investment managers (5.73)

5. (tie) Private local real estate operators (5.73)

4. Real estate brokers (5.78)

3. Insurance company real estate lenders (5.97)

2. REITs (6.22)

1. Commercial/multifamily developers (6.28)

Obviously, this ranking requires a great deal of qualification, since inevitably there will be variation according to asset class, region, market/submarket, and–of course–a professional’s skill and quality of connections. With that said, we can take the fact that all of these businesses received average scores between 4.5 and 6.3 as a sign that all of them are doing Okay, at the very least. “Okay,” relative to a few years ago, is a step in the right direction.

Not surprisingly, single-family developers and CMBS lenders are at the bottom of this list (well, technically the top, but you know what I mean).

While these two lines of business are beginning to feel the effects of economic recovery, their resurgence is still in its early stage. Home values will have to improve a lot more before demand calls for new single-family product (after all, one might argue the rebound in home values is simply because the REITs and private equity shops are buying up thousands of distressed assets, artificially contracting the available supply). Likewise, the CMBS market–while heating up–is nowhere near the level of activity of its 2006 peak (when the volume of CMBS issued reached a mind-boggling $228.6 billion).

It should be no surprise that REITs, institutional investors, and fund managers are all ranked fairly highly. According to an Ancient Chinese Proverb that I just made up, Fortune favors those who already have a fortune. (Someone should put that in a fortune cookie or something.) Flush with capital, such investors have more freedom, and more opportunity pounding on their doors, than other CRE professionals.

Still, as real estate values continue to rebound, we will see more service providers, builders, and other industry members show improved sentiment toward their own specialties.