Entrepreneurs in the real estate leasing sector truly have the wind at their back, as renting is the new owning.
The net profit margin for lessors of real estate (i.e., landlords) has improved dramatically since the recession, growing from roughly 3 percent in 2009 to 13 percent today. The percentage of sales growth has also seen similar improvement, nearly quadrupling since 2010, even though sales growth dipped during the past year.
Lessors of real estate include landlords of residential buildings, mini-warehouses, self-storage units, non-residential buildings and other real estate properties.
“Despite (and because of) the constant increase in rental and leasing rates in both the residential and non-residential areas, the industry is seeing strong growth with healthy, improving margins,” says Sageworks analyst James Noe.
“Real estate agents and brokers, who facilitate these types of transactions, have also seen strong growth in recent years, and that certainly makes sense.”
Though the rate of sales growth dropped half a percentage point in the last year, the dip represents more of a flattening of the trend, according to Sageworks analyst Chuck Nwokocha.
“The growth in net profit margin shows that the real estate lessors are operating more efficiently. Profitability is increasing while overhead and expenses remain relatively the same or shrinking,” Nwokocha says.
With such an increase in net profit margin, the real estate leasing industry made the list of the top 15 most profitable industries for the 12-month period ending july 31.
“The housing downturn turned many homeowners into renters. Additionally, many buyers are still having a hard time qualifying for mortgages because of credit scores damaged as a result of the financial downturn,” Nwokocha says.
“The result is that you have a much higher supply of renters and the market is responding to that [with] better profits for the rental and leasing industry.”
