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Commercial Real Estate Software Market sizing segmentation report

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Provides an updated CRE software market sizing and segmentation report, based off previous study. Includes all commercial / residential real estate (excluding homebuilding) along with capital markets and real estate funds management

Publié dans : Immobilier
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Commercial Real Estate Software Market sizing segmentation report

  1. 1. CRE Software Due Diligence Report to GI Partners 1CONFIDENTIAL AND PROPRIETARY Commercial Real Estate Software Market – Sizing and Segmentation Report May 5, 2015 www.frontlinepartners.net www.lionpointgroup.com
  2. 2. CRE Software Due Diligence Report to GI Partners 2CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 2CONFIDENTIAL AND PROPRIETARYCRE Software Market Sizing & Segmentation Report 2CONFIDENTIAL AND PROPRIETARY Table of Contents CRE Software Market Sizing & Segmentation (Top Down Approach) 3 CRE Software Market Sizing (Bottom Up Approach)  Reconciliation with other CRE Market Sizing Estimates 14 CRE Software Market Sizing and Segmentation Report
  3. 3. CRE Software Due Diligence Report to GI Partners 3CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 3CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 3CONFIDENTIAL AND PROPRIETARY 3Summary of RE Fund Manager Market Validation Interviews CONFIDENTIAL &PROPRIETARYCRE Software Due Diligence Report to GI Partners 3CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 3CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 3CONFIDENTIAL AND PROPRIETARY CRE Software Market Sizing and Segmentation Analysis (Top Down Approach)
  4. 4. CRE Software Due Diligence Report to GI Partners 4CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 4CONFIDENTIAL AND PROPRIETARYCRE Software Market Sizing & Segmentation Report 4CONFIDENTIAL AND PROPRIETARY Real Estate Market Segmentation Residential Development/ Construction Owner/ Operators Property Services Institutional Investment Corporate Real Estate Homebuilders Multi-Family Housing Senior Housing Student Housing Military Housing Master Plan Communities Land Development Commercial Construction Multi-Family Construction Specialty Office Retail Industrial Hospitality Healthcare Mixed Use Property Management Facility Management Energy Telco Brokerage Equity Investment Opportunity Funds Pension Funds Debt Investment Lenders / Banks I-Banks Insurance Retail Users Large Block Industrial Health Higher Education Government Land Owners Markets Real Estate Market Segmentation Six key market segments define the real estate industry
  5. 5. CRE Software Due Diligence Report to GI Partners 5CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 5CONFIDENTIAL AND PROPRIETARYCRE Software Market Sizing & Segmentation Report 5CONFIDENTIAL AND PROPRIETARY Real Estate Market Segmentation Residential Development/ Construction Owner/ Operators Property Services Institutional Investment Corporate Real Estate Homebuilders Multi-Family Housing Senior Housing Student Housing Military Housing Master Plan Communities Land Development Commercial Construction Multi-Family Construction Specialty Office Retail Industrial Hospitality Healthcare Mixed Use Property Management Facility Management Energy Telco Brokerage Equity Investment Opportunity Funds Pension Funds Debt Investment Lenders / Banks I-Banks Insurance Retail Users Large Block Industrial Health Higher Education Government Land Owners Markets Real Estate Market Segmentation We are predominantly focusing on three key sub-segments: Owner/Operator - Residential (excluding homebuilding), Owner-Operator - Commercial; Institutional Investment – Equity (funds / institutional investors) Focus of our Report is on these three segments (excluding homebuilding / CRE Lending / Servicing)
  6. 6. CRE Software Due Diligence Report to GI Partners 6CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 6CONFIDENTIAL AND PROPRIETARYCRE Software Market Sizing & Segmentation Report 6CONFIDENTIAL AND PROPRIETARY CRE Real Estate Market Sizing North America and Europe represent 80 percent of the market expenditure with strong spend in residential, owner/operator, and institutional investment Global Distribution of Real Estate Expenditure Market Expenditure (as a percent) by Geographic Region Market Expenditure (as a percent) by Geographic Region and Market Segment North America Europe Asia/ Pacific Latin America Owner Operator - Residential 30% 27% 35% 30% Owner Operator - Commercial 25% 30% 25% 25% Investment Management 20% 15% 12% 10% Corporate 12% 10% 10% 15% Development/Construction 6% 10% 13% 15% Property Services 7% 8% 5% 5% Total 100% 100% 100% 100% North America 48% Europe 32% Asia/Pacific 17% Latin America 3%
  7. 7. CRE Software Due Diligence Report to GI Partners 7CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 7CONFIDENTIAL AND PROPRIETARYCRE Software Market Sizing & Segmentation Report 7CONFIDENTIAL AND PROPRIETARY CRE Software Market Sizing / US Spend Potential In 2015, an estimated $19.9 billion was spent on software and services in the real estate market with slightly more than half of that spend ($11.1B) occurring in the U.S. North America 48% Europe 32% Asia/Pacific 17% Latin America 3% Global Real Estate Technology Expenditure North America 0.8% Europe 0.6% Asia/Pacific 0.5% Latin America 0.2% Real Estate Technology Spend as a Percentage of Revenue Real Estate US Technology Spend as a Percentage of Revenue Real Estate Technology Spend By Geographic Region Market Segment 2015 Technology Expenditure ($,BN) Expenditure Propensity (1) Owner Operator (Commercial) $3.18 Institutional Investment (Equity)-(2) $3.82 Leading Buyer Leading Buyer Property Services $0.81 On-time Buyer Corporate Owner Operator (Residential) $1.35 Lagging Buyer Development /Construction $1.39 On-Time Buyer $0.56 Lagging Buyer (1) Expenditure Propensity used to slope relative technology spend by segment, (2) Institutional Investment allocated 65% - Equity, 35% Debt/Bonds
  8. 8. CRE Software Due Diligence Report to GI Partners 8CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 8CONFIDENTIAL AND PROPRIETARYCRE Software Market Sizing & Segmentation Report 8CONFIDENTIAL AND PROPRIETARY Customer Market Segmentation Select sub-segments of the institutional investment, owner/operator, and corporate real estate markets are most attracted to real estate ownership, management and investment solution set (s) Real Estate Market Segmentation Drilldown Owner/Operator (Resi/Commercial) Private Public Corporate Retail Users Large Block Industrial Health Higher Ed Government Land Owners Institutional Investment Lender/Servicer Investor Debt Derivatives Mezzanine Fixed Income or Equity Securities Real Estate Primary Market Secondary Market Mortgages Bonds Lines of Credit Direct Indirect Commercial Non- Commercial OfficeMulti-FamilyRetail Hospitality Industrial Residential Owner/ operator
  9. 9. CRE Software Due Diligence Report to GI Partners 9CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 9CONFIDENTIAL AND PROPRIETARYCRE Software Market Sizing & Segmentation Report 9CONFIDENTIAL AND PROPRIETARY Market Segmentation Description Each player in the market segment provides unique services to the market place Market Segmentation Key Functional Description Primary Market Segmentation Corporate Real Estate Owner/ Operator Institutional Investment Secondary Segmentation Lender/ Servicer (Debt) Investor (Equity) Private Public Build, occupy, and manage buildings to meet specific business requirements Key Real Estate Market Description Originate and lends money to real estate investors and developers. Some lenders service and other sell that right. Invest direct / pooled capital into real estate through funds or JVs. The capital comes from pension funds, institutional, and private investors. Invest pooled capital into real estate through the purchase of assets. The capital comes from private equity and institutional investors. Invest pooled capital into real estate through the purchase of assets. The capital comes from public markets and institutional investors.
  10. 10. CRE Software Due Diligence Report to GI Partners 10CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 10CONFIDENTIAL AND PROPRIETARYCRE Software Market Sizing & Segmentation Report 10CONFIDENTIAL AND PROPRIETARY Segmentation Trends Analysis With the increase in available capital and market recovery, many players are positioning to take advantage of the market recovery / upswing and investors need for alternative investments. Market Segmentation Trends Analysis Primary Market Segmentation Corporate Real Estate Owner/ Operator Institutional Investment Secondary Segmentation Lender/ Servicer (Debt) Investor – Direct/ Funds (Equity) Private Public Large real estate holders becoming targets for acquisition to release capital tied up in asset base Key Trends Creating more flexible finance vehicles Dramatic growth in institutional real estate, and fund managers, seeking geographic expansion / cross-border investments Moving towards a funds management model and getting closer to institutional investors Mergers of public REITs, geographic expansion, usage of joint venture funding with institutional investors Nominal Growth Growth Trend Nominal Growth High Growth High Growth Nominal Growth
  11. 11. CRE Software Due Diligence Report to GI Partners 11CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 11CONFIDENTIAL AND PROPRIETARYCRE Software Market Sizing & Segmentation Report 11CONFIDENTIAL AND PROPRIETARY Examples of Market Players Due to fund / JV ownership structures, a number of large institutional investors (in form of investment managers / funds, or via direct investments) also play a critical role in the asset and investment/ fund management functions for the ownership of commercial real estate. Market Player - Segmentation and Size Primary Market Segmentation Corporate Real Estate Owner/ Operator Investment Management Secondary Segmentation Institutional Investor (Equity) Private Public Wal-Mart, Kroger, Washington Mutual, Safeway, Bank of America, US Postal Service Tier 1 Market Player Players ING, Prudential, TIAA-CREF, Principal Real Estate Hines REIT, Inc. Behringer Harvard REIT I, Inc. Simon Property, ProLogis, Public Storage, General Growth, Boston Properties, Ventas Universities, School Districts, State Government Departments Tier 2 Market Player Players AEW Capital, Colony Capital, Apollo Real Estate, Starwood Capital, Beacon Capital Dividend Capital Trust, Inc. G REIT, Inc. St Joe, Camden Property, Essex, BRE Properties, Brandywine 1000’s of Corporations Tier 3 Market Player Players Hart Realty Group, Campbell Group, Rothschild Realty, TimberVest Desert Capital REIT, Inc., DiamondRock Hospitality , Company Winthrop, Lodgian, Associated Estates, RedLion Hotels, American Land Lease Lender / Servicer (Debt) Wachova, Wells Fargo, Prudential Guggenheim, Northwestern Mutual, TIAA-CREF NorthMarq Capital, NCB, PPM Finance
  12. 12. CRE Software Due Diligence Report to GI Partners 12CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 12CONFIDENTIAL AND PROPRIETARYCRE Software Market Sizing & Segmentation Report 12CONFIDENTIAL AND PROPRIETARY Opportunity Market Size – US Market IT Spend Potential 43% of the total US technology expenditure for CRE software in targeted segments comes from public REITs, while institutional investment equity investors and private owner/operators collectively comprise an additional 43% of Target Market in the U.S. Market Segmentation Sizing – US Applied Example Primary Market Segmentation Retail Users, Large Block, Industrial, Health, Higher Education, Government, Land Owners Corporate Real Estate Owner/ Operator Institutional Investment Secondary Segmentation Lender /Servicer (Debt) Investor (Equity) Private Public Market Players and Magic Targets Banks, Life Insurance, Finance, CMBS/CDO Issuers, REITS Opportunity Funds, I-Banks Insurance, Pension Funds Private REITS, Private Equity, REOCs Public (Listed) REITS Percentage of Market 35% 65% 35% 65% 100% US Market IT Spend Potential $0.73BN $1.35BN $2.45BN $4.55BN $1.38BN $295 $812 $177 ($,BN) 2015 US Market Size $2.08 $7.00 $1.38 ($,BN) 2015 US IT Spend Note: Owner Operators include Residential / Commercial; Broken out as follows: Residential: $443.1B US Market Size, $3.82B US IT Spend Commercial: $369.3B US Market Size, $3.19B US IT Spend
  13. 13. CRE Software Due Diligence Report to GI Partners 13CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 13CONFIDENTIAL AND PROPRIETARYCRE Software Market Sizing & Segmentation Report 13CONFIDENTIAL AND PROPRIETARY U.S. Market Player Segmentation and Size The US markets are relatively concentrated at top two tiers, which accounts for more than 75 percent of the total technology potential spend. U.S. Market Player - Segmentation and Size Note: (1) The opportunity fit represents the high value functions for each market player which represents more than 90 percent of the overall functional value, so the technology spend has not been adjusted or weighted. Primary Market Segmentation Corporate Real Estate Secondary Segmentation Investor – Direct/ Fund (Equity) -65% Private – 35% Public – 65% Sq FT >10M Tier 1 Market Player Attributes >$50BN Invested in Real Estate Assets >$2BN Invested in Real Estate Assets Market Cap >$5BN Sq FT 1M - <10M Tier 2 Market Player Attributes $5BN - <$50BN Invested in Real Estate Assets $0.5BN - <$2BN Invested in Real Estate Assets Market Cap $0.50BN - <$5BN Sq FT < 1M Tier 3 Market Player Attributes < $5BN Invested in Real Estate Assets < $2BN Invested in Real Estate Assets Market Cap < $0.50BN Lender/Servicing (Debt)-35% Annual Originations > than $5BN Annual Originations $1BN - > $5BN Annual Originations < $1BN Owner/ Operator Institutional Investment Primary / Secondary Spend Potential TIER 1 TOTAL $3.60 BN TIER 2 TOTAL $2.72BN TIER 3 TOTAL $2.03BN 50% $690 % of Mark’t ($MM) 10% $135 40% $980 20% $910 10% $73 30% $414 % of Market ($MM) 53% $715 25% $613 50% $2,275 70% $511 20% $276 % of Market ($MM) 37% $500 35% $857 30% $1,365 20% $146
  14. 14. CRE Software Due Diligence Report to GI Partners 14CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 14CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 14CONFIDENTIAL AND PROPRIETARY 14Summary of RE Fund Manager Market Validation Interviews CONFIDENTIAL &PROPRIETARYCRE Software Due Diligence Report to GI Partners 14CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 14CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 14CONFIDENTIAL AND PROPRIETARY CRE Software Market Sizing and Segmentation Analysis (Bottoms Up Approach) • US Commercial Real Estate Inventory – driven off CoStar US inventory
  15. 15. CRE Software Due Diligence Report to GI Partners 15CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 15CONFIDENTIAL AND PROPRIETARYCRE Software Market Sizing & Segmentation Report 15CONFIDENTIAL AND PROPRIETARY Market Sizing / Segmentation - US National Office Breakout by building class (1) Class A 17,090 3,266,252,671 191,120 12.3% $28.68 Class B 193,114 4,867,596,268 25,206 11.5% $20.26 Class C 293,448 2,333,491,683 7,952 8.0% $16.55 Grand Totals 503,652 10,467,540,622 20,783 10.5% $22.65 Market Segment # Bldgs. Total RBA (SF) Avg. Bldg. Size (SF) Vacancy Rate (%) Avg. Rent/SF/YR CBD 42,188 2,427,769,004 57,546 10.2% $29.03 Suburban 461,464 8,039,591,618 17,422 11.2% $21.22 Grand Totals 503,652 10,467,340,622 20,783 10.9% $22.65 Market Segment # Bldgs. Total RBA (SF) Avg. Bldg. Size (SF) Vacancy Rate (%) Avg. Rent/SF/YR US National Office Market – Breakout by CBD vs Suburban (1) Source: Co Star Group National Office Report – Year End 2014
  16. 16. CRE Software Due Diligence Report to GI Partners 16CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 16CONFIDENTIAL AND PROPRIETARYCRE Software Market Sizing & Segmentation Report 16CONFIDENTIAL AND PROPRIETARY Market Sizing and Segmentation - US National Retail Market Breakout by product type (1) General Retail 873,991 6,290,193,298 7,197 4.2% $15.83 Mall 1,353 1,092,392,766 807,386 5.7% $16.20 Power Center 1,981 875,333,303 441,864 4.7% $16.48 Shopping Center 93,733 4,225,532,816 45,080 9.3% $14.19 Market Segment #Bldgs. Total RBA (SF) Avg. Bldg. Size (SF) Vacancy Rate (%) Avg. Rent/SF/YR Specialty Center 426 93,191,643 218,760 6.2% $15.63 Grand Totals 971,484 12,576,643,826 12,946 6.1% $14.90 (1) Source: Costar Group National Retail Report – Year End 2014
  17. 17. CRE Software Due Diligence Report to GI Partners 17CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 17CONFIDENTIAL AND PROPRIETARYCRE Software Market Sizing & Segmentation Report 17CONFIDENTIAL AND PROPRIETARY Market Sizing and Segmentation - US National Industrial Market Flex 90,389 2,268,784,744 25,100 9.9% $11.05 Warehouse 532,757 18,877,445,127 35,433 6.9% $4.80 Grand Totals 623,146 21,146,229,871 33,934 7.2% $5.50 Market Segment #Bldgs. Total RBA (SF) Avg. Bldg. Size (SF) Vacancy Rate (%) Avg. Rent/SF/YR (1) Source: Costar Group National Industry Report - Year End 2014 Breakout by product type (1)
  18. 18. CRE Software Due Diligence Report to GI Partners 18CONFIDENTIAL AND PROPRIETARYCRE Software Due Diligence Report to GI Partners 18CONFIDENTIAL AND PROPRIETARYCRE Software Market Sizing & Segmentation Report 18CONFIDENTIAL AND PROPRIETARY IT Spend Potential – US Commercial Real Estate Estimate Office Retail Industry Total Market Segment 503,652 971,484 623,146 3,098,282 #Bldgs. 1,467,340,622 12,576,643,826 21,146,229,871 44,190,214,319 Total RBA (SF) $22.65 $14.90 $5.50 $12.24 Avg Rent/SF/YR $237,085 $187,392 $116,304 $540,781 Gross Potential Annual Revenues ($MM) Adjustments (Conservative Reductions) 100% Class C Office 293,448 2,333,491,683 $16.55 100% General Retail 873,991 6,290,193,298 $15.53 Net Potential / Addressable Market - US Commercial Real Estate < 38,619> < 99,574> $ 402,588 Assumed IT Spend (Software Only – US Market) – 0.8% of Revenues $ 3.221 B Calculated IT Spend (Software Only – US Market) – 0.8% of Revenues Nominal Difference between two FrontLine approaches (Top Down, Bottom Up) $ 3.180 B

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