Stuart A. Feldstein

President, SMR Research Corporation


In 2015, the number of new corporate and partnership businesses increased by 5.1% over 2014 levels according to our new study.

It was the sixth straight year of increase in new company formations, following a huge 18.6% decline in new starts in the 2009 recessionary year.

SMR’s study looked solely at brand new corporation, LLC, and other partnership startups.

This is in contrast to the “number of business establishments” survey done periodically by the U.S. Census Bureau, which counts all establishments – such as chain stores where a new store opening is merely an expansion of an existing business.

In recent years, percentage increases in new starts were often higher than the 5.1% achieved in 2015. There were double-digit annual percentage increases in new starts in 2002, 2003, and 2004 – following a slight decline in 2001 (another recessionary year).

For additional details, including a chart of the growth in corporate and partnership formations for selected states from 1995 to 2015, see Entrepreneurs In The USA.

Age of U.S. Commercial Buildings

At the end of 2017, the average U.S. commercial building was about 50 years old (49.83 years).

This finding is in line with prior years. When we looked at building age in 2011, and in 2014, the average was almost exactly 50 years old.

So, new buildings pop up, while all others get older – and the net result has been no real change in average age.

Chain drug stores (Walgreens, Rite-Aid, etc.), had the lowest average age in our analysis at 21 years.

This underscores the rapid recent spread of chain drug stores; good news for them, not so much for the independent drug stores these chains are gradually replacing.

At the other end of the spectrum, mixed-use buildings had an average of 75 years, a very large number. This means the average mixed-use building was built all the way back in 1942.

By “mixed use,” we mean single buildings that have stores and apartments above them, for example.

The more recently constructed buildings by type also included the commercial condo buildings now so familiar in so many places.

Both commercial/industrial condos and commercial office condos had an average age below 31 years.

When we think of new building “genres,” mini-warehouses often come to mind. But at an average age of 31 years, even these are not quite as new as the condo-style commercial building.

As one might guess, the oldest buildings also include boarding houses, cemeteries (they often do have buildings on them), and museums and libraries. At an average age of 66.6 years, bars and taverns are rather old as well.

Airports are not generally new — but the buildings on airport property often are, with an average age of only 28.6 years. More in tune with the common wisdom, medical office buildings (a huge category) also are relatively new.

Building Age Data breaks down the average age by building type.

Values of Commercial Buildings

The average market value of a U.S. commercial building was $1.4 million at the end of 2017, up from $1.27 million when we did similar research in 2014.

The increase has been 3.6% per year since 2014, certainly a sustainable pace.

If $1.4 million seems surprisingly low to you, it may be due to what comes rapidly to mind when you think of a “commercial building.” You may think of a landmark like the Empire State Building.

But the more typical commercial building is more like the dozens you pass on your morning commute — most of them small and unremarkable. For every Empire State Building, there are thousands of local gas stations, beauty parlors, karate dojos, convenience stores, and small shops.

Indeed, the $1.4 million figure is a mean average. A median (midpoint) value would be lower.

These conclusions flow from a study of market values of 8.364 million U.S. commercial buildings where values were available to us. The values do include land value. All 8.364 million properties had a combined value of $11.8 trillion, an impressive number.

What is the actual split between modest and expensive buildings in terms of quantity?

Of the 8.364 million buildings, fully 8 million were worth $5 million or less. The other 357,863 had a value of more than $5 million.

Looking at aggregate total values, California reigns supreme among states. Commercial buildings in California had a total value of $2.1 trillion at the end of 2017, or 17.8% of the value of all U.S. commercial buildings.

This is much greater than California’s percent of the U.S. population and reflects the uniformly high property values of the state.

New York City, the “commercial capital” of the U.S. in some respects, also has very high property values. But the upstate New York cities like Buffalo, Syracuse, and Rochester dilute the state’s average building value greatly, down to $2.2 million per building.

In the aggregate, New York state buildings had a value of $1 trillion, only about half of what exists in California.

Texas and Florida were #3 and #4 in aggregate building value. Each now has a human population greater than New York, but New York commercial buildings were #2 in total value after California.

The highest average building value was in the District of Columbia, which is not surprising when you think about it. DC is 100% urban and pricey, while other states include rural areas with farm buildings. Agriculture is part of our database, and these building types tend to bring down the averages.

We get estimated building market values in two ways.

First, some of the nation’s tax assessors report what they believe to be a building’s market value. You can argue with the accuracy of tax assessor numbers, but in the aggregate, they aren’t too bad.

Second, some tax assessors report only an “assessed” value for a property, which is often below market value and set merely for taxation millage purposes. When we get a tax assessor “assessed” value and no market value, we compare the assessed values to recent sale prices in the same vicinity and adjust the assessed values up to estimated market value.

Property Values By State provides further details.

Risk Scores

If our credit risk scores are as good as we claim, then we must have some idea about the number of U.S. commercial buildings in dire jeopardy, right?

Some will have commercial mortgages in grave danger of default.

Some will be risky for new buyers based merely on location and building characteristics.

And some are likely to be nightmares for property-casualty insurers, because financial risk correlates with claims.

So, how many? Risk Score Distribution provides details.

As of January, 2018, we counted 23,891 properties that had commercial mortgages with default risk scores above 500 (meaning five times or greater than the norm likelihood to default on the loans).

We also counted 72,431 properties with extremely high inherent risk for new buyers, and 105,374 with very high claims risk for insurers based on financial stress.

Of course, most commercial properties are relatively risk-free, otherwise the whole national economy would be in deep trouble.

As the data show, a very large majority of properties have risk scores below 100 in every category. The 100 score is our national norm level of risk. Millions have risk scores below 25 – and thank goodness they do.

All three of our risk scores are intended to rank-order properties by risk.

Because we get a monthly updated flow of mortgage notices-of-default, meaning very high delinquency, we are able to test and refine our scoring models at any time.