Marcus & Millichap, the last of the major publicly traded brokerages to post quarterly results, reported a fifth consecutive loss from lower property and financing deals.
The Calabasas, California-based company's loss narrowed to $5.5 million in the second quarter from $8.7 million in the prior-year quarter, as revenue fell just under 3% to $158.4 million.
The national investment sales brokerage was the only big broker to report a drop in earnings for the quarter in an industrywide property sales slowdown that's spanned the past couple of years. CBRE, JLL, Cushman & Wakefield, Colliers and Newmark reported profits and revenue gains driven by stepped-up office leasing and steady growth in services such as engineering, consulting and management of properties, projects and investments.
Marcus & Millichap executives noted that the 2.8% decline in revenue was the smallest year-over-year decrease since higher interest rates began contributing to a slowdown in property sales in the third quarter of 2022.
Other positive signs during the quarter included a 27% sequential increase in deal volume from the first quarter as more buyers and sellers began making deals.
“The passage of time has finally brought more realistic pricing and a growing sentiment that valuations are at or near the bottom for most property types,” CEO Hessam Nadji told investors on the company’s earnings call on Wednesday.
Rate Cut Expected
Chief Financial Officer Steve DeGennaro said executives are “cautiously optimistic” that sales and financing activity will pick up as economist surveys indicate expectations that the Federal Reserve will cut interest rates next month, and buyers and sellers start receiving clear signals that inflation and elevated borrowing rates are under control.
An expected rate cut could “reinvigorate real estate dealmaking and provide much-needed clarity for price discovery and stabilization,” DeGennaro said.
He cautioned that the expected recovery in deal activity “will take time to positively benefit our results.”
Nadji added that “the market still faces uncertainty related to the prospects of a soft landing and the Fed’s balancing act. However, we believe lower interest rates and pent-up buyer demand with record capital still on the sideline bode well for healthier sales and financing volumes ahead.”
The company reported total revenue slid to $158.4 million from $162.9 million for the same time last year as brokerage commissions slipped 4% to $135.4 million from the year-earlier period.