Newmark executives said they expect property sales and financing placements to decline further in the first half of 2023 after a slow end to last year.

The New York-based firm, the second major brokerage to post quarterly financial results this month, reported revenue of $607.3 million in the final quarter of last year, a 38% drop from the same time a year earlier, led by a 62% decrease in property sales as deal activity slowed across the industry in the closing months of 2022.

Profits declined to $9.4 million in the fourth quarter, a 95% slide from the $189.2 million in net income reported for the year-earlier period.

Newmark isn’t alone in seeing the negative effects of a market seizing up. Colliers, the first of the publicly traded brokerages to post results, last week reported declines in revenue and profits in the fourth quarter as higher interest rates and other headwinds contributed to an industrywide slump in investment sales, lending and other activities.

Executives for both companies told investors that they expect the weakness in sales and capital markets to last through midyear as buyers and sellers stay on the sidelines. Those forecasts could set the stage for what may come from their larger brokerage rivals CBRE, JLL and Cushman & Wakefield as they report earnings in coming weeks.

Newmark expects that its hiring of Douglas Harmon and Adam Spies, ranked as New York’s top capital markets team, from Cushman & Wakefield will help drive strong growth when property sales eventually pick up and debt markets re-open to provide more loans.

"As we have seen with past downturns and subsequent recoveries, capital markets leads the rebound,” Newmark CEO Barry Gosin said on the company’s earnings call Thursday. “Once the markets and the [Federal Reserve Bank] are aligned, we expect pent-up demand to drive significantly higher industry volumes.”

Industrial and retail leasing were bright spots for Newmark in 2022, surpassing pre-pandemic levels for the full year, Chief Financial Officer Mike Rispoli said during the call.

Newmark, the fifth-biggest real estate brokerage by stock market value, has pivoted from capital markets deals to such activities as advising clients on debt refinancing and converting offices and other underused properties into apartments, flex life science, warehouses and other buildings, Gosin said.

For example, Newmark's Dustin Stolly and Jordan Roeschlaub in December arranged the sale and financing of 25 Water St., a 1.1 million-square-foot office tower in Manhattan planned to be redeveloped as a 1,300-unit apartment building in one of the largest office-to-residential conversions in the U.S.

The office conversion project underscores the challenges that office landlords face in cities across the country. Rispoli, citing CoStar data, noted that total U.S. office leasing declined 28% year over year in the fourth quarter.