Two major commercial real estate services firms posted higher-than-expected earnings as executives said they will be watching in coming months as clients begin pausing plans because of myriad concerns, from lingering inflation to the potential effects of new economic policies.
Marcus & Millichap posted revenue of $240.1 million and an $8.5 million profit in an “exceptionally strong” quarter compared with the year-earlier period — its highest quarterly revenue in two years in a nearly 45% increase over the year-earlier period — during a rush of deal activity after the Federal Reserve cut interest rates last fall, CEO Hessam Nadji told investors during an earnings call.
Earlier on the same day, Newmark reported a 19% jump in revenue in the quarter to $888.3 million compared with the earlier period amid double-digit gains in property and investment management, capital markets and leasing.
Executives for both brokerages predicted a rebound in real estate deals in 2025, despite what they said is a slower-than-expected start this year as the industry pauses to weigh the potential effects of tariffs and other economic policies.
“Our team continues to battle interest rate volatility as the most disruptive factor in bringing in buyers, sellers and lenders together and closing deals,” Nadji told investors. “Many clients who were preparing to bring inventory to market in the first quarter have returned to a wait-and-see stance.”
CBRE and Colliers International also reported higher-than-expected quarterly earnings as office leasing and property sales surged in the final months of 2024.
Uncertainty reigns
While overall real estate activity will likely increase this year as property prices stabilize, prompting buyers and sellers to make deals, “we continue to face the headwind of higher and still-volatile interest rates," Nadji said.
The Calabasas-based brokerage specializing in property investment sales and capital markets posted its $8.5 million profit for the quarter after a $10.2 million loss in the year-earlier period.
Despite an 8% increase in revenue for the full year to $696 million, the brokerage reported a $12.4 million loss for the full year, which was still an improvement over the $34 million loss in 2023.
The Fed’s efforts to reach its inflation rate target is “definitely proving to be more difficult than expected, as the labor market remains strong and threats of tariffs create additional uncertainty,” Nadji said.
“Each of these moves impacts real estate pricing, investor sentiment and loan-to-value ratios by lenders, among many other nuances of marketing and closing deals," Nadji added.
Despite these headwinds, Marcus & Millichap's brokers expect heightened activity later this year, in part due to "a growing number of situational distress where maturing loans and/or operational issues such as the cost and availability of insurance will push more listings and sales,” Nadji said.
Shared optimism
Nadji joined Newmark CEO Barry Gosin in expressing optimism, albeit more cautiously, that deal activity will pick up after what both executives said is a slow start in the first weeks of 2025.
Gosin was more bullish, predicting strong revenue and earnings growth this year following a $61.2 million profit for 2024, higher than the $42.5 million in the prior year.
Newmark's results fueled a gain in the company's stock price as high as 11% in mid-morning trading on Friday, while Marcus & Millichap's shares also rose by as much as 5.7%.
"The investments Newmark has made in talent and our platform over the past two years drove double-digit, top-line improvement across every major business line in the quarter," Gosin said. "Our pipeline across all major business lines remains robust, and we expect momentum throughout the year."
Newmark CFO Mike Rispoli added that the company's leasing revenues increased by 15.1%, led by strong double-digit growth in office volume.
Data centers also provided a revenue boost last year as Newmark finished with nearly $17 billion in data center deal activity last year.
"And we expect to do more,” Gosin added.
The combination of reshoring the production of semiconductors and other manufacturing, the advent of AI, and the White House’s hypothetical plans to invest in data center infrastructure “makes the future look incredibly bright” for the data center industry, Gosin added.
JLL, the world’s second-largest brokerage, and Cushman & Wakefield, the third largest, are expected to post earnings next week.