An industrywide pullback in real estate sales activity as interest rates rose delivered a hit to investment brokerage Marcus & Millichap's earnings — and executives don't expect the financial pain to abate until property sales return to normal levels, which they expect in the second half of this year.

The Calabasas, California-based national brokerage, which joined Colliers and Newmark in reporting a slowdown in transaction activity in the fourth quarter, said that its number of sales and financing deals dropped by more than a third from the year-earlier period. That came amid a nearly 50% year-over-year decline in total revenue for the quarter to $262.4 million and an 87% drop in net income to just under $8 million.

Marcus & Millichap, based on robust deal activity in the first half of 2022, posted a record $1.3 billion in revenue for the year despite steep declines in the fourth quarter as rising interest rates and other costs prompted many buyers and sellers unable to agree on a price to cancel deals, executives said.

“In a normal market, the fourth quarter typically has the most deal volume as investors rush to transact and deploy capital by year-end,” CEO Hessam Nadji said during the company's earnings call on Friday. “However, 2022 was anything but typical, as fourth-quarter volume and revenue were the lowest for the year.”

Nadji, like executives for Toronto-based Colliers and Newmark, based in New York City, expects deals to pick up in the second half of the year as the market adjusts.

“Notwithstanding ongoing near-term market headwinds, we expect clarity to emerge as the Federal Reserve nears the end of its tightening cycle, and real estate investors recalibrate expectations on valuations," Nadji said. "This will take time to emerge broadly and lift trading volumes. But there is no shortage of capital or buyer demand for appropriately priced assets."

The company has focused on the importance of recruiting and retaining brokerage talent across North America as it has tried to bolster its sales force over the past year.

The results have been mixed. As brokers and others left the company, Marcus & Millichap ended the year with 1,904 investment sales and financing professionals, down 4.5% from the end of 2021.

Broker commissions revenue dropped 48% in the fourth quarter compared with the prior year, executives said.

Another obstacle to closing deals was the rising number of lenders that either severely tightened their lending criteria or pulled out of the market entirely, Nadji said.

The brokerage's strong presence in the recovering hotel, retail and self-storage sectors was a rare bright spot in the closing months of the year.

Marcus & Millichap does not provide earnings forecasts or break out revenue by property type, though brokerage of shopping centers and other retail property sales typically accounts for about 40% of its transactions.