Executives for Colliers said they expect sharp declines in property sales and financing in the first half of 2023 after a slow end to last year.
The Toronto-based firm reported revenue of $1.22 billion in the final quarter of last year, a 9% drop from the same time a year earlier, and a nearly 50% decline in profits to $22.5 million as deal activity slowed in the closing months of 2022.
The company is the first major real estate brokerage to report quarterly financial results, and its forecast could set the stage for what could come from its rivals CBRE, JLL, Cushman & Wakefield and Newmark in coming weeks. Colliers executives forecast up to a 50% decline in property sales and capital markets revenue through midyear as buyers and sellers stay on the sidelines.
"Interest rate volatility, challenging debt availability and geopolitical issues impacted our capital markets results in our seasonally strongest quarter," Colliers CEO Jay Hennick said on the company’s earnings call Thursday. "We expect this to continue through the first half of 2023."
Despite the disruptions, "transactions are still being completed and pent-up demand should translate into additional volumes in future quarters as conditions stabilize,” Hennick said.
Although Colliers has not announced staffing cuts similar to those made by larger rivals CBRE and JLL, Hennick said "we're doing everything we can to reduce costs" and cut discretionary spending.
Colliers executives said they forecast between $4.6 billion and $4.8 billion in revenue for the full year, surpassing the $4.5 billion for all of 2022, despite the expected weakness in the first half.
Steady income from leasing, engineering, property management and other services should partially offset deep declines in real estate sales and capital markets in the first six months, Hennick told investors.
The largest commercial real estate brokerages last fall slashed earnings forecasts and talked openly about reducing their headcounts and other deep cost cuts. The downturn in sentiment came just a few months after the brokerages confidently touted 2022 as another record-setting year for profits and deal activity as firms emerged from the worst of the pandemic.
Most brokerages plan to clamp down on expenses amid steep declines in investment sales, lending and other activities, inserting a dose of turmoil into what started as a heady year.