Colliers International boosted its 2022 outlook for the second time since May, joining rival large real estate brokerages JLL and Newmark in reporting solid revenue growth in the second quarter despite an expected slowdown in deal activity for the rest of the year.
The Toronto-based firm, the fourth-biggest brokerage based on revenue, reported a 20% year-over-year increase in revenue to just over $1.1 billion in the quarter ended June 30, led by increased deal activity in the Americas and income from its expanding investment management, property management and consulting businesses.
“Despite a war and other economic and geopolitical turmoil in Europe, and the seemingly endless lockdowns in Asia, Colliers continues to perform through all market cycles,” CEO Jay Hennick told analysts during the company's earnings presentation on Wednesday. “We’re posting great numbers despite the uncertainty around office leasing. We’re watching that very carefully. People are rethinking the amount of space they need. Work-from-home is not consistent across companies.”
JLL, the second-largest brokerage, and New York City-based Newmark reiterated or increased their 2022 outlook.
Colliers increased its outlook for 2022 revenue to reflect higher income from acquisitions and stronger-than-expected sales and leasing activity so far this year.
Fueled by land and industrial property sales, the company reported a 28% revenue gain from its capital markets business in the quarter from the prior year, despite rising interest rates that have put a damper on mortgage and construction lending. Leasing revenue increased 20%, with year-over-year growth in office and industrial transactions.
"We had another strong quarter with growth in capital markets and leasing across office, industrial, multifamily and land," CFO Christian Mayer said. "It’s certainly going to be more difficult in the back half of the year, and interest rate and market conditions will be part of that."
Colliers has since May expanded its investment, advisory and property management offerings across the globe through several acquisitions. It acquired majority stakes in Rockwood Capital, a real estate investment firm based in New York City, and Paragon Building Consultancy Holdings Ltd., one of the United Kingdom’s top building and project management firms.
The company announced a deal June 30 to acquire a 75% interest in Versus Capital, a Denver-based alternative asset management firm that manages about $6 billion of investments, and this week announced it acquired a controlling interest in Australian building engineering firm Peakurban, based in Sydney.
Colliers expects to spend a record $1 billion on acquisitions this year as part of a six-year plan to diversify the brokerage’s investment management and other offerings, bring in recurring income from contracts and expand its footprint outside North America.
JLL's Economic Caution
Earlier Wednesday, JLL executives cautioned that deal activity could slow in the rest of the year as companies postpone real estate decisions and weigh the effects of a slowing economy.
The Chicago-based firm reported a 17% increase in total revenue to just under $5.3 billion for the quarter ended June 30 compared with the same time last year, led by strong fee and commission income from leasing and capital markets activity across the office, industrial and other commercial property sectors. Net income rose 3% to $222.4 million.
"JLL showed strong and resilient performance through the second quarter, with double-digit fee revenue growth across nearly all of our business lines,” CEO Christian Ulbrich said during a conference call to discuss earnings.
Businesses are taking more time to determine pricing and in some cases are pushing back decisions to finish sales or leases as they weigh the effects of rising inflation and interest rates, Ulbrich said.
"Since we spoke last quarter, global economic prospects have softened," he said. "The economic environment has prompted investors to become more cautious and in certain instances, they have delayed the closing timeline for transactions. "
There's sufficient liquidity and a significant amount of capital yet to be deployed in the commercial real estate space, Ulbrich added.
"Once investors gain comfort with the future path of interest rates, we expect this capital to drive an acceleration in capital markets activity," he said.
Moreover, a record number of leases are scheduled to expire in the coming year, supporting the potential for strong deal activity in the office space, where leases are lengthening as tenants focus on the highest-quality workspace, Ulbrich added.
CBRE, the world's largest commercial real estate services firm by revenue, and Cushman & Wakefield, the third largest, are scheduled to report results Thursday.