Colliers posted a lower third-quarter profit and joined other real estate brokerages in trimming its full-year earnings outlook as higher interest rates resulted in reduced sales and lending.
The Toronto-based firm still reported a higher-than-expected 12% increase in revenue to $1.1 billion in the third quarter from the same time last year, driven by higher income from property and investment management and leasing, CEO Jay Hennick said on the company’s Tuesday earnings call.
The gains, driven mainly by strength in the Americas and the United Kingdom, more than offset an industry-wide softness in capital markets, where higher interest rates and geopolitical tensions have reduced the availability of capital for real estate investment sales and lending, Hennick said.
However, Colliers reported a 12% decline in net earnings to $44.5 million in the quarter from a year ago, in part due to global fluctuations in currency exchange rates.
The brokerage joined CBRE, the world’s largest commercial real estate services firm, and New York-based Newmark, in cutting its projected earnings growth for the full year. Colliers now expects 2022 adjusted earnings to increase by a mid-teens percentage from last year, down from the company’s projections of low-20s percentage growth earlier this year.
However, unlike CBRE, which reported that it’s cutting $400 million in costs through layoffs and other reductions, Colliers is in growth mode, and has no plans to cut costs or reduce personnel, executives said.
"We don't have a reason for a formal cost-cutting program right now," CFO Christian Mayer said. "But I can say that we have our budget process under way, and certainly, cost management is top of mind as we prepared for 2023 with varying levels of transaction revenues."
Collier has grown aggressively this year in the United State and across the globe, focusing as its competitors are on property management and other parts of its business that are more resilient to economic headwinds.
The company acquired controlling stakes recently in Phoenix-based property management Arcadia Management Group and capital markets adviser Pangea Property Partners, based in Oslo, Norway, a move the company expects will make it the dominant player in Sweden and Norway. Colliers in August acquired Sydney-based engineering firm Peakurban Pty Ltd.
Other large real estate brokerages, including JLL, Cushman & Wakefield and Marcus & Millichap, are scheduled to report their results this week.