Real estate brokerage Newmark Group said its earnings and revenue fell in the third quarter as the industry struggled with higher interest rates and sluggish deal activity.
Newmark said total revenue declined 7.3% to $616.3 million in the quarter compared to the year-earlier period, led by a steep drop in commercial property sales, leasing and lending fees as the higher cost of capital has slowed deals this year.
The New York-based company, the third large brokerage to report earnings for the quarter, joined Cushman & Wakefield and CBRE Group in forecasting a slow transaction market through the first half of 2024. Also, like its peers, Newmark said it will further reduce compensation and other expenses.
The company expects to cut another $25 million by mid-year 2024 for total cost savings of $75 million after finishing $50 million in previously announced reductions ahead of schedule, Chief Financial Officer Mike Rispoli said.
Unlike CBRE and Cushman, Newmark provided a bullish outlook for parts of its business in the final three months of this year. The brokerage projected that deals in its leasing and capital markets pipeline — paired with expected double-digit gains in property management and other services — will boost revenue by 14% to 22% and adjusted earnings by 40% to 63% in the fourth quarter over the prior-year period.
Gosin cited deals such as Newmark's brokering of a $2.2 billion self-storage portfolio sale by Blackstone to Public Storage this fall as evidence that its professionals are continuing to close deals. Newmark also arranged more than $900 million for San Francisco-based Prime Residential for its 4,249-unit Park La Brea apartment complex at 6200 W. 3rd St. in Los Angeles.
Newmark’s net income fell 62.6% to $14.1 million from $37.7 million as transaction volume declined and costs for interest, acquisitions and staff recruitment climbed.
"Certainly, we continue to be in a difficult market, and at least the first half of next year will continue to be challenging. We’ll see what happens in the second half," Rispoli said.
The company's earnings performance has probably reached its bottom this year, Gosin added.
"It's only going to get better. The question is, how much better,” he said.