Marcus & Millichap posted a $10.2 million fourth-quarter loss to become the latest brokerage firm to outline the effects of higher borrowing costs and lower demand on commercial real estate.

The loss for the Calabasas, California-based investment sales brokerage compares to a $7.2 million profit for the year-earlier quarter. Revenue fell 37% to $166.2 million from $262.4 million for the same time in 2022.

CEO Hessam Nadji told investors during the company's earnings call Friday that a "lack of the usual fourth-quarter investor urgency to close deals before year end" illustrates severely hampered borrowing conditions and an inability of buyers and seller to agree on property values and deal pricing, .

With fewer deals in the pipeline going into 2024 when compared to 2023, “the headwinds facing the market are likely to remain a challenge through the first half of the year,” CFO Steve DeGennaro said.

Marcus & Millichap joined CBRE, the world's largest commercial real estate brokerage, and Toronto-based Colliers, the fourth biggest, in projecting that deal activity will pick up later this year. Executives for the companies expressed optimism that the Federal Reserve Bank will cut interest rates and credit conditions will improve.

For now, deal activity remains muted after one of the industry's most challenging years on record ended with further declines in sales and profits, Nadji said.

The company posted a loss of $34 million for the full year of 2023, compared with a $104.2 million profit in 2022. The number of closed deals fell 39% from the prior year, executives said.

The investment sales brokerage's total revenue for the year fell 50% to $645.9 million from $1.3 billion in 2022, reflecting an industrywide 55% decline in deal volume last year, according to Nadji.

“Listings have been difficult to price appropriately and are taking longer to market and put under contract," Nadji said. "An elevated number of our deals have fallen out of contract, with many of them going in and out of contract more than once."

Company executives pointed to signs that owners are finally ready to make deals, with a recent uptick in properties being brought to the market by larger corporate owners met with “cautious interest” from buyers, Nadji said.

“We anticipate that [properties] previously withheld in the hopes of better pricing will now be brought to market at more realistic prices in the quarters ahead,” Nadji said. “The passage of time, and the market’s realization that interest rates are unlikely to return to previous record lows, is starting to spur the valuation reset necessary to bring buyers and sellers back into alignment.“

Similar to its larger competitors, the brokerage has added brokers and capital markets specialists in New York, Washington, D.C., Dallas, Los Angeles and other cities in recent months, Nadji said.

"Our branding, talent acquisition and platform enhancements are positioning us well to lead in the eventual market recovery," Nadji said. "In the interim, our focus remains on maintaining a strong balance sheet, fostering client relationships and strengthening the business for the long term.”