Marcus & Millichap reported its sixth consecutive quarterly loss as rising costs offset the national investment brokerage’s first year-over-year revenue gain since 2022.
The Calabasas, California-based company, the last of the major publicly traded brokerages to post quarterly results, posted revenue of $168.5 million in the third quarter — up 4% from a year ago — as commission and financing fees rose along with property sales and lending volume from the same period a year ago.
Marcus & Millichap joined CBRE, Cushman & Wakefield, Colliers International, Newmark and JLL in reporting increasing revenue, setting the stage for what CEO Hessam Nadji called "a measured but sustainable recovery in the transaction and financing markets."
Nadji said the third quarter marked the first time that Marcus & Millichap has posted a quarterly year-over-year revenue gain since the onset of the market disruption two years ago. A 15% increase in total sales volume to $8.5 billion underscored a tilt toward larger, higher-dollar deals than in earlier quarters, Nadji said.
"We believe that these underpinnings of a recovery cycle include the return of capital to the market as prices adjust, the Federal Reserve’s shift toward lowering interest rates and notable improvement in our pipeline,” Nadji told investors during an earnings call Friday.
Marcus & Millichap's loss narrowed to $5.4 million in the third quarter from $9.24 million in the prior-year quarter.
The company was the only big brokerage to report a drop in earnings for the quarter, as it continues to face increased business development costs, including the hiring and training of professionals. Nadji called the investments part of the brokerage's "strategy to remain on offense during the downturn," noting the investment will provide leverage during the market recovery.
However, deal activity is rising as prices across many property types become more attractive to buyers, Nadji said.
“It appears that investor psychology is finally shifting toward 'missing out on buying opportunities,' while more sellers are coming to terms with realistic pricing,” he added.
Brightening fundamentals
The emerging trends include a stronger momentum toward institutional capital returning to the market.
“Record capital on the sideline coupled with price adjustments over the last two years are motivating buyers to re-enter the market, while more sellers are motivated to sell assets," Nadji said. "We believe our disciplined approach to platform investments and expense management, combined with our strong capital position, sets us up well for the future."
However, smaller private investors are still hindered by tight lending requirements from banks and credit unions. Marcus & Millichap saw a 4.3% year-over-year decline in private-client revenue, while revenue from larger deals typically made by institutional investors jumped 23.5% in the quarter, Nadji said.
Stronger property fundamentals are also drawing investors back to the market, he said.
Tenant demand is largely in balance with levels of new construction across most property types. Construction starts are expected to decline in 2025 and 2026, “particularly positive for multifamily and industrial properties" that have seen the highest levels of construction in recent years, Nadji said.
The brokerage also expects to benefit from a combination of pent-up demand from two years of deals that have been canceled or postponed during the dysfunctional market.
Rising distress among some owners is also driving more sales activity in shopping centers, industrial, self-storage and larger apartment sales, he added.