Cushman & Wakefield, the world's third-largest commercial brokerage, said leasing revenue rose in the fourth quarter to partially offset a steep decline in sales and capital markets activity.
The Chicago-based firm's total revenue fell 4% to $2.55 billion as capital markets revenue slid 32% and fees collected from real estate transactions dropped 2% from the same time in 2022. Leasing revenue rose 5%, while Cushman posted a slight uptick in revenue from property, facilities and project management.
"We’ve already started to see some green shoots," CEO Michelle MacKay told investors during a conference call on Tuesday. "In the fourth quarter, leasing revenue grew year over year in all three of our reported regions, due to growth in large office and industrial deals in the U.S. and strength in Europe and Asia-Pacific."
Cushman joined CBRE, the world's largest commercial real estate brokerage, Toronto-based Colliers and Marcus & Millichap in projecting that deal activity will pick up later this year. Executives expressed optimism that the Federal Reserve will cut interest rates and credit conditions will improve.
Despite the fourth-quarter decline, the $2.55 billion in revenue for the last three months of 2023 — helped by the leasing revenue — slightly exceeded the $2.5 billion projected by Wall Street analysts.
Cushman reduced costs and expenses by 4% to $2.44 billion in the quarter. It posted a $69.8 million quarterly profit, more than twice the amount from the prior year, driven mainly by lower tax payments in the final three months of 2023.
Reducing Debt
The quarterly profit, however, wasn’t enough to offset declines in transaction activity earlier in 2023 that resulted in a $35.4 million loss for the full year. The company posted a full-year profit of $196.4 million in 2022.
Cushman & Wakefield ended the year with just under $3.2 billion in total debt. Rating company S&P cited the debt incurred following the brokerage's 2018 initial public offering, along with declines in leasing and capital markets revenue, as factors in downgrading the brokerage’s credit rating to BB- from BB last month.
Reducing debt is a key priority for Cushman & Wakefield, executives said. The company plans to start repaying a $193 million loan that is scheduled to mature next year by the end of this quarter, CFO Neil Johnston told investors Tuesday.
The company also refinanced two loans last year, executives said.
"We've looked at every aspect of our business, and updated and mapped out long-term strategy plans for the first time since Cushman became a public company in 2018," MacKay said. "And we're not done."
New York City-based Newmark is scheduled to report results on Thursday, and JLL, the second-biggest brokerage by revenue, is slated to be the last major real estate services firm to report earnings, on Feb. 27.