While sales fell for the biggest publicly traded real estate brokerages in the second quarter, there was a bright spot in the form of steady income from managing properties and projects while performing other services.

Declines in sales and leasing income fell to lows not seen since the early months of the pandemic as higher interest rates left buyers and sellers sitting on the sidelines. CBRE, JLL, Cushman & Wakefield, Colliers and Newmark reported drops in revenue and Colliers posted a loss.

At the same time, all the firms reported year-over-year increases in such services as property, facilities and investment management, as well as in their share of total revenue. It was a result that analysts say reflects a strategic shift among the biggest brokerages to even out their financial results when the economy slows.

"The larger brokerages have anticipated the decreases on the brokerage side of the business and for the last several years have moved towards a more consultative model to provide outsourced corporate real estate services," Norm Miller, chair emeritus of real estate finance at the University of San Diego's Knauss School of Business, said in an email. "Adding management services needed in both strong and weak economies has helped stabilize their income."

That stabilization came at the right time: Some firms went as far in recent weeks as announcing additional cuts and lowering their outlooks for the rest of the year along with projecting that transaction activity won't pick up significantly until at least early 2024.

Toronto-based Colliers, for instance, reported a 58% increase in investment management revenue to about $119 million from the prior-year quarter, fueled in part by the brokerage's acquisitions last year of New York-based real estate investment firm Rockwood Capital and Basalt Infrastructure. It also had a 10% increase in revenue from its outsourcing and advisory business, including engineering and design and property and project management, to just under $520 million.

Property management, engineering and some other services that companies outsource to Colliers increased to 48% of its total revenue, up from 42% a year earlier, in part due to the brokerage's purchase of a majority stake in Paragon Building Consultancy Holdings, one of the United Kingdom's top building and project management firms.

"Having such a large percentage of recurring revenue highlights our balanced and resilient business model and enables us to withstand market fluctuations," Colliers CEO Jay Hennick said.

Management revenue also buoyed Cushman & Wakefield's results this year. The Chicago-based brokerage increased its property and facilities management revenue by 4% in the first half of the year to $1.79 billion from the same time last year. About 53% of Cushman’s fee revenue in the second quarter came from property, facility and project management, up from 44% from the same time a year earlier.

"The great thing about services is the fact that it has long contracts, it's resilient," Cushman CFO Neil Johnston told investors during the company's earnings presentation. "There is a base level of activity, year in and year out."

CBRE reported better-than-expected 13% growth in net revenue from its global business, which includes managing facilities and projects. The increase helped the world’s largest brokerage offset weaker-than-expected property sales in the second quarter as overall revenue declined 1% to $7.7 billion from the prior year's quarter.

Increases in property management and other services were a bright spot for the brokerages, but they can't make up for the drops in their higher-profit transaction business, Alexander Goldfarb, managing director and equity analyst for Piper Sandler, said in an interview.

"This is still a business based on transactions and as much as management teams would love to speak about stability of revenue and how that should help the stock, in truth, they really love the transaction revenue," Goldfarb said.

"They can grow it a lot quicker and it’s a lot more lucrative on the profit margin," Goldfarb added. "If a firm advises on a major sale or sells a few billion of office towers, that's bragging rights, that gets the limelight. If you manage a portfolio of assets, it's not so exciting on the cocktail circuit."

In the years since the Great Recession, global brokerages have built property and facilities management and other businesses that generate recurring revenue from contracts that provide a cushion when the economy weakens and broker sales and leasing commissions dry up. The growth of the management businesses over the prior decade was one of the main reasons those brokerages started rebounding within a year after the onset of the pandemic, executives said at the time.

The growth in services, while not enough to fill in the gap for transactions, has helped provide a steady income stream for the big brokerages, Robert Shibuya, CEO of Dallas-based national tenant rep advisory firm Mohr Partners, said in an interview. It also reflects a shift in commercial real estate practices.

"Many clients are no longer self-performing services like lease accounting or facilities management," Shibuya said. "They're outsourcing them to the biggest brokerage like CBRE."