The largest commercial real estate brokerage firm said it expects real estate market conditions to deteriorate as soon as possible so that recovery begins within the next 12 months.
Executives at five of the largest brokerage firms by revenue said last week while discussing their most recent quarterly results that they expect real estate capital markets and rental activity to begin a tentative recovery in 2024, possibly in the second half of the year. Ta.
Newmark executives acknowledge the company’s performance is at an all-time low despite a tough market, with hybrid in-office and remote working protocols established and companies making decisions about office space needs. He said lease contracts will recover as sales increase.
“We think we’re at the bottom, but we think we’ll get even better going forward,” Newmark CEO Barry Gosin told shareholders on the New York-based company’s earnings call. ” he said. “The question is how much better will it get?”
Amid economic uncertainty, rising interest rates and changing demand patterns due to the pandemic, industry experts have wondered all year long about when the good times will return for brokers in the battered trading market. Brokers are talking about the next 12 months, but non-brokers say it could be much longer.
CBRE, JLL, cushman & wakefield, collier, and Newmark Executives began putting off hopes for a rapid recovery as early as May, warning of a tough few months ahead before hoping demand starts to improve later this year.
But brokerages in recent days have reported further declines in third-quarter sales and profits, as well as multimillion-dollar cost cuts.
Deal activity continued to decline from last year’s levels due to higher interest rates, tighter lending conditions and persistent uncertainty about when companies will start expanding again.
JLL Chief Executive Christian Ulbrich said he expected the market to start recovering in the second half of this year.
He now expects that to happen in the second half of 2024 at the earliest, a setback to the Chicago-based company’s long-term financial performance outlook.
“As a result of the overall industry weakness and trading activity, we plan to extend our timeline for achieving all medium-term goals beyond 2025,” Ulbrich said.
In addition to listed securities companies, some experts at financial results conferences for investors predicted that there is a possibility of an improvement starting next year. More Partners CEO Robert Shibuya said the worst was yet to come.
“The consensus of the people I talk to every day is that the markets are not going to get better in 2024, especially for those who are focused on capital markets,” said the Dallas-based company, which provides portfolio management and other services. Mr. Shibuya said. Services to Tenants. “Most of what we’re hearing from brokers on the street is that they hope things will start to improve in early to mid-2025.”
In one recent transaction, a client reduced its headquarters space in a gateway city by two-thirds from 180,000 square feet to 60,000 square feet, Shibuya said. Some of the investors he knows are not paying their mortgages and are unable to refinance their loans.
“I’ve been pitching business to a lot of Fortune 500 companies, and they’re all saying they’re dramatically reducing their footprint,” Shibuya said in an interview.
He said the company’s fourth-quarter results are likely to see an even larger decline due to delays in processing transaction data.
“I don’t know if you’ve seen ‘Game of Thrones,’ but there’s a line in ‘Game of Thrones’ that says, ‘Winter is coming,'” Shibuya said. “I think winter is coming for commercial real estate, and it will be winter all the way into 2024.”
Ari Ginsberg, a professor of entrepreneurship and management at New York University’s Stern School of Business, isn’t surprised that real estate services companies are holding off on hopes for a recovery.
“The immediate situation is not very good. Securities companies, like other publicly traded companies, need to be realistic but optimistic at the same time,” Ginsburg said in an interview.
He added: “Given the global and economic uncertainty, the rollercoaster effect has created anxiety about what will happen next. We don’t know when things will get better.”
Chad Littell, national director of capital markets analysis at CoStar, said office deal flow has declined for eight straight quarters, but deals could pick up in the second half of 2024.
But if a recession of the magnitude of the Great Recession were to occur, real estate values could likely continue to decline for several years, he said.
“Typically, at inflection points in real estate cycles, increased transaction volume reinforces price trends rather than reversing them,” he said. “In this case, the price trend appears to be down from here.”