Dive Brief:
- Colliers recorded $1.18 billion in revenue in the third quarter of 2024, up 12% year over year, led by growth across its three segments — real estate services, engineering and investment management, the company reported Tuesday.
- Revenue for Colliers’ real estate services segment, which comprises its leasing, capital markets and outsourcing businesses, grew 9% year over year to nearly $735 million, Colliers reported. Outsourcing revenue grew 4.9% year over year to $280.5 million in the third quarter, according to an earnings presentation.
- “We're seeing some larger deals starting to come to market. There's been some hesitation over the last few years, but now there's some confidence in the economy,” Chris McLernon, CEO of real estate services at Colliers, said on an earnings call Tuesday. “Certainly the trend is that the return to office continues … through mandates or just through people wanting to get back ... and share time with employees. So that's all positive.”
Dive Insight:
Colliers’ leasing business posted $266.3 million in revenue in the third quarter — a roughly 6.7% year-over-year increase — building on last quarter’s momentum, notably in the U.S. and the Europe, Middle East and Africa markets. In particular, office leasing was up 22% on the back of several large transactions during the quarter, McLernon said on the call.
Revenue for the firm’s capital markets business climbed about 17.4% year over year to $188.2 million, with transaction volumes “up meaningfully,” compared with a low base in the prior third quarter, particularly in the Americas and the Asia Pacific, Colliers said.
The overarching real estate services segment’s margins stayed flat at 8.8% during that time, with “margin growth constrained due to continued aggressive investment in recruiting in strategic markets,” Colliers said in its earnings presentation.
The company expects “incremental margin in the order of 20% on an incremental revenue dollar,” in its leasing and capital markets businesses, with the real estate services segment seeing muted growth due to “incremental margins from valuation or from property management, which are more modest in nature,” Jay Hennick, global chairman and CEO of Colliers, said on the call.
Hennick noted that the fourth quarter is the firm’s seasonal peak and that the real estate services segment’s margins could improve with “a decent amount of recovery” in leasing and capital markets.
McLernon said companies are increasingly prioritizing amenity-rich prime office spaces. “It has to be more of an experience space and there needs to be amenities and it needs to be centrally located. So we're definitely seeing, across the globe [and] in all regions, an uptick in office leasing based on the confidence of their business models and the general economy,” he said.
McLernon reported that industrial leasing revenue in the U.S. — Colliers’ biggest market for industrial leasing — grew 8% in the third quarter, with the firm expecting more of an equilibrium in industrial leasing by mid-2025.
“That’s a good sign, but generally around the world, there is a hesitation from tenants to sign leases. There’s been more vacancy in the market, so it takes more time to look at the alternatives,” McLernon said.
McLernon pointed out that there is a “hangover” in the market — created from a buildup of industrial leasing to fund the pandemic-era e-commerce boom — but said “fundamentals long-term are very strong for industrial,” amid on-shoring and near-shoring efforts.
The firm expects more of an equilibrium in industrial leasing by mid-2025.
Colliers’ engineering segment revenue climbed 22% year over year to $316.6 million, with growth primarily driven by its recent acquisition of Englobe, and adjusted earnings before interest, taxes, depreciation and amortization, up nearly 23% from a year ago to $39.8 million, according to its presentation. The company expects its engineering segment to organically grow in the high single digits on an ongoing basis, ranging from 5% to 8%, as the company enters 2025 and thereafter, CFO Christian Mayer said on the call.
Mayer noted that the engineering segment faced a “very tough” comparison due to strong results in the third quarter of 2023 driven by a few large projects that were completed during that time, resulting in a lower organic growth rate for the segment in the third quarter of 2024. Operating earnings fell about $300,000 from the prior year to $19.7 million, “primarily impacted by higher intangible asset amortization expense related to recent acquisitions,” Colliers said.
