Dive Brief:
- Cushman & Wakefield’s property, facilities and project management segment remained relatively flat in the third quarter, according to the company’s Q3 2023 earnings report.
- With growth in the company’s U.S. property management and facilities management units offsetting lower project management revenues, the overall services business was Cushman’s only business to remain steady for the quarter, the company reported. Its leasing business saw a 16% drop in revenue for the quarter year over year, with its capital markets and valuation businesses falling 33% and 17%, respectively.
- Cushman & Wakefield CEO Michelle MacKay said on an earnings call that although unique factors impacted results this quarter, “we aren’t satisfied with the low level of organic growth that we reported in our services business. This is a big priority for us and a key area to invest in.”
Dive Insight:
Cushman & Wakefield attributed its leasing revenue decline to higher interest rates and macroeconomic headwinds. The firm has had a “couple of large leases this quarter for occupiers, but we’re also seeing them holding off on decision-making,” MacKay said.
The company expects leasing volume to hold through next year, MacKay said, expressing hope for gradual improvement over time. If that is not the case, the company is “well-prepared” both in terms of cost structure and having a services business related to capital markets, she noted. She also pointed to emerging preconditions for recovery, including rising inflation. The Federal Reserve’s actions may impact the situation, she added, referring to an upcoming meeting of central bank officials this week.
MacKay said that there is always a balance to strike between deleveraging and investing for growth. “We’re not just pushing on one pedal. We’re going to push on both pedals at the same time. Services, the duration, the nature of the [property, facilities and project management] business for us is really valuable in relation to our other businesses,” she said, thus the C&W Services business will be a key area the company targets for investment.
Regarding the impact of occupancy trends on demand for outsourcing services, MacKay noted that the average lease in the U.S. is about six or seven years and the effects of remote work have largely subdued. “We think we’re nearing the end of the remote work impacts, and we’ve seen a lot of it happen already,” she said. “Most businesses have already made their decisions on space. So either they’ve signed a new lease, likely for less space, or they’re still in their existing space, or they listed their space to sublease. A lot of this has already played through the system.”
In response to a question about the potential of a bankruptcy from WeWork, which Cushman & Wakefield partners with and services, CFO Neil Johnston said that while the firm does a lot of work for WeWork, it does not anticipate that a bankruptcy would significantly affect its business. “Many of those spaces still need to get serviced, managed, or have something to get cleaned. It’s an essential service, so we don’t see it as a material impact to the company,” Johnston said on the earnings call.
