Dive Brief:
- Cushman & Wakefield reported an increase in property, facilities and project management revenue for the fourth quarter of 2023 and the full year. Revenue from its leasing business increased marginally in the fourth quarter but declined for the full year, the company said.
- In the fourth quarter, property, facilities and project management revenue increased 2% year over year, to $908.5 million, driven by strength in property management and facilities services, which offset lower project management revenue, the company said. For the full year, property, facilities and project management revenue climbed 3% year over year, to $3.57 billion, driven by the Americas and the Asia-Pacific regions, while leasing revenue dropped 12% to $1.8 billion, the company said in its Feb. 20 earnings release.
- Despite declines over the full year, leasing revenue grew 5% in Q4, to $586.7 million. Cushman & Wakefield CEO Michelle MacKay noted on a Feb. 20 earnings call that the firm saw strength in the Northeast, Tri-State and Midwest markets. “We are encouraged by the fourth-quarter performance and leasing,” CFO Neil Johnston said on the call, citing expectations of a more conducive interest rate environment in 2024.
Dive Insight:
Cushman & Wakefield’s total revenue for the fourth quarter shrank 4% year over year, to $2.55 billion, and dropped 6% year over year to $9.49 billion for the full year. Adjusted earnings before interest, taxes, depreciation and amortization dipped 3%, to $213 million, in the fourth quarter and fell 37%, to $570.1 million, for the full year. Management attributed the revenue decrease to delayed occupier decisions, echoing MacKay’s third-quarter earnings call remarks last November, about occupiers holding off on lease decision-making. Occupiers’ ambivalence about leases, the company said, reflects the impact of challenging macroeconomic conditions and interest rate uncertainty on commercial real estate transaction volumes.
On the Feb. 20 earnings call, MacKay said the company’s growth in large office and industrial deals across the U.S. drove the 5% year-over-year increase in its fourth-quarter leasing revenue. “We expect stable to modest growth in the [leasing] segment in 2024, supported by a solid level of lease expiration,” MacKay said. “Even with many companies still implementing hybrid work, there’s 10.5 billion square feet of occupied office space globally,” and “roughly $400 million of dry powder in the market waiting to deploy,” she said, underscoring that the firm sees significant opportunities to organically expand its services.
Johnston said management anticipates some cost pressures in 2024, driven by normal inflation and higher incentive compensation, but that the company’s cost-efficiency initiatives are expected to offset these headwinds.
In the fourth quarter, lower project management fee revenues partially offset growth in its property and facilities management services, the firm reported in its earnings presentation. Johnston attributed the slowdown in project management to reduced capital expenditure budgets that caused ad hoc property management services to decline.
MacKay said management has updated and mapped out long-term strategic plans for the first time since the company’s initial public offering in 2018.
“We’re using data to make tough decisions around spending and capital allocation, which will set us all up for future growth,” MacKay said on the call. “We made extraordinary strides last year in a short period of time, operating with rigor, executing with speed and urgency.”
The commercial real estate firm recently rolled out an AI+ initiative to accelerate client decision-making and help service firms boost operational efficiencies. It has started hiring prompt engineers, data scientists and data architects to support that move.
The company expects total fee revenue growth in the first quarter of 2024 to be relatively flat compared with the previous year. It anticipates that cost savings in the quarter will more than offset inflation, according to its earnings presentation.
