Lutnick bullish on US real estate, says NGKF outpacing rivals

BGC head cites low interest rates, NGKF's limited exposure to Asia and emerging markets

TRD New York /
Feb.February 10, 2016 02:30 PM

BGC Partners chair and CEO Howard Lutnick said the U.S. economy’s current “low interest rate environment is good for real estate,” and added that Newmark Grubb Knight Frank’s domestic focus and low exposure to volatile global markets gives it an advantage over rival brokerages.

Speaking on BGC’s year-end earnings call Wednesday, Lutnick was confident that the U.S. real estate market would not be greatly impacted by a global economic slowdown, and dispelled concerns that Federal Reserve interest rate hikes would throw the market off course.

The Fed “raising rates another quarter- or half-percent [this year] will not impact the overall real estate market,” Lutnick said. “We think the fundamentals of the real estate business are good.”

Fed chair Janet Yellen said this week that the central bank may revise its plan to implement multiple interest rate hikes over the course of this year due to global economy uncertainty, particularly in China.

Lutnick also expressed faith in the strength of the U.S. economy, and said that commercial brokerage Newmark Grubb Knight Frank, a BGC subsidiary, would outperform rival brokerages due to its limited global exposure and core focus on the U.S. market.

In BGC’s year-end earnings release, Newmark CEO Barry Gosin noted that NGKF’s full-year revenues and earnings growth for its real estate services “outpaced the results of our publicly-traded competitors and relevant industry metrics by wide margins.”

The company’s list of its publicly-trade peers includes CBRE Group, JLL, Colliers International, HFF, Savills and Marcus & Millichap.

“Many of our publicly-traded peers have huge exposure to Asia, which is dramatically difficult for them,” Lutnick said. “They have huge exposure to emerging markets, which is dramatically difficult for them.”

“We are a U.S. real estate company,” he noted. “The United States is growing its economy at about 2 percent, which means there’s new jobs. We have unemployment at below 5 percent. Those jobs mean that companies are continuing to grow.”

Lutnick said that while companies are not expanding rapidly, there’s a healthy, albeit slow, pace to growth.

“And if you were going to bet on anyone, you’d bet on U.S. real estate with low interest rates – and that’s why you’re seeing us outperform, generally,” he said.

While Gosin said NGKF anticipates that industry-wide brokerage revenues in the U.S. overall – across both sales and leasing – “will be flat to up 5 percent in 2016,” he said NGKF should see top-line revenue growth of 20 percent this year – numbers “significantly outpacing the industry.”

News trickled out last week that NGKF could be chopping its four names to one — simply “Newmark.”

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