How JLL, CBRE and Colliers softened blow from sales slump

Commercial brokerages lean on property management as transactions tank

JLL's Christian Ulbrich, CBRE's  Bob Sulentic and Colliers' Jay Hennick (Getty, Linkedin, JLL, CBRE)
JLL's Christian Ulbrich, CBRE's Bob Sulentic and Colliers' Jay Hennick (Getty, Linkedin, JLL, CBRE)

As commercial real estate deals dried up, some big brokerages managed to keep the revenue hit to a minimum.

Transactions fell by about half for CBRE and JLL last quarter from a year ago, and profits were down significantly, yet their revenues were down by just 1 percent and 4 percent, respectively. Other brokerage giants, including Colliers and Savills, also saw comparatively small drops.

They did it with gains in areas that aren’t dependent on deals, especially property and facilities management.

“We grew our resilient business lines while also effectively managing through the industry-wide slowdown in investment sales and leasing activity,” JLL CEO Christian Ulbrich said on the brokerage’s Aug. 3 earnings call.

CBRE reported a net revenue gain in its Global Workplace Solutions arm of 13 percent, which the brokerage said was driven by growing its client base, especially from its acquisition in 2021 of London-based project manager Turner & Townsend. The unit provides project management and advisory and transaction services.

Revenue from the brokerage’s facilities management business was up by almost 12 percent, while net revenue from property management rose by 3 percent, something CBRE also attributed to client base growth.

“CBRE’s results slightly exceeded our expectations, driven largely by better-than-expected growth in Global Workplace Solutions and aggregate growth in our resilient lines of business, offset by weaker-than-expected property sales,” CEO Bob Sulentic said on the brokerage’s July 27 earnings call.

Colliers’ revenues also dropped by about 4 percent. CEO Jay Hennick attributed the Toronto-based brokerage’s resilience to growth in recurring revenues, which made up 65 percent of the firm’s adjusted EBITDA.

“Having such a large percentage of recurring revenue highlights our balanced and resilient business model, enables us to withstand market fluctuations,” Hennick said on the brokerage’s Aug. 2 earnings call.

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Revenue from the brokerage’s investment management segment rose by 58 percent year-over-year last quarter, and the outsourcing and advisory division’s revenue increased by 10 percent.

And according to a report covering the first half of the year, revenue at London-based Savills was down a modest 2.5 percent as the brokerage relied on what it calls its “less transactional businesses” like consultancy and property and facilities management. 

To be sure, the brokerages would prefer healthy profits to stable revenue. But the drop-off in investment sales, a lucrative arm of their business, made that impossible. Sales have slumped because of a jump in interest rates, a tighter lending environment and uncertainty in the office and multifamily sectors, among other reasons.

Driving JLL’s income last quarter were LaSalle, the brokerage’s investment management arm, where quarterly revenue was up by 27 percent year-over-year, and proptech arm JLL Technologies, where revenue increased by 18 percent.

“LaSalle’s business performed well given the decline in real estate asset values, and incentive fees were better than expected, demonstrating the diversification and strength of this portfolio,” Ulbrich said.

Ulbrich also cited growth in JLL’s property and workplace management business lines. JLL’s property management fee revenue grew by 9 percent, which Ulbrich attributed to the brokerage expanding its portfolio in North America and South America and to incremental fees from interest rate-sensitive contracts in the United Kingdom.

Not every brokerage’s revenue was cushioned by other income streams. California-based Marcus & Millichap suffered a 59 percent drop in second-quarter revenue from last year as sales volume plunged by 62 percent and average transaction size dropped by 28 percent.

Revenue at New York’s Newmark was down by 22 percent despite a 3 percent increase in income from management services.

Correction: CBRE’s revenue figures have been adjusted in this updated story.

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