- Cushman & Wakefield’s Q2 profits rose to $13.5M from $5.1M YoY, driven by higher leasing revenue and effective cost-cutting measures.
- The firm expects a “waterfall effect” of sales if the Federal Reserve cuts interest rates in 2H24, with improving inflation data boosting markets.
- Specifically, they project low- to mid-single-digit growth in leasing revenue for 2024 and expect capital markets revenue to return to mid-single-digit growth by 2025.
- Cushman & Wakefield refinanced over $1B in debt and aims to reduce total debt by $200M by mid-2024, with another $50M cut planned for Q3.
Cushman & Wakefield (CWK) reported a welcome rise in Q2 profits, which climbed to $13.5M from $5.1M a year earlier, as reported by CoStar.
The gains were attributed to higher leasing revenue as well as ongoing cost-cutting and restructuring efforts under CEO Michelle MacKay, who took the helm a year ago.
Investor Enthusiasm
CWK is the second major brokerage to report quarterly results, after CBRE, and both firms noted a general rise in market optimism. Industry experts also anticipate the Fed may cut interest rates before the end of 2024, potentially triggering a “waterfall effect” of real estate sales, according to MacKay.
During an earnings call, he emphasized the positive shift in market sentiment. “The majority of the uncertainty around rates and inflation has started to move into the rear-view mirror. We’ve seen better inflation data, and the economy has remained resilient, and this is positive for capital markets.”
Leasing Activity
In Q2, CWK reported revenue of just under $2.3B, slipping 5% YoY from $2.4B. This decrease was mainly due to a 15% drop in capital markets revenue, which fell to $163.2M.
Despite this, the company saw its third consecutive quarter of higher leasing fee revenues, driven by strong deal activity in the Americas and Asia Pacific.
Cost Cutting
Since becoming CEO, MacKay has implemented millions in cost cuts and conducted a comprehensive review of the company’s operations, focusing on cash flow and growth expectations. Less profitable services have been restructured or eliminated, contributing to the firm’s financial health.
Over the past year, CWK refinanced over $1B in debt and is already halfway to its goal of reducing total debt by $200M. MacKay announced plans to cut another $50M in debt in Q3, too.
Future Outlook
Overall, Cushman & Wakefield anticipates leasing revenue growth in the low- to mid-single-digit range for the year, driven by robust performance in industrial, office, and retail deals. CFO Neil Johnston also expects capital markets revenue to improve, with growth returning to mid-single digits by 2025.
The numbers definitely support their confident stance on the matter. The firm’s net loss for 1H24 was $15.3M, much less than the $71.3M loss they reported in 1H23.
Other major brokerages, including Colliers International (CIGI) and Newmark (NMRK), are expected to report their results soon, with JLL (JLL) and Marcus & Millichap (MMI) scheduled to release theirs next week.
