Major U.S. commercial real estate brokerage houses are reporting first quarter net losses across the board, reflecting the ongoing impact of the current recession and dearth of transaction activity. This is believed to be the first time in recent memory that all the major brokerage firms reported a quarterly loss, an occurrence that can’t be recalled even during the last major recession following the dotcom bust in 2001.

Jones Lang LaSalle reported a net loss of $61 million for the first quarter; FirstService (which owns a majority of Colliers International) reported a net loss of $44.7 million in the first quarter; CB Richard Ellis posted a first quarter net loss of $36.7 million; and HFF (Holliday Fenoglio Fowler) posted a first quarter net loss of $6.1 million.

Cushman & Wakefield's Italian parent company reported a $31 million loss for the real estate unit as of year-end 2008, its most recent reporting period; Grubb & Ellis, which, is having to restate its financial results going back to 2005 due to accounting errors, has yet to report first quarter 2009 or year-end results for 2008 but said it expects to report a decline in net income and will take significant impairment charges to goodwill and the value of its real estate investments.

"Our first quarter results were again severely impacted by the continuing adverse and unprecedented conditions in the global capital markets and the economic recession in the U.S. and in a majority of other global economies," John H. Pelusi, Jr., HFF Inc.'s CEO said in a statement that succintly summarized the current business envionment. "We believe these difficult conditions will continue throughout 2009 and possibly into 2010."

"We have implemented a number of cost-saving initiatives and taken necessary measures to more appropriately align our resources with these challenging economic conditions which included significant reductions or eliminations of management salaries and personnel reductions of approximately 20.6% as compared to our highest employment levels at the end of the third quarter 2008," added Pelusi. "We are prepared to make further adjustments in the event that the situation warrants as we continue to focus on operating our business as efficiently as possible."

However, Pelusi also noted that it is times like these when clients depend most on the experience and abilities of their real estate advisors.

"Many of our clients are faced with extraordinarily difficult situations given the lack of liquidity in the capital markets, and we are fully focused on finding the best capital market solution for their individual needs," Pelusi said. "With 165 transaction professionals with an average tenure of approximately 16 years in the real estate industry and over eight years tenure with the company, we remain very focused on ways to also take advantage of all revenue generating opportunities that we see building with a special emphasis on our multifamily debt and investment sales business, our distressed debt and REO business, our loan sales and loan sale advisory business, our investment banking advisory business as well as our loan servicing line of business."

While reporting an overall loss, Jones Lang LaSalle Inc. reported the revenues in its Americas region were up 15% despite weak market conditions and attributed that result to the successful integration of its Staubach purchase.

"Our first three months are traditionally loss-making and our slowest period of the year with revenue accelerating as the year progresses," Colin Dyer, CEO of Jones Lang LaSalle, said in the firm's first quarter investors conference call. "This first quarter was accompanied by the worst market environment in memory, making our seasonal loss more pronounced than in previous years, and it was further exacerbated by one-time charges for impairments and restructuring."

"The downturn continues to impact most of our transaction-based activity, however, with investment sales continuing their 18-month decline and after defying the markets for several quarters, our leasing activity is also declining in world markets, but less than the market as a whole," Dyer added. "We are responding to this situation aggressively, starting with costs. We have reduced personnel costs in all parts of our business to lower staffing concentrated in support areas, lower base salaries, and by adapting bonus plans and aligning them to current market conditions. These cuts extend to the independent members of our Board of Directors who have voluntarily reduced their compensation by 20% for a year."

U.S. transaction volume reached a new low in the quarter for Jones Lang LaSalle with preliminary data indicating just $8 billion of property being traded. U.S. office leasing decreased by 32% from the prior quarter and almost 45% from the first quarter of 2008.

"Several areas of our business have performed well," Dyer added. "The successful integration of Staubach contributed to healthy revenue increases in the Americas and our Corporate Solutions business is emerging as the dominant platform, winning new outsourcing assignments in all regions. Our other annuity businesses are holding up well, both in Jones Lang LaSalle and in LaSalle Investment Management. And overall, we continue to gain share in all markets."

CB Richard Ellis Group Inc. saw its first quarter revenue fall 28% overall and said it initiated a 29% reduction in operating expenses.

"With respect to operating expense management, we had previously announced targeted annual run rate savings of approximately $385 million," Brett White, president and CEO of CB Richard Ellis, said in the firm's first quarter investors' conference call. "To date, we've been so successful on our cost cutting efforts; we have now increased our target by approximately $100 million. Please keep in mind that our current $475 to $500 million target excludes the reduction in variable commission and other compensation expense that automatically occur as a result of the company's reduced transaction revenues. If this variable expense reduction was added to the cost-cutting target, it would significantly increase the company's total savings."

In addition, during the first quarter, CB Richard Ellis obtained an amendment to its credit agreements that increases the cushion in key financial covenants, giving the firm more flexibility to repurchase, refinance or renegotiate the debt.

CB Richard Ellis' Americas sales revenue for the quarter declined 70% on a year-over-year basis and its leasing business declined 32% in the first quarter of 2009 versus prior year. Despite much lower activity levels on the transaction side of the business, in the U.S. alone, CB Richard Ellis still closed almost 600 sale transactions and negotiated about 5,500 leases during the quarter.

"We continue to our efforts to increase market share as both producers and clients migrate to higher quality services platform in difficult times. And we believe our efforts are succeeding," White noted on the positive side. "For example, in investment sales, we once again captured the number one position in the U.S. with a share of 17.1% as compared to 14.2% in 2008."

Another highlight in the quarter for CB Richard Ellis was being ranked by the International Association of Outsourcing Professionals as the highest commercial real estate services company and ranked it eighth overall with the likes of Accenture and IBM.

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