Commercial real estate brokerage Colliers posted a second-quarter loss as sales and leasing fell, joining rivals in struggling with higher interest rates that slammed the industry.
The Toronto-based company said revenue fell 4.4% to $1.1 billion from the year-earlier quarter and it posted a net loss of $6.9 million, compared with a profit of $30.3 million in last year's second quarter. The loss was mainly due to a 39% decline in revenue and a 7.5% drop in leasing income.
Colliers follows CBRE, Newmark and Cushman & Wakefield in reporting financial results for the quarter disrupted by lower property transaction volumes.
The commercial real estate industry is reeling from rate hikes over the past year that drove up borrowing costs, slowed capital markets activity and kept buyers on the sidelines concerned about a possible recession.
“Globally, capital markets investment volumes hit the lowest levels seen in a decade due to the rapid rise and uncertainty around interest rates, combined with the tightening debt market which has affected price discovery between buyers and sellers,” Chris McLernon, global CEO for real estate services for Colliers, said during the company’s earnings presentation.
But, also like its rivals, the company said year-over-year increases in non-transaction income from such services as property and facility management, investment management and consulting buoyed the results for the quarter.
Colliers reported a 9.2% increase to about $520 million in revenue from the prior-year quarter in its property management and advisory businesses, and a 58% jump in its investment management arm to about $119 million from the earlier period.
Maintaining Financial Outlook
The company, in part due to the strength of the services not linked to real estate deals, is holding to projections made in May that it expects to match or come close to last year's total revenue of $4.5 billion.
“Since the rest of our business is performing well, we’re maintaining our financial outlook for the year,” Colliers CEO Jay Hennick told investors.
He added that “since 2015, Colliers has transformed into a highly diversified and global professional services company with significant recurring revenue streams.”
The company forecasts revenue of between $4.4 billion and $4.6 billion for the full year, despite the expected weakness in real estate activity for the rest of the year before beginning to improve gradually in 2024.