Property brokerage Colliers doubled its profit in the second quarter as leasing revenue exceeded expectations in a sign of rebounding demand.
The Toronto-based commercial real estate firm said revenue rose 6% to $1.1 billion from the prior-year quarter, driven by strong office and industrial leasing and steady growth in nontransaction services such as engineering, consulting and management of properties, projects and investments.
Colliers, the fourth-largest brokerage by revenue, joined rivals CBRE and Cushman & Wakefield in expecting a rise in sales and financing should the Federal Reserve cut interest rates. The central bank signaled this week that a reduction could some as soon as September.
Executives at the firm said a small gain in capital markets revenue signaled improvement in financing, with a 2% rise in property sales and lending in the Americas to $127.5 million. Colliers posted $23.2 million in capital markets revenue in Europe, the Middle East and Africa, up 3% from the earlier quarter.
Colliers posted a $71.9 million profit in the quarter, up from $35 million in the year-earlier period, as a 32% increase in the number of office lease transactions in the Americas drove a 13% jump in the company's global leasing revenue to $289 million.
"Leasing revenues exceeded expectations while capital markets saw modest growth for the first time in 24 months, albeit from a relatively low bar," Colliers CEO Jay Hennick told analysts during the company's earnings call on Thursday.
Rebounding Activity
Brokerages dealt with a drop in U.S. office leasing to 321.8 million square feet in 2023, the lowest since leasing declined to a historic low of 280 million square feet in 2020. Office sales volume, meanwhile, fell nearly 60% last year compared to 2022, according to CoStar data, hitting a pandemic-era low.
Cushman & Wakefield posted a 15% decline in capital markets revenue during the second quarter but it expects activity to improve through the rest of the year, returning to mid single-digit growth during 2025, with an anticipated decline in interest rates and a pickup in multifamily and other property sales.
In another sign that activity is already picking up, Cushman & Wakefield said its net loss of $15.3 million during the first half of the year narrowed from $71.3 million for the first half of 2023.
Colliers reported a 4% revenue jump in nontransaction services such as property and project management, engineering and consulting to $541.6 million. Investment management revenue rose 6% to $126 million from the earlier period.
Colliers this week closed the acquisition of a controlling interest in Canadian engineering and environmental services firm Englobe as the global real estate brokerage joins rivals in expanding business lines that are not as reliant on commission-driven revenue generated by property sales and other transactions.
"This acquisition establishes Colliers as one of the top players in Canada, complements our rapidly growing engineering operations in the United States and Australia, and aligns with our strategy of expanding our high-value recurring revenue streams, which now represents 72% of our earnings," Hennick said.