Marcus & Millichap posted a second-quarter loss as property and financing deals declined with higher interest rates making buyers and sellers sit on the sidelines.
The national investment sales brokerage had a loss of $8.7 million, compared to a profit of $42.2 million in the year-prior quarter, as revenue slid nearly 60% to $163 million. The loss was mainly because of spending to hire and retain sales staff, develop new technology and fund other growth initiatives.
Marcus & Millichap, the last of the large brokerages to post results, followed CBRE, Newmark, Cushman & Wakefield, Colliers and JLL in reporting financial results hurt by lower property deal volumes. The commercial real estate industry has been reeling from rate hikes that drove up borrowing costs and slowed capital markets activity.
The Calabasas, California-based company said Friday the latest financial results especially pale in comparison to the second quarter of 2022, when deal activity was robust. Marcus & Millichap and several other brokerages posted record or near-record earnings for that quarter last year.
“The widened bid-ask spread and restrictive lending environment severely hindered trading and financing volumes," CEO Hessam Nadji told investors during an earnings presentation.
Marcus & Millichap is also the second major brokerage to post a net loss for the quarter. Toronto-based Colliers this week reported a loss of $6.9 million compared with a profit of $30.3 million in last year's second quarter, mainly due to revenue declines that included a 7.5% drop in leasing income.
Marcus & Millichap's brokerage commissions fell more than 60% in the quarter to $140.3 million from a year earlier, the company said. Sales declined across all deal sizes, as well as fees from financing transactions.
Nadji foresees real estate activity gradually picking up as buyers holding record amounts of capital move off the sidelines and start making deals again — though he cautioned that "it is difficult to forecast the timing for a full-scale recovery in trading volumes."
Nadji added that "healthy property fundamentals, with the exception of office, and a shift in sentiment from recession concerns to an expectation of an economic soft landing, bode well for sustained buyer interest. We are encouraged by progress on bringing down inflation and the [Federal Reserve]'s tightening cycle nearing its end, which should lead to gradual improvements in market conditions."