Cushman & Wakefield executives reported signs of life in the beleaguered office sector as more businesses decide how much space they will need for their employees with the pandemic showing signs of waning.
The Chicago-based brokerage reported that revenue from global office leasing contributed to robust results for the second quarter and first half of 2022, hours after CBRE Group, the world’s largest brokerage, also reported healthy activity in offices.
Cushman, the third-largest brokerage by revenue, reported a 35% year-over-year jump in leasing income in the six months ended June 30, driven by steady growth in office deals and strength in the industrial real estate sector. One promising sign is that the percentage of new leases signed by companies versus short-term renewals is increasing, as is the average length of lease deals as businesses get off the sidelines to shed, add or reconfigure their office space, CEO John Forrester said.
The optimism on office leasing was at odds with the outlook from other large global brokerages. JLL, Newmark and Colliers International were less bullish in their outlook for offices. Those companies reported that many tenants are still postponing decisions about their office footprints amid a general slowdown in deal activity. CBRE and analysts predict that the U.S. and global economies are slipping into recession.
Cushman reported a 16% increase in second-quarter total revenue to a record $2.6 billion. The brokerage, like its peers, said it is building up its property management, consulting and real estate valuation businesses to provide a steady income stream across all economic cycles.
Still, Forrester singled out offices as showing particular improvement from two years ago, when most organizations were working from home and social distancing.
Preliminary Cushman data shows that global office leasing volume increased 21% in the first half of 2022 over the prior year. Demand from life sciences, which represents a growing portion of Cushman’s deal activity in the United States, contributed to the increase, Forrester told investors during Thursday's earnings call.
“The leasing business has been strong in the first half and the office sector is improving steadily,” he said. About half of Cushman's global office markets recorded positive demand in the first half of the year, Forrester added.
The CEO noted that U.S. office-using businesses added 635,000 jobs in the first half of 2022.
"There are now 1 million more office-using workers in the U.S., as of June 2022, than prior to the commencement of the pandemic," he said. "And as we know, more jobs all the time means more demand for all types of useful space, particularly office.”
Not all of those workers are actually working in offices, however, and that growth doesn't mean office activity will return to pre-pandemic levels anytime soon. Cushman executives acknowledged that probably won't happen until the end of 2024, even though more clients appear ready to make longer-term commitments.