Marcus & Millichap posted its fourth consecutive quarterly loss as property sales and financing deals declined in the first quarter, with higher borrowing costs and economic uncertainty keeping buyers and sellers on the sidelines.
The national investment sales brokerage had a loss of about $10 million, up 72.4% from a loss of $5.8 million in the year-earlier period. Revenue slid 16.6% from the year-earlier period to just over $129 million as brokerage commissions and fees declined amid an industrywide slowdown in deal activity.
Marcus & Millichap’s loss reflects both a decline in sales amid persistent high interest rates, and the company’s long-term spending to attract and keep talented brokers, acquire boutique firms and invest in the business, CEO Hessam Nadji told investors on the company’s earnings call.
“The shift toward higher-for-longer has prolonged interest rate volatility, which remains disruptive to real estate valuations, marketing of listings and transaction closings,” Nadji said.
Nadji — like executives for CBRE, Newmark, JLL, Cushman & Wakefield and Colliers — expects deals to pick up in the second half of the year as buyers and sellers receive clear signals that inflation and elevated borrowing rates are under control.
Calabasas, California-based Marcus & Millichap, which specializes in commercial property sales and financing, has reported net quarterly losses since last year's second quarter as the industry reels from rate hikes that drove up borrowing costs and slowed capital markets activity.
“These results reflect the productivity drag on our sales force as listings take longer to market and many deals continue to fall out of contract due to financing issues or repricing,” Nadji told investors. “This is time-consuming for our sales force, and limits their bandwidth to engage in new business development.”
Brokerage commission revenue decreased almost 18.9% to $109.5 million in the first quarter as the number of transactions declined almost 14% from year-earlier levels.
Revenue from financing fees dipped 9.1% to $14.4 million compared to the prior-year period.
The company's total operating expenses fell slightly to $149.2 million compared to $170.9 million for the same period in 2023 as the company trimmed costs.
While these conditions are likely to persist through much of 2024, price adjustments, distressed situations and maturing loans could drive additional transactions in the quarters ahead, the company said in its outlook.
"Over the long term, real estate demand is expected to return sales and financing volumes to higher-than-current levels given the record capital on the sidelines," the company said.