Two major commercial real estate services firms posted higher profits as office leasing and property sales surged, prompting the firms to raise their financial outlooks for the rest of the year.
Cushman & Wakefield, the world’s third-largest real estate services firm, posted an 11% increase in revenue to $2.6 billion and a $51.4 million profit in the third quarter, nearly triple the $17.7 million reported for the same period a year ago.
Newmark — the fifth-largest firm of its kind — posted revenue of $863.5 million, up nearly 26% over the $685.9 million reported in the same quarter last year. It posted a $42.6 million profit, more than double the $17.8 million in the earlier period.
The firms joined CBRE, the world's largest commercial real estate services firm, in reporting higher-than-expected deal activity and earnings for the rest of the year. JLL, Colliers and Marcus & Millichap are set to report earnings in coming days.
Chicago-based Cushman reported revenue increases across all its business lines, led by a 21% jump in property sales and a 9% increase in leasing.
“This quarter, we delivered the largest third-quarter leasing revenue in the history of the company,” CEO Michelle MacKay told analysts during the firm’s third-quarter earnings call.
Newmark, meanwhile, posted a nearly 14% jump in leasing revenue to $244 million, a record for any third quarter, CEO Barry Gosin said.
Firms boost financial outlooks
Cushman's leasing gains were driven mainly by office and industrial deals in the Americas, where more companies are upgrading their real estate holdings, Cushman Chief Financial Officer Neil Johnston said.
“In both sectors, flight to quality remains a key theme and continues to lift average revenue per lease,” Johnston said.
MacKay said the results from various segments led to Chicago-based Cushman's best third quarter on record for cash flow generation, enabling the firm to prepay $100 million in debt, bringing its total debt paydown over the past two years to $500 million.
Cushman's moves to reduce borrowing costs have fueled strong earnings growth this year, allowing the firm to raise its expectations for growth in earnings per share to between 30% and 35%, up from last quarter's estimate of 25% 35%, MacKay said.
Newmark also expects higher revenue and earnings this year. The New York City-based firm predicted revenue of between $3.18 billion and $3.33 billion for the full year, an average 18% increase at the midpoint over the company’s estimates during its last earnings call in August.
The firm expects adjusted earnings before income taxes, depreciation and amortization of between $543 million and $579 million — an increase of up to 30% over the prior estimate.
“The pipelines remain really strong into the fourth quarter,” Newmark Chief Financial Officer Michael Rispoli told analysts. “We don't see anything in the market that is slowing transaction activity down at the moment.”