Global Brokerages Rally In Fourth Quarter, Project Another Year Of Growth

Strong financial reporting from the world's largest brokerages in the fourth quarter may herald an end to the malaise that has dragged down commercial real estate markets for nearly two years.

“The simplest story is that commercial real estate continues to rebound out of Covid, and the realization that interest rates are going to be higher for longer is allowing the debt markets to make deals and the transaction market to slowly open up,” said Alexander Goldfarb, an analyst at Piper Sandler with an overweight rating on Newmark's stock.

Cushman & Wakefield posted fourth-quarter earnings in line with analysts' expectations Thursday morning, and while the brokerage's earnings lagged some market peers, they reflected the broader sector's recovery, which executives expect will carry them even further in 2025. 

Cushman's profits for 2024 came in at $131M, up from a $35M loss the prior year, the brokerage reported. Despite meeting expectations with Q4 earnings at 48 cents per share, the stock was trading down more than 4% Thursday after increasing by more than 10% in the last 12 months. 

The firm saw a 7% increase in leasing revenue for the year, with fourth-quarter revenue driven by industrial and office activity across the Americas. Capital markets revenue was up 4% year-over-year, its fastest rate of growth since the beginning of 2022, which CEO Michelle MacKay said was reflective of the early stages of the sector’s recovery.

“For two years, the market was largely recalibrating to higher interest rates. That was the hardest part. Now we are largely past that,” MacKay said on the company's Q4 earnings call. “Property values have corrected, central banks have begun reducing rates for debt, costs and availability of debt have improved because lenders are sensing the inflection, and buyers and sellers are proving that they can do deals in this environment.”

MacKay’s commentary was widely echoed by her competitors during their Q4 earnings calls this month. 

CBRE is projecting double-digit revenue growth in 2025, a year that Chief Financial Officer Emma Giamartino said would “easily set a new peak” for the company’s earnings per share after finishing the year with annual revenue up 12% at $35.8B. 

JLL reported $6.8B in fourth-quarter revenue, up 16% from the prior year. Toronto-based Colliers’ total revenue grew 11% year-over-year to $4.8B. Newmark reported its profits jumped 24% year-over-year in the fourth quarter, and CEO Barry Gosin is targeting a 40% boost to earnings in the next two years.

The brokerages are benefiting from a widespread market thaw reaching some of the hardest-hit corners of the sector, from an increase in office leasing to a burst of sales at the end of the year.

“People realize that waiting for rates to fall to refinance isn’t going to happen. Waiting for rates to fall to be able to get a better value for their building isn’t going to happen,” Goldfarb said. “People are getting on with their lives and, at the same time, there's a ton of money that wants into real estate, so valuations are still pretty healthy.”

The companies' stocks have climbed as they boosted earnings throughout 2024. CBRE and JLL are up more than 50% over the last 12 months, while Newmark’s stock has climbed 36% over the same period. Colliers stock has been roughly flat.

“We're company-building right now,” CEO Jay Hennick said on Colliers' earnings call. “We believe, coming out of this, we will have an exceptional platform that will be positioned beautifully to continue to accelerate its growth.”

Brokerages have leveraged the explosion in data center demand to boost earnings as investors pour billions of dollars into the sector, despite some potential that a bubble is brewing as tech firms race each other to market with new artificial intelligence models.

Jim Covello, Goldman Sachs’ head of stock research, raised alarms when he published a report in September questioning whether too much money was being spent on the sector.

In January, a Chinese company unveiled a new AI model that it said could achieve similar results to leading U.S. tech companies’ models with significantly less computing and electrical cost. The news triggered a stock sell-off, although the affected stocks have largely recovered. 

Top investors in the space have tried to tamp down concerns by predicting that more efficient AI models will only accelerate its adoption, thus increasing demand for computing power overall. Even if there is a bubble, it won’t surprise anyone who has been in the business long, Goldfarb said.

“From the moment Adam and Eve left the garden, there's always been some sort of real estate bubble. It's just part of real estate,” Goldfarb said. “What Barry [Gosin] is trying to do is to have a nimble team that’s staffed appropriately such that they can benefit from the exuberance of data centers right now, but also guard against being too exposed on the eventual downturn.”

Other question marks have come up as President Donald Trump has unleashed a policy blitz in the first month of his second term. 

But executives and investors have hardly been bothered by uncertainty injected into the market by Trump’s early moves to expand broad tariffs, redirect government subsidies and shed real estate occupied by the federal government.

“The policy situation remains fluid and unpredictable. We're studying it, our clients are studying it, but there's a lot we don't know in terms of precise timing and scope of things like tariffs and how policy is going to change and how it'll impact property,” MacKay said Thursday. “Having said that, on the whole, property has proven throughout history and many administrations that it can navigate these changes.”