Cushman & Wakefield To Slash Expenses By Another $40M
Cushman & Wakefield is embarking on a second round of aggressive cost cuts in an attempt to tame the effects of plummeting transaction volumes and rising interest rates.
Michelle MacKay, who replaced CEO John Forrester in early July, said the company plans to slash its budget by $40M during a second-quarter earnings call. The reductions would add to the $90M in cuts announced earlier this year.
The $130M in savings represents about 10% of the firm’s general and administrative expenses, Chief Financial Officer Neil Johnston said.
“While our cost-out programs are in part a response to today's operating environment, more importantly, they are positioning us to be more efficient, and to achieve better long-term margins when transactional volumes recover,” he said on the call, per a transcript.
Cushman & Wakefield joins its peers CBRE and JLL in taking steps to reduce the impact economic turmoil has had on the brokerage world’s bottom line. The former posted a negative cash flow of $86M in the second quarter, a stark reversal from the positive cash flow of $400M a year prior.
Just yesterday, JLL announced it is looking to sublease more than 61K SF of its headquarters space in Chicago, according to CoStar.
About 20% of the $130M in Cushman & Wakefield’s cost savings are considered temporary, Johnston said, but could be extended if the firm’s financial condition does not improve.
Executives on the call did not directly address the possibility of layoffs, but said they are constantly evaluating teams and making employment decisions based on performance.
A balance sheet line item shows Cushman & Wakefield has spent $27.2M on cost saving initiatives in 2023 so far, $12.2M of which was in Q2. A footnote explained that was primarily made up of severance pay and other separation costs related to employee layoffs and shedding leases.
“If we have an individual or group that's been working for us, we have somewhere between 5 to 10 years of financial history on that individual or team,” MacKay said on the call. “We know if they're enterprise positive or negative, so we have perfect information when we make a decision about who to offer retention to and who not to offer retention to.”
Fourth-quarter earnings revealed Cushman & Wakefield saved $24.4M primarily through lowered employment costs. In May, the firm laid off more than 700 workers after losing a contract to provide services at Google-owned offices in Silicon Valley, according to The Real Deal.
The company’s financial woes have been heightened by the loss of some of its top performers, including Doug Harmon and Adam Spies, who moved to Newmark earlier this year.
Cushman & Wakefield is projecting a 20% loss in brokerage revenue this year, with the Americas region seeing a decline of 32% in the second quarter. It reported Q2 revenue of $2.4B, an 8% annual decline.
