The nation’s largest brokerage firms are doubling down on areas outside of leasing as turmoil in the economy stymies transactions across the U.S.

Revenue earned through capital markets and leasing took a significant hit in the fourth quarter, a period when deal volume historically ticks up as investors rush to deploy capital before year’s end.

But as interest rates sidelined deals, other business lines posted impressive gains, and executives are counting on segments less prone to economic swings to carry them through what is sure to be a challenging first half of 2023.

Several firms are zeroing in on property management, a service that is in high demand as companies look to cut costs via outsourcing.

At CBRE, global workplace solutions — a business line that includes facilities and portfolio management for occupiers as well as project management for developers and landlords — acted as an important offset to the decline in transactional business at the end of last year.

Nontransactional business, including GWS, made up 45% of operating profits in 2022, and that share is expected to exceed 50% in 2023, CBRE executives reported during their Feb. 23 earnings call. GWS net revenue grew 13%, and CBRE predicts growth will once again reach double digits in 2023.

“People are giving us more property to manage because they want to save cost, so the combination of those factors has allowed us to grow that business consistently over the years during downturns,” CEO Bob Sulentic said on the call.

Property management was also a bright spot for Cushman & Wakefield. Revenue from that business line increased 8% in Q4, while capital markets declined by 52% and leasing fell 10%. The firm expects a similar growth pattern in its project and facilities management vertical in 2023.

But with giants like CBRE and JLL also placing their bets on outsourcing, competition for business could be stiff for smaller firms like Cushman & Wakefield.

“Sitting here in January, we've got a very strong pipeline, and we feel good about our ability to retain and win business,” CEO John Forrester said on C&W’s Q4 earnings call, also held Feb. 23. “But ultimately, the success rate within that retention and renewal will make the difference of 100 basis points to 200 basis points here or there.”

Fees collected via assets managed by Colliers as well as record acquisition activity produced a 53% increase in the firm’s investment management revenue in Q4. The firm plans to use the $8B it raised last year to grow its assets under management by 10% to 15% in 2023.

Frederic Bastien, managing director and equity research analyst at Raymond James, described Colliers’ renewed focus on its investment management and engineering and design verticals as “game changing” for the business.

These recurring and value-add business lines should propel earnings in 2023, even as economic headwinds stomp out transaction activity in the first six months of the year, Bastien wrote in a report shared with Bisnow.

Work dynamics, a segment of JLL’s business that helps companies enhance their office portfolio through investments in sustainability and technology, was a top performer for the firm in 2022. Revenue in that area grew by 11% in Q4, which helped to offset the 20% and 35% declines seen in leasing and capital markets, respectively.

Many companies are rightsizing their office space, but CEO Christian Ulbrich said he still expects work dynamics to continue to grow as clients expand their portfolios through mergers and acquisitions. A growing focus on environmental, social and governance benchmarks should also propel growth in this area, he said.

Still, Ulbrich said work dynamics business will likely fade into the background once deals pick back up later this year.

“It's a very important part of our business, and the proportion of that business will continue to grow over the next couple of years,” he said during the firm’s Feb. 28 earnings call. “But as you know, once the transactional markets are returning to a more normalized activity, the profitability of our capital markets and our leasing business tends to be still significantly higher.”

Transactional business has borne the brunt of economic headwinds, but it hasn’t stopped completely. In some cases, leasing performed better than expected, with Colliers posting a 3% gain in leasing in Q4, driven mostly by continuous activity in industrial and office.

Pushing deals across the finish line will continue to be a challenge for at least the first half of this year, but Colliers CEO Jay Hennick said leasing will likely post modest gains as companies are forced to make space decisions.

“Ultimately, leases have to be renewed, extended, a move has to take place,” he said during his company's Feb. 9 call. “There is a repeatability to leasing that you don't necessarily have, for example, in capital markets.”

CORRECTION, MARCH 2, 9:45 A.M. CT: This story has been updated to clarify that not all of CBRE’s increase in operating profits came from its GWS business.