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Cushman & Wakefield Posts $29M Loss As Leasing Improves, Sales Outlook Dims

Cushman & Wakefield ended the first quarter with $2.2B in revenue, down 3% from the same time last year, and lost $29M, a 62% year-over-year reduction in losses.

Cushman & Wakefield's leasing fee revenue grew by 5% in the first quarter compared to last year.

The narrowing of losses comes as Cushman & Wakefield is realizing some of the benefits from cost-cutting moves the past two years and a bump in leasing activity, the firm’s executives said on an earnings call Monday. 

“In 2023, we spoke with you frequently about positioning ourselves in a thoughtful way for the recovery, and as you can see from our performance, the actions that we took in support of these words created strong first-quarter results,” CEO Michelle MacKay said. 

The firm’s global operations pulled in $1.5B in fee revenue and saw 5% fee growth from global leasing in the first quarter. Fee revenue from services dipped $26M year-over-year to $871M, while capital markets and valuation and other services were largely flat.

The only marked improvement year-over-year was in leasing services, which grew $19M to $382M.

MacKay and Chief Financial Officer Neil Johnston said recent macroeconomic signals had slowed deal velocity in the near term but added the firm expects capital markets growth to accelerate in the second half of 2024.

The brokerage’s leaders “acknowledge that the recent increase in interest rate volatility is likely to cause a short-term reversal of trends in the second quarter as the market adjusts,” Johnston said.

“Ultimately, however, our first-quarter results provide us increased confidence that transactions will return to the market in greater volume when rate stability is achieved.” 

Cushman & Wakefield’s capital markets fee revenue declined 1% from the first quarter of 2023, but that was a better performance than the 32% year-over-year drop it saw in Q4 2023.

MacKay said capital markets activity was stronger in the early part of the quarter “when there was more optimism over a potential first rate cut from the Fed.” 

“Although the recent uptick in rate volatility will most likely cause a pause in transaction volumes in Q2, the improvement that we experienced in Q1 gives us more confidence that global investment sales pipelines are solid and investors are ready to engage when the time is right,” she said.

Cushman & Wakefield also made efforts to reduce its debt load in the first quarter after revenue was weighed down by interest payments last year and some investors began questioning the cost spent on debt service. 

It paid off a $50M term loan due in August 2025 and has $143M of remaining term loans set to mature in 2025. It repriced $1B in debt, reducing the interest rate by 25 basis points and pushing maturity to 2030, and now has $644M in senior secured notes maturing in 2028.  

The Chicago-based brokerage had $1.7B in liquidity at the end of the first quarter, comprising $600M in cash and a $1.1B revolving credit facility set to mature in 2027. 

The firm completed $30M in cost savings last year, including job cuts, and has no further staff reductions planned in the near term, Johnston said.

The brokerage expects leasing activity to be relatively stable in 2024, but the makeup of leasing activity has shifted, MacKay said.

The fourth quarter was dominated by larger deals in trophy buildings, while the firm is “starting to see a mix in of smaller tenants, still in high-quality buildings, however, but smaller leases in the first quarter of this year,” she said. 

When and whether the Federal Reserve cuts interest rates will continue to impact deal flow, MacKay said, but she added the U.S. market had been buoyed by strong GDP performance. 

“What we're looking forward to over the course of the next year or two is those two firing at the same time,” she said. “When they're more connected, you’ll start to see much higher growth rates in leasing and capital markets together.”