Higher borrowing costs and a slowdown in demand have hit the bottom line of yet another commercial real estate brokerage.

Marcus & Millichap posted a $10.2M loss during the fourth quarter, the Los Angeles-based investment sales brokerage disclosed on Friday. By contrast, the firm brought in $7.2M in profits in the same quarter the previous year.

Revenues dropped by 37% for the quarter, down from $262.4M in Q4 2022 to $166.2M in the final quarter of last year. For the full year, the company posted a $34M loss and a 50% drop in revenues.

The brokerage’s deal volume was also down by 39% from a year prior, which reflected the overall volume of U.S. commercial sales declining by 55% during 2023, according to CoStar.

The company’s performance was in part due to difficulty reaching listing prices that both buyers and lenders could agree on, Marcus & Millichap CEO Hessam Nadji told investors during the earnings call.

Market headwinds, including higher borrowing costs and expenses, meant the market saw less demand and less “urgency to close deals before year-end,” he said.

The losses weren't limited to the company's balance sheet. Marcus & Millichap ended 2023 with 1,783 “investment sales and financing professionals,” according to an investor presentation released along with its earnings. The figure was a 6.4% decline from 2022, translating to a headcount reduction in its sales and debt brokerage staff of more than 100 people.

Even so, Nadji said that the brokerage had recruited new capital markets specialists and brokers in New York, Dallas and Los Angeles.

Challenges are likely to continue well into this year, especially during the first quarter when deal volume typically slows, Steve DeGennaro, the brokerage’s chief financial officer, said on the call.

“The headwinds facing the market are likely to remain a challenge through the first half of the year,” he said.

Like brokerages including CBRE and Colliers, Marcus & Millichap executives predicted an uptick in activity toward the back half of the year, with the market showing signs of accepting the interest rate environment and some flexibility on pricing beginning to show through as buyers and sellers start to accept new asset valuations.

“We anticipate that assets previously withheld from the market in the hopes of better pricing will be brought to market at more realistic prices in the quarters ahead,” Nadji said.

Marcus & Millichap’s losses stand in contrast to earnings reports from other big brokerages. Colliers reported a slight increase in revenues in Q4, while CBRE reported revenue increases of around 9% and a $477M fourth-quarter profit.

But Marcus & Millichap is focused on the capital markets, which makes it more sensitive to real estate cycles than other publicly traded brokerage firms, which have more recurring revenues with property management and outsourcing businesses.