JLL posted a net loss in 2023 as heightened borrowing costs spurred a pullback in transaction activity, but executives say better days are coming, with buyers emerging as interest rates and prices stabilize.

The Chicago-based brokerage saw its net income decline by 64% to $225.4M for the full year, even as fourth-quarter revenue grew by 4% to $5.9B, according to its fourth-quarter earnings report. Fee revenue dipped 2% for the quarter and 11% for the year, in large part due to slower leasing activity.

The bid-ask spread narrowed amid a slowdown in interest rate hikes, prompting a slight uptick in transactions that should gain momentum in the latter half of the year, JLL CEO Christian Ulbrich said during the company’s earnings call Tuesday morning.

“Overall, there is a clear willingness in the market to trade,” he said. “We believe that will continue over the course of the year, obviously picking up more in the second half.”

The brokerage reported Q4 diluted earnings per share of $3.57 and $4.67 for the year, outpacing analyst expectations but still lower than with $3.62 and $13.27 posted in the prior-year periods.

Fourth-quarter and full-year leasing fee revenues declined by a respective 5% and 15%, driven mostly by smaller average deal sizes across nearly all asset types.

On the industrial side, midsized tenants are driving demand. And larger office transactions were signed in Q4, though the volume of those deals was 60% below pre-pandemic norms, Chief Financial Officer Karen Brennan said.

“We are seeing an uptick, and that is encouraging, but it certainly has some room to run,” she said.

Like most brokerages, JLL struggled through the last couple of years. The company has gone through several rounds of layoffs to offset shrinking profits, and earlier this month, Bob Knakal, one of its lead brokers, left the business.

Despite the downturn in leasing and investment sales, resilient segments of JLL’s business notched fourth-quarter revenue gains.

Property management delivered 12% revenue growth, while JLL Technologies saw a 14% increase. Work Dynamics, the corporate services arm of JLL’s business that helps clients with their office strategies, increased by 8%.

The company is also exploring potential mergers and acquisitions, focusing on companies that offer the same services as JLL but would touch various business lines, Ulbrich said.

“M&A pricing has come down a fair bit,” he said. “We have been consistently evaluating deals, and as we continue to do so, we are seeing more and more opportunities.”

There is reason for cautious optimism in 2024 as interest rates stabilize and prices normalize, Ulbrich said. More bidders have entered the market over the past eight months, which is an encouraging sign for transaction-based businesses, he added.

“We are beginning to see green shoots emerge in the commercial real estate market,” he said.