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CBRE Posts Year-Over-Year Earnings Decline; Plans to Invest in “Secularly Favored” Businesses
In a harbinger of what to expect from the major commercial real estate services firms this earnings season, CBRE Group on Thursday reported double-digit year-over-year declines in core adjusted net income, core EBITDA and core EPS for 2022’s third quarter. By business segment, Q3 results were less uniform than those topline figures might indicate, with the firm citing areas of strength during the quarter.
“In contrast with last year’s strong third quarter, the capital markets environment weakened materially as the quarter progressed,” CEO Robert Sulentic said on Thursday’s earnings call. “Property sales performed in line with expectations in July and August; however, most debt and equity capital sources moved to the sidelines after Labor Day, causing both sales and loan originations to fall sharply.”
Unlike the capital markets segment, leasing performed well, Sulentic said. “Revenue was up across all property types, led by office.”
Additionally, said Sulentic, “many parts of our business are either cyclically resilient or benefit from secular tailwinds. These businesses, including occupier outsourcing, valuations, property management, loan servicing, investment management and project management, posted solid results for the quarter.
“We plan to further capitalize on our balance sheet to invest in secularly favored parts of our business that add differentiated capabilities,” he continued. “Over the past two years, project management, flex office space, renewable energy and industrial and multifamily assets have been at the forefront of those efforts.”
Simultaneously, the company is looking to trim costs. “We are targeting over $400 million of cost reductions due to management actions,” CFO Emma Giamartino said Thursday. She added that approximately $300 million of targeted cost reductions would be permanent, “with the vast majority coming from headcount reductions.”
CBRE was the first among publicly traded services firms to report its Q3 results. Newmark’s earnings announcement comes out on Oct. 28, with JLL, Colliers, Marcus & Millichap and Walker & Dunlop all reporting in early November.
