Major commercial real estate brokerages say they are bracing for some tough months ahead before demand starts to improve later this year or early in 2024.

The firms reported year-over-year revenue declines averaging about 40% to 50% in the first quarter amid concerns about the stability of the banking system and other economic challenges.

Executives for Marcus & Millichap and Newmark, the last of the major real estate services firms to report first-quarter results, joined executives at CBRE, JLL and Cushman & Wakefield in agreeing that it will be at least until late this year until improvements in the economy could finally bring an uptick in leasing, sales and other commercial property activity.

The declining results of firms brokering real estate leases and sales underscored the effects of the liquidity crisis facing small banks and challenges in leasing and real estate lending as businesses face weakening global economic conditions.

“Although the timing is difficult to predict, we see record capital on the sidelines, and a return of multiple offers for appropriately priced assets,” Marcus & Millichap CEO Hessam Nadji said during the company’s call Friday.

The Calabasas, California-based investment sales brokerage’s financial results were affected by a steep drop in larger sale transactions, which had had previously recorded “exceptional growth” in the past few years, Nadji added.

Newmark, based in New York, reported a 24% decline in revenue to just under $521 million from the year-earlier quarter, including a nearly 53% drop in investment sales income to $72 million.

“With the market expectation of rate stability, capital markets activity should increase in the fourth quarter and continue through 2024,” Gosin said during the earnings call on Friday.

Toronto-based Colliers, meanwhile, cut its earnings expectations for the full year due to what its executives said will be a slow recovery in real estate sales and other capital markets transactions.

With the additional stress on the banking system and increasing limitations on debt availability, there’s more uncertainty around property valuations, CEO Jay Hennick said during the company’s earnings call.

“Since our initial outlook 90 days ago, we’ve seen higher interest rates and challenging debt markets impact transaction volumes,” Hennick said. “Lower transaction volumes are now expected to persist for the remainder of the year.”

Full-Year Earnings Gains

Despite the slow pace of recovery, executives for several brokerages said that by the time 2023 is over, they could see income gains for the full year compared with the prior year.

The companies attributed the improved full-year results to increases in property management, consulting and other fees from services not directly affected by the cyclical nature of real estate sales and leasing.

Executives for JLL, the world’s second-largest brokerage by revenue, reiterated their forecast from the Chicago-based company’s previous earnings call in February for an increase of up to 16% in adjusted earnings for 2023, barring an unexpected worsening of geopolitical or macroeconomic conditions.

Cushman & Wakefield, the third-biggest brokerage by revenue, forecast a 9% to 10% increase in adjusted income this year that assumes a mild recession, with no major recovery in commission revenue from real estate leasing and sales.

“We expect the near-term outlook to remain challenging,” said Cushman CEO John Forrester, who is slated to retire and be succeeded by company President and Chief Operating Officer Michelle MacKay. “However, an increasingly complicated economic and real estate environment is resulting in an ongoing flight to quality and we believe that diversified global service providers of true scale like Cushman & Wakefield are best positioned to successfully navigate through economic cycles for both clients and talent.”