CBRE Group : Expects 20-25% Reduction in Profitability Due to Capital Markets Recovery Delay

CBRE Group : Due to a capital markets recovery delay, Dallas-based CBRE Group expects a 20% to 25% reduction in profitability this year.

The global real estate service group predicts growth in loan servicing, property management, investment management, and workplace solutions this year.

In its latest quarterly financial report, the corporation reported considerably lower property leasing and sales profits than previous year.

CBRE CEO Bob Sulentic noted that GDP and employment growth exceeded expectations.

“However, the opposite was true with interest rates, where increases in the last 90 days and expectations that rates will end the year higher than anticipated last quarter pressured our business that is sensitive to commercial real estate capital flows, particularly our sales and financing businesses.

“We expect this pressure to continue,” he said. “We are also seeing signs in our own business that will lead to improved performance, likely starting next year.”

CBRE Group
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Despite the commercial property industry’s slump, CBRE officials expect record earnings next year.

In the last quarter, Americas property leasing revenue fell 22%. CBREindicated that global lease revenue was down across all key property types, especially office.

Americas property sales revenue fell 49% in the second quarter. U.S. commercial property acquisitions have dropped.

CBRE’s second-quarter net revenue was $4.5 billion, down 7% from 2022. The real estate company’s quarterly net income fell 58% to $201.4 million.

“We are beginning to see signs in our own business that will eventually lead to improved performance likely starting next year,” Sulentic told analysts in a conference call.

“Our investment management team responsible for capital raising has noticed a definitive change in investor sentiment in the last 90 days.

“Many of these investors remain cautious but are now exploring how to take advantage of the reset in pricing as they develop their 2024 commitment plans.”

Sulentic said CBRE expects a modest recession.”However, we now think that the recession will start at least one
quarter later than we thought before, and that the economy will start to recover next year,” he said.

We know that investors keep an eye on the U.S. office market and how much business real estate loans banks have.

“And we think things will sort out more with the banks now, and they’ll have debt available,” Sulentic said. “So we’re feeling better about where things are going, but we’ll probably see that next year.”

Trammell Crow Co., owned by CBRE, reported a $8.7 million operating loss in the second quarter

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