Dive Brief:
- Cushman & Wakefield increased revenue 11% year over year to $2.5 billion in the first quarter, led in part by higher facilities and project management revenue and growth in leasing in the Americas, the company announced Thursday in its earnings report.
- Service revenue grew 7% year over year thanks to “new wins and mandate expansions within facilities management,” while leasing grew across all segments at 17% year over year, particularly in the Americas office and industrial sectors like data centers, according to the firm’s earnings presentation.
- “New and modern facilities are winning. Larger [industrial] users are seeking modern logistics facilities to support automation [and] higher power requirements,” MacKay said. That’s becoming the primary driver of demand, and construction is down 60% from peak levels in 2022, which is going to help vacancy drift lower. Also importantly, the industrial leasing market is now 80% larger by dollar volume than it was pre-pandemic. As those leases roll over, transaction values are going to be significantly higher.”
Dive Insight:
Despite the record first-quarter revenue, Cushman & Wakefield reported a net loss for the period, down $12.6 million, compared with $1.9 million of income in the prior year’s Q1.
“The $14.5 million decline in net income was principally driven by [a] pension buy-out settlement loss, [accounts receivable] securitization servicing liability, lower earnings recognized from our equity method investments and cost inflation,” the company said. The settlement loss is related to a $16.6 million pension buy-out matter in the U.K., per the earnings report.
The growth in services resulted from clients increasingly consolidating towards providers that can deliver integrated multi-service capabilities at scale, MacKay said on an earnings call. Project management revenue rose 15% year over year, largely driven by international performance, she said.
The one area where the firm saw slightly slower services growth over the past couple of quarters has been in the Americas’ facilities services business, MacKay said. “That’s our janitorial business, where we've seen some contract transitions, but we feel very good about the work we’re doing there,” she said. “We are strengthening the platform and we like the pipeline that we’ve seen and what’s happening.”
She noted that another key area of strength in the U.S. is its global occupier services businesses that provides outsourcing for large enterprise clients. “We’ve had some very big, notable wins recently and [that] lends itself really well to cross-selling and growing the business,” she said.
In its leasing segment, Cushman & Wakefield also achieved its highest first-quarter revenue in company history, growing 17% due to broad-based performance across industries, deal sizes and geographies and “growth in 15 of our top 20 cities in the Americas,” MacKay said.
Americas leasing grew 19% year over year, with double-digit growth in core, mid-size and large leasing deals. Office demand remained solid, with particular strength in industrials like data centers, CFO Neil Johnston said on the call.
“Office was up 11% globally, performing especially well in the Americas, with gains across all deal sizes and particular strength in New York City, Northern California and Phoenix,” he said.
Demand on the quarter rolling net absorption exceeded 5.2 million square feet in the first quarter, the strongest level since the pandemic, MacKay said.
Industrial leasing revenue grew 25% with double digit growth in each of the firm’s regions, according to Johnston.
“The Americas benefited primarily from new business wins and expanded client mandates in our facilities management business,” he said. “We continue to move up the value chain with our clients.”
MacKay noted that subleased space is trending lower, down about 25% from the peak, reflecting businesses taking their space back. “We also have this really interesting supply dynamic, [which] exists in the industrial market as well, where the U.S. construction pipeline is 85% below its Q1 2020 peak,” she said. “The dynamic is driving demand into the best located, cloud-based space. There’s a bit of a scarcity play going on here as well. Lease terms are holding. … The fundamentals are aligning to really support sustained activity in the office leasing sector.”
The company has had success building out its leasing talent, with a significant number of recruits in office leasing and industrial leasing, MacKay said. “That’s been a consistent bright spot for us over the past year, so we expect to continue to do some really strong leasing there,” she said. MacKay noted the firm recently landed some teams in Boston and expects that fundamentals will continue to be strong in the U.S. industrial market due to minimal supply.
“For leasing and industrial in particular, demand is accelerating. In Q1, absorption in the U.S. was up 52% year over year,” she said. “So this is a great place to recruit.”
