Dive Brief:
- Cushman & Wakefield grew revenue 11% year over year to $2.9 billion in the fourth quarter, bolstered by strength in services and leasing revenue, the company said in its earnings report, released Thursday.
- In the Americas, leasing revenue grew 5% year over year, reaching its highest quarterly level ever, the company said in its earnings presentation. In the Americas, services fee revenue grew 2% to $624 million, driven by improvements in facilities management, property management and project management.
- “Our leasing business continued its consistent and solid performance … and our services businesses continue to make strides on new business wins, retention and moving up the value chain,” CEO Michelle MacKay said on the company’s earnings call.
Dive Insight:
Cushman & Wakefield’s growth in leasing in the Americas was the result of “strength in office and industrial, driven by higher deal count and increased revenue per lease as clients continue to prioritize a high-quality employee experience,” CFO Neil Johnston said. Industrial demand centered on large modern facilities, with the market seeing substantial demand for sites over 500,000 square feet that can support automation and higher power requirements, he said.
Industrial leasing in the Americas was up 10%, due in part to clients looking for quality space, Johnston said. Trends in e-commerce and last-mile delivery are expected to keep growth strong, he said.
The company’s project management business is well-positioned in the industrial sector as well, he said. Offices are a growth area, too. “Across both office and industrial asset classes, we continue to see opportunities for our project management businesses as occupiers and investors seek to elevate the quality of their properties to meet evolving market demand, particularly as new construction activity declines,” he said.
The company saw success from de-siloing operations across its business, according to MacKay, who noted that the company recently won a large integrated portfolio management mandate from an international corporation as a result of success in these areas. “We worked with the client not just to win their business, but to provide integrated execution across all of their locations. We displaced the incumbent,” she said.
The company’s investment in AI is expected to help position it going forward, she said. “Make no mistake, AI will create winners and losers,” she said. “Winners will be trusted partners that provide advisory-led, relationship-driven solutions to their clients for complex problems. They will be de-siloed integrated enterprises with open data and information flow. And most importantly, they will have proprietary data at scale that crosses both the advisory and services businesses.”
In response to a question on the earnings call, MacKay said she doesn’t expect AI to have negative impacts on its office leasing and brokerage operations. “We believe the concerns about AI disintermediating the commercial real estate brokerage on [the] whole are materially overstated,” she said.
Large, complex, negotiation-driven decisions are present in both large and mid-sized commercial real estate deals, she said. “And in each case, there's significant financial and operational risk to those individuals signing those leases,” she said. “We believe that AI is absolutely going to enhance underwriting or market intelligence, efficiency, but it's far more likely to augment a trusted adviser than replace them. Think about making a 5- to 10-year decision. Think about the financial impact of that on a company and as to whether or not they would turn that decision over to AI. We do not believe that to be the case.”
The office segment makes up about 55% of the company’s leasing business and 21% on the capital markets side, making up just over 40% of its overall business, Johnston said. MacKay added that Class B space will be the most impacted by AI, but said Cushman & Wakefield generally does not work in that space.
While there are increasing delinquencies in real estate, the company is relatively insulated from that, in part because it’s not a property owner, MacKay said. “The most important driver of our results is really velocity,” she said. “If the increase in delinquencies leads to more buildings changing hands and a bit more price discovery, that’s a net positive not only for our brokerage business, but also for our service business as this means they’ve got the opportunity to manage buildings as they change hands.”
