It is earnings season again and two of the main public brokerages, JLL and Marcus & Millichap just had their earnings calls on Wednesday and Thursday respectively. While they both showed significant revenue growth they both were on pace to be very near their last years’ numbers.
The two firms are quite different, mind you. JLL is a huge global leasing and capital market brokerage. They saw good growth in the Americas and Asia Pacific but were hurt by slowing volume in “EMEA” (Europe, the Middle East and Africa). They are one of the leaders in the industry but reported only spending $6 million on technology, mostly on the patent for their Blackbird intelligence tool. While this much-anticipated tool could help their team get ahead, the spend does seem a little low for a company that earned $1.5 billion in revenue this quarter alone.
Marcus & Millichap is focused almost exclusively on the US market. Their revenues increased 10% from last year to $199 million. 55% of their transactions were in the western region and multifamily accounted from 52% of all of their deals. The majority of their growth came from the Private Client Market segment, something that they are keen to increase for the second part of the year.
Both of these companies increased their profitability, mostly due to the tax cuts enacted this year. While they still see significant growth in their near future they did warn of “slowdown in market sales in the short- to mid-term in view of a maturing cycle, rising interest rates, bid-ask spread gap between buyers and sellers and economic trends.”
Public commercial real estate brokerages have been having a great year with around 50% growth for both companies. But, investors felt spooked by even these substancial gains from both companies due to the seemingly slow future growth potential and the prices of both companies dropped around five percentage points after each of their earnings reports. It seems like there are still good times ahead but the wild climb might be about to come to an end.