Property Brokers Slump With High Borrowing Costs Weighing on Deals - BLOOMBERG
SEPTEMBER 14, 2023
(Bloomberg) -- Shares of commercial real estate brokerages dropped Wednesday as higher interest rates and strong economic data risk adding more pressure to transactions.
CBRE Group Inc. shares dropped the most since June 2020, falling 8.1% Wednesday at 2:26 p.m. in New York. Jones Lang LaSalle Inc.’s stock was down nearly 10%, while Cushman & Wakefield Plc shares declined 6%.
Commercial property brokers have been grappling with a slower market as higher rates weigh on borrowers. Recent economic data pointed to underlying inflation running at a faster-than-expected pace in August, raising the risk that the Federal Reserve will hike again this year.
Emma Giamartino, CBRE’s chief financial officer, said Wednesday at a Barclays Plc conference that the market has become more challenging as rates rose recently. The company is now expecting its earnings per share to fall in the “high-teens range” in the three months ended September compared with the second quarter, she said. Analysts had expected adjusted EPS to remain flat.
“The recovery clearly has been pushed back,” Giamartino said.
The market will also face more uncertainty given the increased potential for more rate hikes, Keefe, Bruyette & Woods analysts said Wednesday in a note.
“Higher Treasury rates in August appear to be having an impact on the CRE market and therefore pushing out volume expectations for recovery, which should negatively impact the CRE brokers,” KBW analysts Jade Rahmani, Ryan Tomasello and Jason Sabshon said.