Colliers bosses to remain focused on cost control

Colliers’ global leadership team has said it will continue to focus on cost-saving measures for the rest of the year to counter ongoing declines in transactional revenues. Chief financial officer Christian Mayer told analysts earlier this week that Colliers made around 28% cost savings in Q2 after taking “aggressive cost-control actions across the company”, and is seeking similar outcomes for the third and fourth quarters. Revenue from the capital markets business plunged by 40% to $334.7m (£264m) in the six months ended 30 June. Mayer said the business has been positioning itself to deal with the decline in capital markets activity that started some nine months ago. Measures have included reducing headcount and producer support and administration roles, and managing discretionary costs relating to business, travel and conferences. He added that lower capital markets and leasing transaction volumes are expected to persist for the remainder of the year. Pandemic “playbook” Mayer added that the business is drawing its approach to cost savings from the “same playbook” it used during the pandemic, although it is a “slightly” different situation. “During the pandemic, it was actually much more black and white,” said Mayer. “Our people were at home. Transactions simply weren’t being talked about and weren’t being explored, so we made more dramatic cuts to those areas. “I think, from an overall perspective, the pandemic-era cuts were significantly more in dollars, but they were focused on the same areas of our transactional business.” Colliers chairman and chief executive Jay Hennick (pictured) said: “Let’s not forget the highly variable nature of our professionals globally around the world, that compensation adjusts based on their production. So we feel… this is a road we have been down several times before. “The structure of our business is quite unique in this respect. And I think leadership has consistently had the fortitude to act when times like these occur, and we are doing that and the results are showing up.” Signs of recovery Although transactional volumes are predicted to remain low for the rest of the year, Mayer said activity is likely to translate into transactions “towards Q4”. “The market has stalled,” said Mayer. “We are at a 10-year low – you have Germany, for example, down 68% year-on-year; the US down 65%. [But] we are seeing some good meetings starting to take place and investors wanting to test the market.” Hennick predicted that values will stabilise sooner than most people expect, with activity levels returning in 2024. “I’m hearing 2025, I’m hearing 2026. I can’t believe it would be delayed to that length of time,” he said. “I think you’re going to start to see activity in 2024, maybe even early 2024. There are funds out there that need to acquire. There are funds out there that need to dispose. You’re seeing Blackstone sell massive pieces of their large REIT to redeploy their capital. “I think it’s all over the place, frankly. And I think it’s going to be the more sought-after real estate assets, you’re going to see movement sooner than you think. “Of course, we would like to see it starting tomorrow. But the reality is, it’s going to be sooner than we think, because these assets are going to have to turn over. Real estate is a much more mature asset today than ever before.” Industrial and logistics outperform Mayer pinpointed industrial and logistics as the top asset class for investor demand, citing a “five-year boom” in the market, low vacancy levels and rental growth. Multi-family was also identified as a subsector with rent increases on the back of “over-demand” in several cities globally. Where office leasing is concerned, trophy assets with the best amenities, locations and tenants continue to be attractive investments, said Mayer. He added that alternatives such as student housing and data centres are also enjoying investor interest. “The problem is that it’s such a small pool of assets, but it’s very much in demand,” said Mayer. Geographically, the APAC markets were highlighted as the most resilient business, with Hennick calling it a “green shoot” of recovery. Leasing in the Asia-Pacific regions was up 24% year-on-year for Q2, with Australia highlighted as the main driver. Hennick said that while availability of capital remains tricky, he does “see a normalisation happening”, although there still needs to be some stabilisation in interest rates. “We need to see a change in mentality among sellers of assets and buyers of assets who are prepared to step up for some of the more quality assets that are available,” he said. To send feedback, e-mail pui-guan.man@eg.co.uk or tweet @PuiGuanM or @EGPropertyNews See also: Will it all come back in 2024? Photo © Colliers