Thursday, February 17, 2011

Updated: CRE Brokerages Report Strong and Accelerating Leasing, Sales Growth In 2010

"A sign of improving commercial real estate market conditions around the globe, the industry's two largest global property services companies reported solid results for the last quarter of 2010.
One group reported a more modest 10% boost in revenue and FirstService Corp., saw total revenue jump about 18%, strengthened by a 30% boost in CRE transaction revenue.

Revenues reported by CBRE and JLL from sales, leasing and other business operations blew past Wall Street projections for the fourth quarter and for the full year. Stepped-up transaction activity across the CRE spectrum lent some octane to the all the publicly traded companies in the CRE services space.

Santa Ana, CA-based Grubb & Ellis reported a 10% rise in revenue in the fourth quarter to $163.5 million while swinging to a net loss of $10.7 million. However, the company narrowed its loss for the year from $78.8 million in 2009, or $1.27 per share, to $66.8 million, or $1.21 per share, in 2010.

Improving real estate conditions led to sales revenue growth of 96% and growth in leasing revenue of 36% over the year-ago period. GBE's Transaction Services business had a very strong year and strong quarter.

Jones Lang LaSalle swung from a loss of $4 million, or 11 cents, in 2009 to a net profit of $154 million, or $3.48 per share, driven by a record $2.9 billion in revenues for the year. More than half of JLL's profit came in the fourth quarter, with net income rising 62% to $84 million, or $1.91 per share. That compares to $52 million, or $1.19 per share, in the same quarter a year ago.

CB Richard Ellis (NYSE: CBG), meanwhile, enjoyed "undoubtedly one of the best years in CBRE's 100-plus year history." The Los Angeles based firm reported a 48% jump in the fourth quarter profit to $95.1 million, or 30 cents a share, while revenue rose 27% to a higher-than-expected $1.7 billion.

Virtually all the firm's regions posted double-digit growth in almost every business line. Only development services, which declined 20% off a low base during a record-low year for new supply, failed to achieve a quarterly boost.

CBRE's investment sales jumped up 40% while revenue from leasing rose 35%, fueled by a very strong 45% hike in the Americas. The strength of Class A property sales coupled with volume increases in other building classes resulted in accelerating fourth-quarter growth, the company said. Strong capital markets activity and improved lending conditions brought increases to the firm's appraisal and valuation, outsourcing and commercial mortgage segments.

"As dire as things appeared two years ago, they now seem equally positive and exciting. We’re at that point in the cycle when all fundamentals are positive and rapidly improving and when everything seems possible," White said during the company's fourth-quarter earnings call with analysts.

"Our strong performance in 2010, and the underlying momentum in the business, increases our confidence that we are in the early days of what ought to be a protracted and healthy recovery and expansion cycle in commercial real estate," White said. "This firm ... has never been better positioned to exploit a recovering marketplace."

Meaningful growth will continue in 2011, though not likely at last year's fast pace, and investment sales and leasing should continue to show year-over-year improvements, CBRE said.

The CBRE chief executive said the company strengthened its balance sheet in the fourth quarter, which "gave us enormous amount of capacity to make acquisitions and to take advantage of this marketplace."

The market cycle has brought "once in a lifetime" opportunities, especially the ING acquisition in the investment management space, White said. Other historic opportunities will come in the more traditional multi-service platforms in the commercial real estate services, he added, noting "this downturn wreaked a lot of havoc and a lot of pain on some of the smaller firms."

JLL revenues rose 17.3% to $956 million in the recent quarter from a year earlier. Leasing, which makes up the biggest slice of JLL's revenue, jumped 24% while property and facility management revenue increased 9.2%.

Mainly on the strength in its commercial real estate services segment, Canada-based FirstService Corp. narrowed its quarterly loss in the fourth quarter to $3.7 million, or 12 cents a share, from $9.3 million, or 40 cents a share, in the same period last year.

Overall revenue rose 18.5% to $552.1 million, while CRE Services revenues, constituting nearly half of all revenue, rose about 30% to $268 million. Colliers saw increased transaction activity in the Americas and Asia Pacific regions. "

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