Marcus & Millichap Stung by 2023 Investment Sales Slump

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Episode Transcript:

Another commercial brokerage titan took a hit from 2023's investment sales downturn. Marcus & Millichap, the prominent LA firm, disclosed a $10.2 million loss over Quarter 4 - a reversal from $7.2 million profits just one year prior.

For full-year 2023, Marcus logged a $34 million net loss as revenues dropped 50% year-over-year. Their deal volumes also declined nearly 40%.

CEO Hessam Nadji attributed this performance to market turmoil - higher borrowing costs coupled with softening tenant demand created a disconnect between buyers/lenders and sellers on pricing, stifling deal urgency.

Headcount in investment sales and financing shrank over 6% - a reduction of over 100 brokers and debt experts, though Nadji noted some new hires in key markets.

Still, leadership expects a potential revival by mid-2024. CFO Steve DeGennaro admitted near-term "headwinds will persist" but said buyers and sellers may ultimately accept reset pricing, rekindling deal flow later this year.

CBRE projected a similar cycle outlook - a winter bottom, then renewed liquidity in summer. After initial sticker shock, Marcus believes postponed listings will trade at adjusted values.

However, while diversified brokerages like CBRE stayed profitable in Quarter 4, Marcus's focus on investment sales leaves them more exposed amid freezes versus outsourcing operations.

This is Tyler Cauble, Signing off