C&W Looks to Make Up for $71M in Losses From Ailing Office Market


Cushman & Wakefield (CWK) is scouring its operation for savings after a rough six months, having identified where it can sock away $130 million by the end of the year as it faces revenue losses thanks to the country’s struggling leasing and capital markets sectors.

C&W saw an overall revenue decrease of 6 percent year-over-year after pulling in $4.7 billion in the first half of 2023, and its net losses amounted to around $71.3 million, company officials announced during C&W’s quarterly earnings call Monday night.

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Earnings before interest, taxes and depreciation at the brokerage decreased by 57 percent from the first half of 2022 to $207 million.

“We’ll be taking more intentional and holistic approaches to capital allocation as it relates to our updated strategy across all of our businesses with the knowledge that investment capital allocation to our business lines is not free and we must evaluate returns accordingly,” C&W CEO Michelle MacKay said during the call. “The health of our balance sheet and our liquidity profile will remain a top priority and as we fine tune our strategy we will look to improve our capital structure over time.”

The company’s struggles in the second quarter were not unexpected, as C&W saw the trend starting in the first quarter, according to Chief Financial Officer Neil Johnston. Service line fee revenue of $1.6 billion declined 15 percent compared to the same quarter last year, resulting in revenue for the quarter of about $2.4 billion, a decrease of about 8 percent.

Ailing performance in leasing, capital markets and valuation accounted for most of C&W’s losses as of June 30, with each taking a dive of 20 percent, 48 percent and 13 percent, respectively, the earnings report showed.

“During the quarter, we successfully executed on cost-cutting programs, we were more than able to fully offset inflation on prior investments realizing $49 million in savings in the first half of the year,” Johnston said. “Our teams have worked diligently to identify an additional $40 million in gross savings, bringing our expected 2023 in-year cost savings total to $130 million.”

With the capital markets tied to interest rates, MacKay believes there will be some relief in that sector soon. The Federal Reserve hiked interest rate to a 22-year high last week and MacKay expects another increase to follow, but that will be followed by a rate cut that should open up capital markets again.

As it faces a sluggish office market, the firm has seen an exodus of top talent in recent months, too. But MacKay dismissed the issue of broker retention when raised by an analyst during the call, essentially saying that the firm wasn’t competing to keep people who may not be giving it the competitive edge.

“I know there are some headlines out there, mostly negative, that have had a bit more traction than the actual fact, but if we have an individual or group that’s been working for us, we have somewhere between five to 10 years of financial history on that individual or team and we know if they’re enterprise negative or positive,” MacKay said. “So we have perfect information when we make a decision about who to offer retention to or who not to offer retention … People with certain skill sets become more or less valuable over time, we are very focused on retaining those individuals who will be part of future growth of the organization.”

Former head of commercial property management Drew O’Connor, who oversaw a team of 680 people, exited C&W this month for a position with Rudin.

In June, Robert Given took his team of top South Florida multifamily brokers including Troy Ballard, Zachary Sackley, Calum Weaver and Brad Capas to CBRE, CO reported at the time.

In April, retail broker Eric Le Goff left the firm to lead Retail by MONA’s luxury practice. Perhaps the biggest blow was in February when investment sales heavy-hitters Adam Spies and Doug Harmon left C&W for jobs at Newmark (NMRK).

Mark Hallum can be reached at mhallum@commercialobserver.com.