UBS Equities-US Real Estate Brokers _Will Fresh Uncertainties Derail the ...-114640954

ab10 April 2025Global ResearchUS Real Estate BrokersWill Fresh Uncertainties Derail the Recovery?Adjusting estimates across the CRE BrokersWe are adjusting estimates for the CRE Brokers ahead of 1Q25 reports. While we expect a robust 1Q, uncertainties have certainly increased, as 1) leasing activity is generally driven by economic trends and 2) capital markets businesses can be impacted by volatility and interest rate moves. That said, we continue to forecast a slow recovery for now (but much lower than in FY24), in line with company guidance. Importantly, outsourcing businesses should remain resilient with structural upside intact. We are lowering price targets for all three given broader multiple compression for the market. JLL remains our top pick for the upturn, but we certainly acknowledge that CBRE should be the most defensive in the group. Services growth should remain solid for JLL and CBRE and improve for CWKIn the 1Q, we forecast property, project and facilities management fees will increase 11% y/y for CBRE, 10% for JLL and decline 1% for CWK. Outsourcing businesses continued to be resilient in recent quarters with the exception of CWK which has been undergoing company specific issues. Following 16% growth in FY24 for CBRE's outsourcing businesses, +7% for JLL, and -3% for CWK, we forecast +10% in FY25 for CBRE, +6% for JLL and +3% for CWK.Capital markets business expected to continue to improve, but at a slower paceFor 1Q25, we estimate capital markets revenue growth of +12% y/y at CBRE , +16% y/y at JLL, and +5% y/y at CWK. Capital markets revenue growth ended last year on a strong note as the environment continued to improve, driven by greater interest rate stability which led to more institutional investors willing to transact. Industry data suggest that strength held up in 1Q25. We are raising our capital markets revenue estimates for all three companies. Following growth in capital markets revenue in FY24 of 15% at CBRE, 15% at JLL and 4% at CWK, we model FY25 up 8% at CBRE, +10% at JLL and +10% at CWK. Leasing revenue growth may slow in FY25 but remain strongFor 1Q25, we forecast leasing revenue growth of +7.5% y/y for CBRE, 7.5% for JLL and 4% for CWK. Leasing revenue growth decelerated in the 4Q at all three companies, but continued to show solid growth. Office leasing has been an area of strength, while industrial leasing continued to face headwinds. Following growth in leasing revenue in FY24 of 12% at CBRE, 11% at JLL and 7% at CWK, we model FY25 leasing revenue up 10% at CBRE, +9% at JLL and +6% at CWK. Figure 1: Commercial Real Estate Brokers Estimate Revisions1Q25 EPS EstimateStreetFY25 EPS EstimateStreetFY26 EPS EstimateStreetNewOldNewOld%ConsensusNewOld%ConsensusNewOld%ConsensusCBRE GroupCBRENeutral$130$146$0.83----$0.75$6.09$5.932.7% $5.92$7.23$7.141.3% $7.02Cushman & WakefieldCWKNeutral$9$14$0.02----$0.02$1.01$1.09(7.3%) $1.05$1.16$1.28(9.4%) $1.37Jones Lang LaSalleJLLBuy$305$340$2.24----$2.05$16.9