Savills has said its performance for 2023 will be “in line with the expected range of outcomes”, despite a “significant reduction” in transactions.
Analysts have predicted the firm will report underlying profit before tax for the year of between £85m and £97.1m, with an average of £91.3m.
In a year-end trading statement published this morning, Savills said: “Throughout the year, real estate markets across the globe have been challenged by significantly increased interest rates, geopolitical events and, on a more asset-specific level, uncertainties over the future role of offices and the valuation of existing stock in the era of sustainability.”
It went on to say: “These factors together with certain location-specific issues significantly reduced transactional activity in global markets during the year.”
The regions worst affected, it said, were North America, Greater China, Australia and Northern Europe, particularly its largest markets of Germany and France.
Savills said global market conditions had remained “extremely subdued” for “longer than originally anticipated” at the start of 2023, which resulted in the group’s transactional businesses experiencing a significant reduction in profit for the year.
It expected market liquidity to improve in H1 2024 as lenders exercise security rights. This would boost transaction volumes, it added.
Savills acknowledged that its performance would not have been in line with expectations had it not been for its “less transactional” service lines. These continued to provide a resilient earnings stream, with the group’s consultancy and property management businesses performing well, underpinning Savills’ overall performance.
The firm was cautiously optimistic for the year ahead. “Challenging macro conditions are expected to continue for some time,” it said. “However, most markets appear to be either at, or past, the moment of peak uncertainty, with sentiment turning towards reductions in the cost of capital being likely during 2024.”
It added: “We believe that H1 2024 will see underlying market improvements, which should set the course for broader recovery in most of our markets during the second half of the year.
“This, together with the benefit of our targeted restructuring programme, should lead to substantive overall improvement in performance in 2024 and set the foundation for further improvement thereafter, when the group’s performance should more clearly reflect our globally diversified and strengthened position in many markets.”
Savills intends to report its full-year results for 2023 on 14 March 2024.
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