Cushman & Wakefield

Cushman & Wakefield reported solid second-quarter results, highlighted by revenue and adjusted EBITDA growth of 11% and 13%, respectively, from a year ago, prompting management to raise full-year adjusted earnings per share growth guidance, at the midpoint, from 17.5% to 20.5%.

Why it matters: Despite solid results and raised full-year adjusted earnings per share guidance, shares fell by low single-digits after lagging stronger results from peers CBRE and JLL last week, since which the increasingly attractive operating environment was priced in. Leasing was a bright spot this quarter, as 27.5% growth from a year ago surpassed the 23.5% and 23.7% growth booked by CBRE and JLL, respectively, albeit off a lower base, though capital markets results disappointed, contracting 1.0% while CBRE and JLL grew 14.6% and 19.2%. The market share loss in US Capital Markets damps the near-term upside associated with the US commercial real estate maturity wall set to peak in 2027, especially because the weakness was exclusive to the Americas region, contracting 6% while EMEA and APAC grew 11% and 50%, respectively.

The bottom line: After digesting results, we are modestly raising our fair value estimate for no-moat Cushman & Wakefield to $15.00 from $14.80 due to higher near-term leasing revenue forecasts and, relatedly, improved near-term operating margins. We see shares as fairly valued. Our raised 2026 revenue growth estimate to 9.9% from 8.4% is exclusively due to faster leasing growth of 21.9%, up from 11.0%, as lackluster services and capital markets results led us to lower 2026 revenue growth forecasts to 6.6% and 7.7%, respectively, from 7.0% and 13.4%. The revenue mix shift improved 2026 operating margins, as a percentage of net revenue, to 7.6% from 6.3%, as the services business is materially lower margin than leasing, though normalization of the highly cyclical leasing and capital markets businesses leave our terminal margin assumptions largely unchanged.

We’re maintaining our fair value estimate for Cushman & Wakefield at $15.00, which corresponds to a 10.7 times 2026 price/earnings multiple. We use an 8.6% cost of capital in our valuation.

Our revenue forecasts now contemplate net revenue growing at an annualized rate of 4.3% over the next decade, up from 4.2%. While our forecasts already baked in long-term, steady tailwinds from a continuation in the flight to quality trend across the office and industrial sectors, and the subsequent increases in churn rates over the cycle, we are now seeing an acceleration in near-term momentum, with our updated forecasts now contemplating 2026 leasing revenue growth of 21.9%, up from 11.0%, and annualized growth over the next decade of 6.0%, up from 5.0%.

The offsets are lower growth across the capital markets and services business, with our estimates now calling for annualized net revenue growth rates of 4.4% and 2.8%, down from 5.0% and 3.2%, respectively. We believe that the large impending wall of commercial real estate loans maturing in 2027 will provide a meaningful short-term tailwind to the capital markets segment, but normalization will ensure that, as the most cyclically exposed segment, it experiences some inevitable downturns along the way. Further, Cushman & Wakefield has continued to cede market share in the capital markets space to larger peers like CBRE and JLL, which damps the near-term upside associated with the maturity wall. Turning to the services segment, the long-term tailwinds associated with an increasing percentage of corporate tenants shifting toward outsourcing to facilities management providers will inevitably taper off as this novel customer pool naturally shrinks. Further, we believe CBRE and JLL are simply better positioned to grow faster and capture additional market share servicing the facility and project management needs of large, multinational corporations, with our forecasts implying that CWK struggles to expand its share similarly, as evidenced by continually slower growth rates off a materially lower base.

Our more constructive view on near-term operating margins is driven largely by changes in the firm’s business mix as a result of our updated revenue growth forecasts. Specifically, our updated forecasts call for slower growth in the capital markets and lower-margin services business and slightly faster growth in the higher-margin leasing business, resulting in 2026 operating margins, as a percentage of net revenue, of 7.6%, up from 6.3%. Looking ahead, our terminal operating margin assumptions of 7.8% remain largely unchanged.

Our call for higher net investment is driven by slightly higher organic capital expenditure forecasts and higher bolt-on acquisition spending as the firm continues to bolster its capabilities and scale across major global metropolitan areas as it seeks to compete on more level footing with CBRE and JLL when winning global mandates to provide services to multinational corporate clients—efforts that are strategically cogent, but which we do not expect to materialize in significant market share capture or even similar growth rates to the firm’s larger peers. To help close the gap, particularly in 2028 and beyond after deleveraging the balance sheet, our forecasts now call for capital expenditure to grow over the next decade at an annualized rate of 12.7%.

Altogether, we forecast a 4.3%, 8.1%, and 9.1% ten-year compound annual growth rate in net revenue, operating income, and adjusted EPS, respectively.

We do not believe Cushman & Wakefield has carved out an economic moat, suggesting a lack of conviction that it can generate risk-adjusted economic profits over the next decade. Quantitatively, our view is corroborated by an average annual return on invested capital of 4.0% over the trailing decade, lagging our estimated 8.6% cost of capital, though we anticipate an uptick in the return profile over the decade to come as commercial real estate transaction volume normalizes following a challenging backdrop between 2022 and 2024. Operating as the third-largest commercial real estate, or CRE, brokerage firm in a highly fragmented global landscape, we believe there is meaningful separation between Cushman & Wakefield and its larger peers, CBRE and Jones Lang LaSalle, or JLL, manifesting in lower rates of servicing as a one-stop shop for large and multinational corporates, the most attractive clientele, and an inferior economic return profile.

Cushman & Wakefield segments its business for reporting by geographic region, though the firm effectively competes across the same business lines as CBRE and JLL, and we believe analysis by this structuring represents a better framework for decomposing the competitive positioning of the firm. While Cushman & Wakefield subdivides revenue within each geographic region by services, leasing, capital markets, valuation, and other, we believe the business mix can most aptly be divided into two buckets: services and advisory, with the advisory business spanning the leasing, capital markets, valuation, and other lines.

The services business comprises a property and facilities management business and a project management business. Each has structural features that can forge switching costs: multiyear contractual revenue, simplification through a single point of accountability across a diverse geographic footprint, and mitigating operational risk associated with provider transitions, particularly in industries with heightened workspace complexity, such as data centers and life sciences. That said, while Cushman & Wakefield is large relative to a long tail of over 100,000 CRE brokerage shops in the United States, its scale pales in comparison to that of JLL and CBRE, which poses headwinds as clients increasingly opt to consolidate these service provider relationships to streamline management oversight and obtain more consistent execution across markets.

Demonstrating this shift, we note how Cushman & Wakefield has contracted while CBRE has grown at a mid-teens annualized rate since 2022 off approximately double the base. Beyond difficulties experienced in isolation, we believe intersegmental interaction occurs as transactional advisory, property management, and project management each serve as a foot-in-the-door to initiate and grow client relationships across a consolidated platform designed to monetize the entire lifecycle of commercial real estate properties, implying that difficulties in one segment are likely to spill over elsewhere, albeit with a slight lag.

The leasing, capital markets, and valuation segments provide a comprehensive range of services and capital solutions across asset types, such as negotiating leases on behalf of corporate landlords and tenants, brokering investment sales, and providing a host of financing solutions. Operating in the highly fragmented industry of commercial real estate brokerage, Cushman & Wakefield is materially smaller than JLL, which is materially smaller than CBRE, forming an interesting backdrop where Cushman & Wakefield is orders of magnitude larger than the average CRE brokerage firm and still lacks the scale to truly compete with the peers its benchmarked most closely to.

As in investment banking, reputation is the ultimate risk reducer in CRE advisory when hundreds of millions of dollars are on the line, and the parallels do not end there. We believe the most advantaged CRE firms enjoy a difficult-to-disrupt flywheel effect: high-profile and lucrative deals are attracted to the company brand of the firm, which in turn attracts the most productive and talented brokers to work there. Though difficult to stop once in motion, the positive feedback loop is hard to set in motion, which has kept Cushman & Wakefield continually lagging CBRE and JLL in recruitment and deal-flow quality.

Further, the accumulation of proprietary data from constant participation across over 60 countries yields valuable deal information absent from deal comparables provided by data servicers like CoStar, such as bid histories, walked-away offers, off-market inventory, and private financing terms. Though advantageous when compared with the long tail of subscale operators, Cushman & Wakefield operates at a distinct disadvantage relative to CBRE and JLL, who run operations 1.6 times and 2.5 times larger, respectively, enabling a superior service offering for large and multinational corporates, culminating in operating margins that look closer to smaller peers than CBRE and JLL, as lower transaction-size deals are structurally less profitable.

Looking ahead, we believe the benefits associated with scale should push the fragmented CRE brokerage industry toward increasing consolidation over time, during which CBRE and JLL should continue to grow their respective shares of the pie meaningfully faster than Cushman & Wakefield, adding additional pressure toward the firm’s growth trajectory and return profile over the cycle. Further, increased adoption of artificial intelligence tools into the CRE workflow heightens industry uncertainty, particularly for players lacking advantageous network scope and deal pipelines composed predominantly of large, complex transactions.

In summation, Cushman & Wakefield appears on the outside looking in toward peers improving economic return profiles in a consolidating industry, which, in combination with an evolving technological backdrop, leads us to award Cushman & Wakefield a no-moat rating.

Achieving an investment-grade credit rating would translate to materially lower interest expenses on its future debt stack.

The trend of increased institutional ownership in commercial real estate could provide a higher floor to transactional volume over the cycle than we forecast.

Corporate outsourcing may present a larger growth runway for the property and facility management business than anticipated, maintaining elevated growth over an entire cycle.

Meaningful improvements in artificial intelligence and subsequent adoption in underwriting workflows could lead to fee compression in the advisory business.

AI-driven white-collar employment reduction could be more pronounced and swift than modeled, permanently reducing office leasing and advisory growth.

Inflation could prove to be more stubborn than anticipated, resulting in elevated interest rates and lower transactional volume.