The main drivers for Newmark’s growth across our businesses are:
- Our investments in talent and the continued elevation of our brand in the U.S. and globally,
- The record amount of commercial and multifamily mortgages due over the next three years,2
- The significant amounts of institutional dry powder waiting to be deployed,
- The continued proliferation of new sources of capital such as debt funds and captive insurance companies,
- An improving interest rate environment and declining inflation,
- A healthy labor market paired with improving return-to-workplace metrics, and
- Strong consumer spending and business investment dynamics.
We expect these factors to drive our best-ever revenues and earnings once industry volumes normalize.
NEWMARK CONTINUES OUTPERFORMING THE INDUSTRY
Newmark has a long-term history of outperformance. From 2011 to 2023, we increased total revenues by a CAGR of 22%, growing faster than all of our public peers, who grew by an average CAGR of 12% over this period.3
The Company’s business model has proven resilient, as we improved our revenues significantly faster than our competitors in the peak market conditions of 2021. Since the second half of 2022, industry capital markets volumes declined meaningfully due to the rapid increase in interest rates and widening credit spreads.4 Newmark nevertheless continued to outperform in 2023’s more difficult market, as our total revenues declined by much less than our peers on average. In the first quarter of 2024, we outpaced the industry yet again. Our recent results were driven by market share gains in capital markets and leasing,5 solid improvements from our management and servicing businesses, and disciplined expense management.
SIGNIFICANT INVESTMENTS IN GROWTH
A key reason Newmark has successfully outperformed and gained market share is our proven ability to attract and retain6 the industry’s most productive and talented professionals. The recent slowdown in industry activity has afforded top producers time to consider where they want to spend their careers to maximize their potential earnings and professional satisfaction. Increasingly, they are choosing Newmark.
With Exceptional People, You Will Achieve Exceptional Results
Over the past five quarters, we have invested substantially more in hiring revenue-generating talent than at any comparable point in the Company’s history.7 In 2023, we added the top Capital Markets team in the U.S., who are based in New York, the largest commercial real estate market in the world. We also hired dozens of other industry-leading Capital Markets and Leasing producers across multiple property types, as well as top professionals in Valuation & Advisory and Property Management.
In 2024, we attracted one of the top multifamily GSE/FHA originators in the U.S., who will work closely with our preeminent U.S. affordable housing Investment Sales team, which we added earlier in the year. The Company also recently recruited some of the most prolific and experienced debt and structured finance professionals, as well as several of the most innovative and active U.S. leasing teams.
Ongoing Global Expansion
In March of 2023, the Company acquired U.K. based full-service real estate advisory firm Gerald Eve, which added management services, leasing, and a top three U.K. industrial investment sales platform.8 This acquisition helped the Company produce approximately 13% of its total revenues outside of the U.S. last year, compared with less than 1% in 2017.
Earlier this year, we opened a flagship office in France, continental Europe’s second largest transaction market. We attracted many of the most accomplished leasing and capital markets professionals in the industry, which further demonstrates the strength of our global brand. We expect to expand in key international markets across nearly all of our service lines.
Why We Attract the Best of The Best
We recognize that bringing an incredible roster of talented individuals together can result in an organization much greater than its parts. Remarkable people who are exceptional at what they do drive change and innovation. The unique personalities we attract build genuine and trusting relationships with their clients and colleagues.
What I have learned over the years is that as a company builds momentum, top professionals want to be a part of it. Simply put, talent attracts talent. Our best recruiters are often the professionals we have added in recent years, as they relay their ability to be more productive at Newmark. This is because we empower our team members with industry-leading technology and infrastructure, access to top-tier research, marketing, data analytics, and meaningful opportunities to cross-sell across our service lines. In addition, we offer a less bureaucratic platform where outstanding individuals can thrive in their respective disciplines.
Our philosophy is to embrace the entrepreneurial spirit while building a culture of collaboration. We have worked diligently to add the best talent with the specialized knowledge required in their respective verticals, which enables their teams to serve clients and strengthen their relationships.
Newmark Provides Clients with Innovative Solutions and Insights
Our growing roster of best-in-class professionals advise clients on their current needs while preparing them for the future with creative thinking and deep insights into dynamic market trends. While elsewhere in this document we highlight some of our recent high-profile wins, below are just a few of the innovative solutions we provide across our businesses.
- Our Loan Sale Advisory group is best known for its successful execution of the $60 billion Signature loan portfolio sale, which exemplified our ability to cross-sell and our strength in managing large and complex transactions.9 Our professionals continue to utilize their local market expertise, national presence, and global connections to help clients maximize cash returns on performing, sub-performing, non-performing, and classified loan sales, while customizing marketing strategies for particular opportunities.
- Our growing M&A Advisory and corporate Capital Markets offerings have participated in some of the largest recent real estate entity transactions. For example, we served as the co-lead advisor to Blackstone Real Estate Income Trust, Inc. ("BREIT") on its sale of Simply Self Storage to Public Storage for $2.2 billion.10 We also provide more bespoke solutions, such as structuring of sale leasebacks, build-to-suits, and monetization of existing net lease assets across nearly all property types.
- Newmark’s expanding debt, equity, and structured finance platform provides clients deep and unique insights into market dynamics, as well as access to a comprehensive group of capital providers. These include traditional lenders, such as banks, as well as emerging sources of capital, including private credit funds and captive insurance companies. We offer creative financing solutions including bridge loans, construction loans, credit facilities, joint venture equity, mezzanine debt, note sales and note financing, permanent loans, preferred equity, recapitalizations, and/or sales of partnership interest, as well as term loans.
- Newmark Valuation & Advisory's growing Bank Credit Risk Solutions group offers stress testing for loan portfolios, risk advisory services, and credit and insurance reviews for clients, including some of the world's largest banks. This expansive team of experienced commercial credit underwriters specializes in loan portfolio stratification, risk review, re-underwriting of loans and the implementation of loan workout strategies, having over the course of their careers guided banks through mergers and acquisitions, consumer and commercial loan due diligence, and numerous other compliance and risk challenges.
- In 2023, we more than doubled the size of our Loan Servicing and Asset Management portfolio to over $170 billion, which includes the acquisition of the balance of Spring11. This platform provides primary servicing for our GSE/FHA portfolio, limited and special servicing, and asset management for a wide range of commercial and multifamily loans. Our Loan Servicing and Asset Management platform, together with Newmark’s Investment Sales, Mortgage Brokerage and Debt Placement, Loan Sale Advisory, GSE/FHA origination, and Bank Credit Risk Solutions businesses, provide us with tremendous insights into commercial and multifamily lending and help us to better advise and cross-sell to our clients across multiple property types and service lines.
- Newmark’s expanding suite of industrial services provides a wide range of Capital Markets, Leasing, and Consulting solutions for investors and occupiers as they navigate the growth in data center utilization for artificial intelligence and hyper-scale uses; the increased use of cold storage and temperature-controlled facilities; the long-term secular evolution of e-commerce; and the dramatic rise in manufacturing investment in North America as companies rebalance supply chains to near-shore traditional and advanced manufacturing. This includes semiconductor, electric vehicle, clean energy, as well as aerospace and defense materials. In addition, our industrial capabilities are increasingly global in scope as we advise clients in multiple countries on nearly every continent with respect to a wide variety of assignments. These range from smaller transactions to helping them manage large and complex manufacturing projects and data centers.
- We offer an increasing number of technology products for our clients in conjunction with our GCS11 business, including Newlitic, an innovative technology solution that integrates enterprises’ real estate portfolio information into a single platform. Newlitic offers capabilities for multiple management reporting needs (including occupancy utilization, portfolio and lease administration, transaction management, capital projects, and facilities management) through customizable web dashboards. A related product, NewliticQuest, offers clients accelerated insights to develop strategic and tactical recommendations, inform business case development, and achieve optimal results for property portfolios.
A GENERATIONAL OPPORTUNITY TO INVEST IN GROWTH
We are at the beginning of a once in a generation opportunity for Newmark to grow its business. Unlike the unique challenges of the global financial crisis or the recent pandemic, we now face a more typical cyclical slowdown due to major central banks raising benchmark interest rates. One thing all cycles have in common is that they end. We expect industry volumes to rebound, which will be good for commercial real estate service providers in general, and for Newmark in particular. We expect transaction activity to gradually improve for several reasons outlined below.
Record Debt Maturities and Institutional Investment
Just as Newmark is taking advantage of market dislocations to invest in adding talented professionals, a growing number of investors are seizing upon a generational opportunity to acquire commercial real estate at attractive values. Real estate-focused institutions have accumulated a near record $400 billion of undeployed capital in closed-end funds. This is in addition to the significant amount of real estate held by other types of investors and owners, who hold over $13 trillion of investable global real estate assets. Moreover, institutions have nearly doubled their weighted average target allocations to real estate from 5.6% of their overall portfolios in 2010 to an estimated 10.8% in 2024.
In addition, there is approximately $4.7 trillion in U.S. commercial and multifamily mortgage debt outstanding. Of this, a record of more than $900 billion of such maturities are due in 2024 alone and $2 trillion is expected over the next three years.12 Of the latter, we believe that approximately:
- One-third are likely to result in a loan sale or property sale,
- One-third will need assistance with restructurings and/or recapitalizations, and
- One-third will require an advisor to help find new lenders.
- An improving interest rate environment and declining inflation,
As a service provider that does not own real estate, these maturities represent an enormous opportunity for us. This refinancing wave is expected to drive double-digit increases in U.S. commercial and multifamily originations this year and next.13
We anticipate the pullback in lending by banks and other traditional lenders to lead clients to seek our innovative financing solutions. These could include sourcing mortgages from a wide variety of lenders, as well as equity recapitalizations and joint ventures, loan sales, and property sales.
We Expect to Outperform When Activity Normalizes
We expect the wall of mortgage maturities and interest rate stabilization to lead to improved industry volumes in debt, followed by increased investment sales activity. We anticipate better office market leasing fundamentals as the recapitalization of properties at lower values leads to a more attractive market. We also continue to expect solid fundamentals for industrial and retail properties, which together represented approximately 41% of our Leasing revenues over the past twelve months compared with 27% in 2019.14 We believe that these factors, along with our leading presence in Capital Markets, will drive growth across nearly all of Newmark's service lines.
We believe the significant investments we have made in talent, data analytics, and technology make Newmark the real estate advisor of choice and uniquely position us to meaningfully outperform the industry. We believe that the resurgence of our Capital Markets businesses, combined with solid growth from Leasing, Management Services, and Servicing, will contribute to the Company surpassing our record 2021 results. Our target is to generate over $3 billion in revenues and more than $630 million of Adjusted EBITDA in 2026.
CONCLUSION
I am extremely proud of what we have achieved over the past decade and remain incredibly excited about Newmark’s future. On behalf of the entire leadership team, I thank our employees, partners, clients, and stockholders for their continued support and shared optimism for the Company’s growth for years to come.
Barry M. Gosin
Chief Executive Officer
NEWMARK
The endnotes to the above letter can be found prior to the 10-K in the Annual Report. These endnotes also contain additional information with respect to the accompanying charts, tables, and the case studies in the color section.