Cushman & Wakefield Q3 2024 Earnings Results & Report

Cushman & Wakefield EPS Results

• Actual EPS: $0.23
• Consensus EPS: $0.21
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: $0.21
• EPS Beat Rate: 8 of last 8 quarters

Cushman & Wakefield Revenue Results

• Actual Revenue: $2.34 billion
• Expected Revenue: $1.61 billion
• Beat/Miss: Beat by +$732.82 million
• YoY Revenue Growth: +2.50%

Cushman & Wakefield (NYSE:CWK) (NYSE: CWK) is a global commercial real estate services company that advises property owners, occupiers, investors and developers. Its services cover office, industrial, retail, hospitality, multifamily and other commercial property sectors.

The company provides leasing and tenant representation, capital markets and investment sales, valuation and advisory services, property and facilities management, project and development services, and consulting. Cushman & Wakefield also supports businesses with workplace strategy, portfolio planning and other real estate-related services.

The company traces its origins to 1917, when Cushman & Wakefield was established in New York. It serves clients through operations across major real estate markets in the Americas, Europe, the Middle East, Africa and Asia-Pacific. Cushman & Wakefield became a publicly traded company in 2018 and is headquartered in Chicago, Illinois.

Cushman & Wakefield Q3 2024 Earnings Call Transcript

Key Takeaways

• Q3 marked our 4th consecutive quarter of leasing growth with 13% revenue increase (Americas leasing up 16%)—highest since Q2 2022.
• Capital markets revenue in the Americas returned to growth (+2% in Q3) for the first time since Q2 2022, and management forecasts ~20% year-over-year growth in Q4.
• The company fully extinguished $200 million of 2025 debt maturities six months ahead of plan and repriced $1 billion of 2030 debt at 50 bps lower, bolstering the balance sheet.
• Free cash flow rose to $187 million in Q3 (vs. $174 million a year ago), with YTD free cash flow up $146 million, enabling accelerated investments while hitting deleveraging targets early.
• Services revenue was flat (-2% reported) in Q3; management maintains 2024 flat organic growth guidance and expects to return to mid-single-digit growth in 2025.

Presentation

[Operator]

Good day, and welcome to Cushman & Wakefield's third quarter 2024 earnings conference call. All participants will be in listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Megan McGrath, head of investor relations. Please go ahead.

[Megan McGrath, Head of Investor Relations at Cushman & Wakefield]

Thank you, and welcome to Cushman & Wakefield's third quarter 2024 earnings conference call. Earlier today, we issued a press release announcing our financial results for the period. This release, along with today's presentation, can be found on our investor relations website at ir.cushmanwakefield.com. Please turn to the page in our presentation labeled "Cautionary Note on Forward-Looking Statements." Today's presentation contains forward-looking statements based on our current forecasts and estimate of future events. These statements should be considered estimates only, and actual results may differ materially. During today's call, we will refer to non-GAAP financial measures as outlined by SEC guidelines. Reconciliations of GAAP to non-GAAP financial measures, definitions of non-GAAP financial measures, and other related information are found within the financial tables of our earnings release and the appendix of today's presentation.

[Megan McGrath, Head of Investor Relations at Cushman & Wakefield]

Also, please note that throughout the presentation, comparisons and growth rates are to the comparable periods of 2023 and in local currency unless otherwise stated, and with that, I'd like to turn the call over to our CEO, Michelle MacKay.

[Michelle MacKay, CEO at Cushman & Wakefield]

Thank you, Megan. This quarter, we continued our track record of successful execution against our goals, driving top-line growth in targeted investment areas, continuing to deliver strong free cash flow conversion, and focusing on value creation through deleveraging and seeding for growth. This quarter also marks an inflection point across many areas of our business. Over a year ago, we began to make strategic, targeted investments in leasing, informed by our view on the most promising opportunities across asset classes and geographies. These investments have translated into clear and measurable results. The third quarter marks our fourth consecutive quarter of year-over-year leasing growth and our highest leasing growth since Q2 2022. We have also reported the first quarter of capital markets growth in the Americas since the second quarter of 2022. We are seeing a broadening of capital markets activities in the market and increased optimism amongst buyers and sellers.

[Michelle MacKay, CEO at Cushman & Wakefield]

The Fed rate cut in September and actions by the central bank outside of the U.S. have been important first steps in the revitalization of the capital markets. The further easing of monetary policy should continue to catalyze growth in the coming quarters. We also achieved an important milestone in reducing our leverage. In October, we fully extinguished our roughly $200 million in 2025 debt maturities, as we had pledged to do, well ahead of schedule. This was made possible by the outstanding work of our global teams to drive free cash flow. Solidifying our balance sheet and improving our cash flow were key early priorities in our strategy to position the company to take full advantage of future growth opportunities, and we executed on this priority six months ahead of plan.

[Michelle MacKay, CEO at Cushman & Wakefield]

Looking forward, leverage reduction will continue to be an important part of our capital allocation strategy, but as we shared with you last quarter, we have already begun accelerating our growth investments as we pivot to more offense. Now, I'll turn the call over to Neil for a review of the financials, and then I'll come back to share a bit more about how we are positioning strategically for the future.

[Neil Johnston, CFO at Cushman & Wakefield]

Thank you, Michelle, and good afternoon, everyone. Our third quarter results highlight improved momentum in several areas of our brokerage business, as well as our continued commitment to strengthening the balance sheet and protecting margins as we accelerate our growth investments. Turning to our quarterly results, service revenue for the third quarter increased by 3% year-over-year. Leasing revenue increased for the fourth consecutive quarter, and we experienced positive capital markets revenue growth in the Americas for the first time since the second quarter of 2022. Adjusted EBITDA of $143 million declined 5%, driven primarily by the impact of our recent services divestiture, as well as roughly $20 million in higher compensation costs compared to the prior year. On a year-to-date basis, adjusted EBITDA of $360 million is up 1% versus last year. Adjusted EPS of $0.23 is $0.02 higher than last year, benefiting from interest and tax savings.

[Neil Johnston, CFO at Cushman & Wakefield]

Taking a closer look at our service line results, our leasing business continues to perform at a high level, with revenue growth of 13% in the quarter. Leasing strength remains largely global in nature. Americas leasing was up 16%, with double-digit growth in both office and industrial. APAC leasing grew 13%, driven primarily by strength in India and Japan. EMEA leasing, while down 8% in the quarter, remains up 5% for the year, which we believe is indicative of a relatively stable market. In capital markets, we saw a return to growth in the Americas for the first time in nine quarters, with revenue up 2%. We experienced growth in office, industrial, and retail transactions during the quarter. Overall, sentiment has improved in the past several months, and while some market uncertainty persists, we feel confident that we've passed the floor in U.S. capital markets activity.

[Neil Johnston, CFO at Cushman & Wakefield]

Looking internationally, EMEA capital markets revenue declined 5%, as the market continues to experience some lumpiness on the road to recovery. Year-to-date, EMEA capital markets revenue has grown 3%, as fundamentals continue to improve gradually. APAC capital markets revenue declined 44%, principally due to the deal timing and strong third quarter in the prior year. Our pipelines in this region remain strong, supported by positive secular trends, and we expect a rebound in activity for the region in Q4. Turning to services, revenue growth was up 1%, excluding the impact of the divestiture, or down 2% as reported, in line with our expectations. In APAC, services revenue increased by 6%, as facility services and project management in India and Australia continued their momentum, spurred by investment into the region. In EMEA, we've continued to focus on margin by restructuring our fixed-price design and build business.

[Neil Johnston, CFO at Cushman & Wakefield]

Our transitional work on that business is essentially complete, and we expect to return to growth in the fourth quarter. In the Americas, services revenue was up 3%, excluding the divestiture, or flat as reported. Facility services and property management grew, while project management declined, as office expansion and renovations continued to be delayed. We remain highly focused on re-accelerating growth in our services platform in 2025. Turning to cash flow, free cash flow for the quarter was $187 million versus $174 million in the third quarter of last year. Our year-to-date free cash flow continues to compare favorably to 2023, improving by $146 million, and our trailing 12-month free cash flow has grown by approximately $100 million.

[Neil Johnston, CFO at Cushman & Wakefield]

Our free cash flow improvements this year have enabled us to execute on our deleveraging plan well ahead of schedule, as well as begin incremental investments to accelerate growth for 2025 and beyond. During the quarter, we repaid $50 million of term loan debt due in 2025, and subsequent to quarter end, we repaid the remaining $48 million, fully extinguishing our 2025 maturities. We also completed another successful repricing of $1 billion of term loan debt due in 2030, lowering the applicable interest rate by 50 basis points. Lastly, moving to our four-year outlook. On the revenue side, we're raising our 2024 leasing revenue growth expectation to mid-single-digit growth from low to mid-single-digit growth, primarily based on the third quarter's strong performance. We continue to expect capital markets revenue to improve sequentially and expect fourth quarter revenue growth of approximately 20%.

[Neil Johnston, CFO at Cushman & Wakefield]

In services, we continue to forecast flat organic revenue growth in 2024, with a target of returning to mid-single-digit growth in 2025. On cash flow, we expect to finish the year within our previously stated 30%-40% free cash flow to EBITDA conversion target. For reference, that translates to a roughly 80% free cash flow to adjusted net income conversion. In conclusion, we are extremely pleased with our continued execution against our strategic priorities. At the beginning of the year, we outlined our 2024 financial strategy to reinvest cost savings into the business, protect margins, and position the company for growth. Year-to-date, adjusted EBITDA margins are up slightly, brokerage revenue is up 3%, and free cash flow has expanded by over $145 million. We completed three debt repricings this year and fully prepaid our 2025 debt maturities, solidifying our balance sheet as we focus the company on growth.

[Neil Johnston, CFO at Cushman & Wakefield]

With that, I'll turn the call back over to Michelle.

[Michelle MacKay, CEO at Cushman & Wakefield]

Thanks, Neil. Many of you have asked for more detail on the outcomes of the strategic work we have engaged in over the past year. I thought I'd give a few examples to help demonstrate the drivers of our recent success, as well as where we see opportunity. What you'll hear is that the themes of our work have been interconnectivity and rigor. And when we combine investment dollars with analytics, accountability, focus, and an empowered team, we are winning. For example, our multi-market account team has seen incredible success this year, partnering with our internal data analytics and services teams to provide unmatched integrated services to mid-sized companies that are looking for advisory solutions and brokerage execution. Our RFPs are up over 50% in this year. Internally, part of our roughly $145 million improvement in free cash flow this year came from identifying opportunities to improve receivables collections.

[Michelle MacKay, CEO at Cushman & Wakefield]

We created cross-functional brokerage and finance teams, which broke down internal silos to get the work done. Additionally, we are making targeted investments to connect talent, data, and technology across our platform to drive both efficiencies and revenue opportunities. For example, we have identified opportunities for meaningful labor management improvements, especially in our services businesses. Strengthening these capabilities allows us not only to better manage costs, but also enhance our global platform offerings. With a focus on talent, we have already achieved a 260 basis points improvement in top talent retention over the past year. Looking forward, our capital allocation priorities will be focused on three main categories. One, funding and fueling our brokerage business while leaning into the capital markets recovery. Two, re-accelerating services revenue and profitability through organic investments and tuck-in acquisitions. And three, we will continue to deleverage opportunistically in balance with our growth objectives.

[Michelle MacKay, CEO at Cushman & Wakefield]

As a company, we continue to mature, and with a more diligent and focused operational mindset, we are uncovering opportunities to fully optimize our operations and go-to-market strategies. This, in turn, is creating optionality for growth, and we are more energized than ever about where we can drive this business in the future. Now, I'll turn the call over to the operator for your questions. Operator?

[Operator]

We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. Please limit your questions to one and one follow-up. If you have additional questions, you may rejoin the queue. Our first question today is from Steven Sheldon with William Blair. Please go ahead.

[Stephen Hardy Sheldon, Partner, Equity Research Analyst at William Blair]

Hey, thanks, and really nice results here. I wanted to start with a clarification question. On 20% growth for capital markets in the fourth quarter, is that year-over-year growth or sequential?

[Neil Johnston, CFO at Cushman & Wakefield]

Yeah, that's year-over-year growth, Steven.

[Stephen Hardy Sheldon, Partner, Equity Research Analyst at William Blair]

Okay, great. Just wanted to make sure. And then in services, I think you talked last quarter about confidence about getting back to mid-single-digit organic growth next year in 2025. So just curious, what's your level of confidence now? How has that changed? And what are some of the factors that investors should be thinking about that will help you get to drive that acceleration?

[Neil Johnston, CFO at Cushman & Wakefield]

Sure. I'm happy to take that, Steven. Look, we continue to feel very good about re-accelerating growth based on what we've seen in each of our businesses. The best way to think about it is to sort of break it up into each of the pieces, and that hopefully will help you understand exactly where we're working. So one of the key components is facilities management. This is our largest business in the APAC region, and we're very strong there. On a year-to-date basis, that's up 7%, and that business continues to perform very well. We're expanding our client base there in all the regions. And as an example, we are the largest facilities management provider in Singapore, which is one of our key markets. If we look at our facilities services business, that too is growing.

[Neil Johnston, CFO at Cushman & Wakefield]

It's growing in the low single digits, but we feel very confident we can grow that organically as we look forward. We've done a lot of work on establishing healthier contracts in that business, and we've started to feel the impact now, and our business development pipeline there is strong. The other business that we are most excited about is our Global Occupier Services business. That's had some really nice wins recently, and we see a lot of potential in fully integrating our businesses with the GOS business. That business is more longer-term, so that will take longer to translate the wins into the positive revenue growth, but certainly an area that we are very, very focused on, and we see a nice growth path there. And then property management and project management, those have slowed a little bit more than expected this year.

[Neil Johnston, CFO at Cushman & Wakefield]

It's primarily in multifamily, and it relates also to project management. That business, the project management side of the business, tends to be shorter-term in nature, and so that will give us a lift as we start seeing stronger leasing in capital markets, and then our property management business is a business that has just done exceptionally well. The pipelines there are also good, so overall, we see tremendous opportunity in the services business, and as we look at pipelines, 2025 will be a key year for that growth to start happening.

[Operator]

The next question is from Ronald Kamdem with Morgan Stanley. Please go ahead.

[Ronald Kamdem, Managing Director, Head of US REITs and CRE Research at Morgan Stanley]

Hey, I had the same question on the capital markets, 20% growth, maybe asking it a different way because I think it does imply some sort of re-acceleration here. Just what is it? Is it the pipeline? Is there a larger deal in there? Is there a geography? Just sort of any color on how, one month into the quarter, that 20% sort of came about would be helpful.

[Neil Johnston, CFO at Cushman & Wakefield]

Yeah, so as we look at capital markets, we're looking at the pipeline. We're looking at basically the deals that are starting to come through. As you know, it takes sort of two to three months just for that business to really develop, and as we look at the building momentum there, we feel very good about what we're seeing in all regions.

[Michelle MacKay, CEO at Cushman & Wakefield]

I would say, as we've said in the past, we're expecting this to be a long multi-year recovery in capital markets. In our last earnings call, I referred to it as waterfall effect, with the market producing more and more velocity and volume over time.

[Ronald Kamdem, Managing Director, Head of US REITs and CRE Research at Morgan Stanley]

Okay, great. And then my second question was just going to be on sort of just looking for high-level commentary on the margins. You talked about sort of mid-single-digit services growth and the capital markets recovery. Just high-level, are you guys thinking about margins impact sort of any differently as those businesses sort of perform? Thanks.

[Neil Johnston, CFO at Cushman & Wakefield]

Yeah, sure. So this year, we've been very focused on protecting our margins as we sort of move through the recession. So as we came through the beginning of the year, we guided what we said was basically we were going to offset any inflation with cost out. We've now progressed from that. We started to see the business turn. We really feel like we're at the bottom of the cycle. And so we are, at this point, not giving any guidance on 2025. But the way to think about the business is, as the brokerage business comes back, the incrementals there are very strong. But those incrementals, certainly in the near term, will be slightly below what we've seen before as we reinvest in the business.

[Neil Johnston, CFO at Cushman & Wakefield]

And so once again, as we go into next year, certainly early on in the year, we'll defend our margins, but we'll also be looking to invest some of that opportunity to make sure that we are well-positioned for growth. We think the cycle's going to be a long one, and so we want to be very, very well prepared for it as we go through the year.

[Operator]

The next question is from Anthony Paolone with J.P. Morgan. Please go ahead.

[Anthony Paolone, Analyst at J.P. Morgan]

Thank you. Maybe, Neil, staying with you on the margin item, I have in my notes from last quarter that the third quarter numbers would be negatively impacted by some comp expenses on the margin side, I think to the tune of, I think, over 150 basis points. Can you maybe help us just update what the impact ended up being and how to think about 4Q in the full year at this point?

[Neil Johnston, CFO at Cushman & Wakefield]

Yeah, good question, Tony. So we guided to roughly $20 million-$30 million of headwind. We actually saw the low end of that $20 million, and the teams did an excellent job of basically matching costs to ensure that we held margin. We'll probably see a little bit more in Q4, not at the same level, probably in the $5 million-$10 million range, so not nearly as material for Q4.

[Anthony Paolone, Analyst at J.P. Morgan]

Okay, great. That's helpful. And then, I guess, on the leasing side, going to mid-single digits, if I just do some of the math there, it suggests that 4Q leasing revenue would be up basically mid-single digits as well. And so I guess my question is, how should we think about maybe what normalization in leasing looks like? Was the third quarter just outsized and that number comes down now, or is there more room to go? Just trying to put some brackets around that.

[Neil Johnston, CFO at Cushman & Wakefield]

Yeah, so leasing, as you know, is a big part of our revenue. It's something which we've been saying now. We've had five quarters of strength in leasing, so it really drove great performance. The Americas alone were up 16%. We did have some big deals in the quarter, which also helped and contributed. And there is lumpiness as we go through the quarters. We've always said to look at an individual quarter is probably not the way to look at it for really over the longer run. And so certainly feel good about how our leasing revenue had grew.

[Operator]

The next question is from Michael Griffin with Citi. Please go ahead.

[Michael Griffin, Analyst at Citi]

Great, thanks. Just wanted to go back and get some more color kind of on the transaction activity and the market and what you're seeing. Can you give us a sense if maybe buyer and seller expectations are converging or if a lot of these deals are mainly kind of debt maturity and distress driven? And then I know that you noted in the release kind of about the Greystone Joint Venture, volumes declining as a result of the tighter lending conditions. I would think that debt capital availability would be important if you're going to see increased transaction activity. So how do you kind of marry the expectation for a transaction activity pickup with what seems like some tightness in the debt markets?

[Michelle MacKay, CEO at Cushman & Wakefield]

Okay, so I'm going to start with this, and then I'll hand it over to Neil. In terms of market and market fundamentals, we continue to be optimistic about recovery. The Fed move in September was a really important first step for us. There is an enormous amount of pent-up demand waiting, and we believe we are positioned exactly where we need to be to handle that. In the future, Fed rate cuts, which we know we probably have one coming this week, mean that floating rate debt's going to continue to get cheaper. With all else equal, that should help some deals across the finish line, especially as we go into year-end and year-end pressure, and may help alleviate some others of debt service challenges that they've been having.

[Michelle MacKay, CEO at Cushman & Wakefield]

I think, most importantly, at least symbolically, the rate cut signals that better days are ahead for commercial real estate because it means that policies become slightly less restrictive, which is a step forward to more supportive financial conditions for the economy, and by extension, more supportive conditions for leasing and capital markets. Lastly, these incremental rate cuts, which we anticipate one in November and one in December, is going to help move some of this dry powder off the sidelines because, again, it signals that the commercial real estate sector is likely at the cusp of the next growth cycle. What we've seen is a real step forward in the investor mindset from risk-off to risk-on. Then, Neil, did you want to talk a little bit about Greystone?

[Neil Johnston, CFO at Cushman & Wakefield]

Certainly happy to talk about Greystone and what we're seeing in the multifamily markets. Greystone, as a result of the change in lending policies at the GSEs, we have seen some tightness in lending in that space. But we're seeing opportunity in multifamily. We basically had a very strong month of mortgage originations in September. Greystone saw that, and so it signals that certainly there may be opportunity coming. At the same time, it's one month, and that's not a trend. So multifamily remains an area we're watching closely. We feel very good about it in the long run. It's a key strategic space for us, but certainly we do expect a little bit of lumpiness as we move through the back of the year and into next year.

[Anthony Paolone, Analyst at J.P. Morgan]

Thanks. I really appreciate the context there. And then, Michelle, just going to those three priorities you laid out kind of at the end of your prepared remarks, I appreciated kind of the additional insights there. But as you think about those three, I know you've done work on the leverage side, really improving the balance sheet and cash flow, but if the first two priorities in terms of pivoting to growth are really what's going to be a catalyst, could you see leverage maybe stay elevated relative to the historical levels if it makes sense to grow the enterprise?

[Michelle MacKay, CEO at Cushman & Wakefield]

Yeah, I don't anticipate increasing leverage. I would say that, just to give you a little more context around the capital allocation, and I know that you all have been asking for more context for quite some time, I want to speak a bit about how we're changing the way that we're approaching investments here because it's not just about how we're allocating. It's about the way we're making decisions. So we spent the last year allocating our capital with what I'll call surgical precision, a practice that we're going to continue doing. And I've changed three components surrounding making investments here. I've changed the actual investment process. I've changed the criteria for investments, and I've changed the post-close management of made investments. And now we're high on our list on our capital allocation is growth in global capital markets and advisory on hold.

[Michelle MacKay, CEO at Cushman & Wakefield]

And that's going to come in the form of adding to our talent pool and our systems with an eye to what the future holds for the industry, not what the past represents. Second, in capital allocation, we're going to be making, as you've seen us make, the right long-term choices for our services business to ensure continued growth. And we're not going to be patching things with a Band-Aid to fix them. So I'm talking about some basic blocking and tackling here: labor management systems, instilling great operating practices, cross-pollinating best practices across services business. And what you can see is that employing this very rigorous approach, the implications were very positive for our free cash flow already. And the third area, which is what's been the focus of this year, which you know well, is reducing leverage.

[Michelle MacKay, CEO at Cushman & Wakefield]

And frankly, I think we hit it out of the park starting that virtuous cycle of right-sizing our leverage and, as importantly, reducing that cost. We were priced three times this year. And the great thing about having this as a target of our capital is that every time we execute here, you accomplish your goal with 100% certainty, and you know exactly what the financial impact's going to be. But in no case do we foresee increasing our leverage as we're growing.

[Operator]

Again, if you have a question, please press star, then one. The next question is from Alex Kram with UBS. Please go ahead.

[Alex Kram, Analyst at UBS]

Yes, hey, good evening, everyone. Maybe you just touched upon this a little bit, but you made a comment earlier around the services side also being more focused on the margin, if I heard you correctly. So can you just talk about what that entails? Is it gaining more scale? Is it maybe a little bit more focused on pricing? Is it maybe a change in competitive dynamic? Where do you think you can get margin upside in that business, and how quickly do you think you can achieve that?

[Neil Johnston, CFO at Cushman & Wakefield]

Yeah, sure, Alex. It's a great question. We've been very focused on that over the past six months, particularly in EMEA, where we had a design and build business, which is essentially a fixed where we have a lot of fixed-price contracts. We've looked at that business, and we've said, "If we're not making money, we shouldn't be doing the work." And so in EMEA, you have seen services down, but I'll tell you the EBITDA related to that revenue has actually been up. That work is essentially complete, so you'll see growth starting to happen in Europe, but that was the one area. And then within the U.S., in a number of our services businesses, we've looked at our contracts, and we've said profitability on those contracts is really critical. Most of the work is now done.

[Neil Johnston, CFO at Cushman & Wakefield]

We feel very pleased with the work we've done, and we're now starting to once again really focus on the top line, and that will lead to more accretive growth as we go forward.

[Alex Kram, Analyst at UBS]

Okay, great. And then just maybe coming back to capital allocation, I think in your prepared remark, you mentioned M&A only in the context of the services business, small tokens, I think, if I remembered you correctly, Michelle. But you just also talked about the capital markets advisory business. So is that also an area for M&A, or how do you think about M&A generally in particular, as you just said, leverage probably stay at these levels?

[Michelle MacKay, CEO at Cushman & Wakefield]

Yeah, the door is always open for M&A. It could be in advisory or services. But I think in particular with regard to advisory for us right now, we are doing a lot of investing in the data and analytics in the capital markets business in particular. And we're also on the hunt for new talent in advisory as well.

[Operator]

The next question is from Peter Abramowitz with Jefferies. Please go ahead.

[Peter Dylan Abramowitz, Analyst at Jefferies LLC]

Hi, thank you. I think in Neil's comments, he mentioned just some delays and things on the project management side, which I know tends to be a little bit sensitive to the macro and kind of confidence from customers there. So just wanted to ask, is there anything thematic that we should take away in what's been causing customers to delay those projects and how to think about when that might ease?

[Neil Johnston, CFO at Cushman & Wakefield]

Yeah, there's nothing really thematic there. We have just seen, particularly in the office space, some delays in buildouts. It really is essentially, we believe, just a function of sort of a more subdued market. We feel like the tide is turning there, and we are focused in that area, but we've just seen some projects that have been canceled that are sort of a dampener on that business. We feel confident going forward, and we're starting to see those pipelines build and projects get executed, but there's nothing thematic. It really is just a function of the space we're in and some of the projects we were working on.

[Peter Dylan Abramowitz, Analyst at Jefferies LLC]

Okay, that's helpful. And then I think, Michelle, the term you've used is sort of a waterfall function in terms of the capital markets recovery. So you already would seem to be indicating a significant acceleration if you're expecting 20% in the fourth quarter. So I guess, should we expect potentially further acceleration as we get into 2025? I know one of your peers mentioned a week or two ago that they're sort of thinking about it as a gradual recovery. So just curious in that context how you are thinking about 2025 from a capital markets perspective as we sort of build out your budget and think about the year ahead?

[Michelle MacKay, CEO at Cushman & Wakefield]

Yeah, I mean, we've always talked about it as a gradual recovery. I've spoken quite often about how we invest in things over the long term, and we expect a long-term recovery. So our base case as it relates to capital markets assumes the Fed's going to continue to cut rates by 25 basis points in November and December, followed by gradual rate reductions until they bring that rate back down to around the 3% range toward the end of 2025. We also believe the 10-year yield is going to hover in this 4%-4.5% range for the foreseeable future, putting a more normalized interest rate curve into place, which is all positive for CRE. But when you think about that, we're talking about that process happening over the next year.

[Operator]

This concludes our question-and-answer session. I would like to turn the conference back over to Michelle MacKay for any closing remarks.

[Michelle MacKay, CEO at Cushman & Wakefield]

Thank you, everyone, for participating in our call today, and we look forward to speaking with you next quarter.

[Operator]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Neil Johnston, CFO
• Megan McGrath, Head of Investor Relations
• Michelle MacKay, CEO

Analysts

• Alex Kram, Analyst at UBS
• Michael Griffin, Analyst at Citi
• Stephen Hardy Sheldon, Partner, Equity Research Analyst at William Blair
• Anthony Paolone, Analyst at J.P. Morgan
• Peter Dylan Abramowitz, Analyst at Jefferies LLC
• Ronald Kamdem, Managing Director, Head of US REITs and CRE Research at Morgan Stanley