Savills has said its full-year performance will be ahead of expectations despite a difficult year.
But it expects the next six months to be less favourable, with H2 providing welcome relief.
“We believe that H1 2023 will be more challenging than its 2022 comparative; however, we expect progressive improvement through the second half of the year,” it said in a trading update ahead of its 2022 results, which are due to be published on 16 March.
Savills said strong performance from the consultancy and property management businesses had “helped underpin” the firm’s performance overall.
However, other areas were less solid. “Since the end of Q1 2022, real estate markets across the globe have been increasingly challenged by geopolitical events, macro-economic issues and policy responses thereto,” Savills said.
“In the transactional businesses, the rapid rise in debt costs has been a significant issue with which commercial investment markets have had to come to terms. This, together with inflationary pressures globally, has also reduced the volume of leasing transactions.”
Savills added that the picture was unlikely to improve over the next six months. “We anticipate the challenges to commercial transaction volumes will remain significant through at least the first half of 2023,” it said.
In addition to the global economic difficulties, Central and Eastern Europe, including Germany, had been “affected to a significant extent” by the economic impact of the war in Ukraine, while the Asia Pacific region had been hampered by China’s Covid-related restrictions.
Despite this, Savills said it had performed ahead of its previous expectations for the year and “substantially ahead” of the 2019, pre-Covid comparative period, with prime residential proving a major highlight.
It acknowledged that the “abnormally high” UK transaction volumes of the post-lockdown market “will reverse in 2023, particularly in markets outside London.
Savills is also anticipating a reduction in revenue in 2023 from base management fees, which will fall in line with quarterly portfolio valuation adjustments.
But, on the whole, the firm was optimistic about how 2023 would end. “Certain markets, such as the UK, are recalibrating faster than in the past, and will be helped by the lack of development supply and an overall trend to sustainability,” it said.
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