Commercial-property brokerages, the stars among U.S. real estate stocks this year, are losing luster as the booming market for deals shows signs of cooling.

CBRE Group Inc. and Jones Lang LaSalle Inc., the global titans of property services, slid the most since 2011 on Monday amid a rout in equities, bringing losses this month to 14 percent and 16 percent, respectively. HFF Inc. has tumbled 20 percent in August and Marcus & Millichap Inc. is down 17 percent.

The prospect of a slowdown in real estate transactions after a five-year recovery is stoking concern that profit growth will weaken at the big brokerages, which make their money on services from selling buildings to handling leases. Rising interest rates may limit gains in property prices, while banks and other lenders to the market are decelerating their rate of new credit expansion.

Much of the earnings growth at the companies “is in the rear-view mirror at this point,” said Brad Burke, an analyst at Goldman Sachs Group Inc., who cut his ratings on JLL, HFF and Marcus & Millichap this month while keeping CBRE at a buy. “This is a natural maturing of the real estate cycle.”

CBRE, the world’s largest brokerage, slid 7 percent Monday to $32.47, the biggest decline in four years. JLL dropped 8.2 percent to $149.28, the most since November 2011.

REIT Comparison

Before this month, CBRE had gained 11 percent for the year, while JLL jumped 19 percent. In contrast, the Bloomberg index of real estate investment trusts had lost 2.6 percent.

While stocks worldwide are falling, the broker losses this month have been worse than other market measures. The REIT gauge is down 5.7 percent for August, while the Standard & Poor’s 500 Index has fallen 10 percent.

Commercial real estate deals in the U.S. rose 23 percent from a year earlier in the second quarter, slowing from a 49 percent surge in the first, according to Real Capital Analytics Inc. First-half volume of $255.1 billion was “front-loaded” by several major sales closing early in the year, including two big industrial warehouse portfolios, Manhattan’s Waldorf Astoria hotel, and Willis Tower in Chicago, the research firm said.

“We have had a very rich transaction market for some time, so the rate of growth in activity has necessarily begun to taper off,” said Sam Chandan, founder and chief economist of Chandan Economics, a provider of real estate data and analysis. “It’s not the kind of growth we saw when we were coming off the bottom.”

Deal Lending

The pace of expansion in commercial real estate lending is slowing, according to quarterly Federal Reserve data. After declines from 2009 to 2012, there was a 2.7 percent jump in outstanding commercial-mortgage debt in 2013, followed by 4.2 percent growth last year. Burke estimates the acceleration won’t be as great in 2015, when he expects lending to increase 4.7 percent.

Commercial real estate transactions are “highly correlated” with credit acceleration, which will soften, Burke wrote in an Aug. 12 note.

Property brokers are facing other headwinds. Equities are tumbling on concern about slowing global economic growth. A strong dollar is crimping non-U.S. revenue and the slump in oil prices is denting real estate demand in energy hubs such as Houston and Calgary.

Empty office space in many markets is getting filled, limiting growth in leasing services, said Russell Platt, managing director and chief executive officer of Forum Partners, a real estate investment firm.

“We’re not necessarily at a pinnacle where the market’s going to fall off sharply, but it’s hard to see the drivers that increase leasing volume materially,” he said.

Middle Innings

The property-service providers remain bullish.

“We’re in the middle of an extra-inning game and we’ve got a ways to go,” Robert Sulentic, president and CEO of Los Angeles-based CBRE, said in a telephone interview. “I don’t ever remember being at this point in the cycle and seeing so little space being built.”

CBRE and JLL have sought to diversify away from investment sales, the most volatile part of their business, to services with more predictable revenue, such as asset management and multiyear contracts to handle real estate services for corporations. CBRE in March agreed to purchase Global WorkPlace Solutions from Johnson Controls Inc. for $1.48 billion to expand in facilities management.

Companies increasingly are outsourcing real estate needs, said JLL CEO Colin Dyer. His firm handles all such services for about 100 clients, including Procter & Gamble Co. and HSBC.

“Momentum is solid,” Dyer said. “People are behaving and managing in a more careful way than they were in the last cycle.”

Rising Competition

Competition among brokers remains intense and new entrants are getting into the game. Hodges Ward Elliott, a boutique hotel broker, opened a New York office this month to expand into investment sales of other property types. TPG Capital in May agreed to buy Cushman & Wakefield Inc., the biggest closely held commercial broker, and merge it with two other recent purchases.

For high-end deals, CBRE and JLL face a formidable rival in Eastdil Secured LLC, a unit of Wells Fargo & Co. Eastdil holds the U.S. crown for property sales valued at $25 million or more, according to Real Capital. CBRE is No. 1 for all building sales above $2.5 million.

“If Eastdil is going to take some market share from the larger companies, they’re only going to take it in a couple of business lines,” said Glenn Rufrano, who ran Cushman from early 2010 to mid-2013 and is now CEO of Vereit Inc. “CBRE and JLL have done a very good job of creating truly global companies with infrastructure and dominance in major markets.”

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