Goldman Sachs is bullish on the outlook for commercial real estate (CRE) services stocks, citing a gradual growth in the sector following tough years.

The investment bank recommended CBRE Group Inc. (NYSE:CBRE), Newmark Group Inc. (NASDAQ:NMRK), and Jones Lang LaSalle Inc. (NYSE:JLL) as the sector's top picks for 2025.

CRE Sector Showing Signs of Life

In a note shared with clients Friday, Goldman Sachs analyst Julien Blouin said the CRE services sector has begun to recover in 2024 as property values stabilized and financing conditions improved.

Lower short-term rates, stabilizing long-term rates, and narrowing credit spreads have created a healthier financing environment for real estate transactions.

According to Blouin, origination volumes—the financing of real estate transactions—have "inflected across all major property types and all major lender groups," pointing to an increasingly active market.

Specifically, Newmark Group has risen from outside the top five in 2019 to the third-largest mortgage loan originator, thanks to its growing capital markets business.

On the investment sales front, Blouin said, "Clarity over and stabilization of property values and funding costs, mixed with gradually returning financing availability across the CRE ecosystem, has strengthened the prospects of an investment sales recovery."

He highlights that JLL has gained significant market share in investment sales volumes, while Newmark has bolstered its presence by hiring top professionals from Cushman & Wakefield plc (NYSE:CWK).

Why CBRE, NMRK, And JLL Are Goldman's Top Picks

• CBRE Group: "Consensus underestimates the top-line and bottom-line growth of CBRE's resilient businesses, including double-digit revenue growth across property management, facilities management, and project management," Blouin said. He added that CBRE's diversification makes it a standout in the sector, providing stability during uncertain times.
• Newmark Group Blouin highlighted Newmark's ascent in mortgage origination rankings, stating, "We believe consensus underestimates capital markets revenue recoveries, bolstered by market share gains." NMRK has leveraged its growing capital markets team and has seen strong momentum in debt origination and investment sales.
• Jones Lang LaSalle: According to Blouin, JLL is benefiting from its increased market share in investment sales, which he described as a "meaningful gain." He also indicated that JLL's ability to capitalize on the CRE recovery puts it in a prime position for earnings growth.

Bottom Line: More Room To Run

While CRE services stocks have risen 39% year-to-date—outpacing the S&P 500's 27% gain—Blouin is confident there's more upside ahead.

"We see additional upside for companies that have large capital markets exposures and are gaining market share, have large resilient businesses with high growth and high margins, and companies that have a track record of supplementing their prudent allocation through internal reinvestment, selective M&A, and share repurchases," he said.

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