"AI Losers Trading" spreads, US real estate service stocks collectively plunge

Accelerated by artificial intelligence (AI) technology penetration and the potential disruption risks across multiple industries, U.S. real estate services stocks plummeted collectively on Wednesday, as investors worried that companies with high labor costs and high commission business models could become the next victims of AI’s impact.

By the close, CBRE Group (CBRE.US) and JLL (JLL.US) both saw their stock prices drop over 12%, with Cushman & Wakefield (CWK.US) falling nearly 14%. Notably, the single-day decline for CBRE and Cushman & Wakefield set the largest record since the market crash triggered by the COVID-19 pandemic in 2020.

Keefe, Bruyette & Woods analyst Jade Rahmani stated in a report released on Wednesday that investors are accelerating the withdrawal from “high-fee, labor-intensive business models that are viewed as potentially vulnerable to AI disruption.” However, she also warned that this round of selling “may overstate the short-term impact of AI on complex transaction matchmaking businesses,” although the long-term effects of AI on the industry remain to be seen.

This wave of decline further impacts the already struggling commercial real estate sector. Since the pandemic reshaped office demand and rising interest rates sharply reduced transaction volumes, the industry has found it difficult to recover. While the AI boom has created structural opportunities in areas such as data centers and high-end office leasing, the market is beginning to reassess whether advances in automation and streamlining transaction processes will exert ongoing pressure on traditional brokerage and agency businesses.

In response to the industry downturn, companies like CBRE and JLL have actively expanded their business scope in recent years, extending into property management, asset valuation, and cross-industry investment sales, covering sectors such as hotels, warehouses, apartments, and life sciences laboratories, aiming to diversify the cyclical risks associated with their core brokerage operations.

Rahmani described this sell-off as part of the latest wave of “AI panic trading.” Over the past week, stocks of software firms, private credit institutions, wealth management companies, and insurance brokers have experienced rapid capital withdrawals, with real estate services stocks becoming the latest affected sector.

However, some institutions believe the market reaction is overly aggressive. Barclays analyst Brendan Lynch said that, in the absence of significant new negative news on the day, the decline in related stocks appeared “excessive.” He pointed out that some of the selling pressure stems from concerns that AI will impact employment and demand in commercial real estate, but these risks “did not appear overnight and have not fundamentally changed compared to the previous day.”

The turning point in market sentiment came last week after AI startup Anthropic released a series of tools aimed at automating legal services, financial research, and other tasks. Nevertheless, several analysts warned that the current sharp sell-off may be more emotional than based on actual risks, exaggerating the real threat.

Jefferies analyst Joe Dickstein stated that the direct threat of AI to real estate leasing and capital markets remains limited. “CBRE and its peers have significant advantages in data scale and industry relationships. As the core intermediaries for large leasing and high-value transactions, their industry positions are unlikely to be shaken in the short term.”