NEWMARK GROUP, INC. (NMRK)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of Newmark’s financial condition and results of operations should be read together with Newmark’s accompanying unaudited condensed consolidated financial statements and related notes, as well as the “Special Note Regarding Forward-Looking Information” relating to forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, included elsewhere in this Quarterly Report on Form 10-Q.

This discussion summarizes the significant factors affecting our results of operations and financial condition during the three and six months ended June 30, 2026 and 2025. We operate in one reportable segment, real estate services. This discussion is provided to increase the understanding of, and should be read in conjunction with, our accompanying unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

Overview

Newmark is a leading commercial real estate advisor and service provider to large institutional investors, global corporations, and other owners and occupiers. We offer a diverse array of integrated services and products designed to meet the full needs of our clients.

Business Environment

There are several factors that impact results across our three main revenue sources (Management Services, Servicing Fees and Other; Leasing and Other Commissions; and Capital Markets), including secular and cyclical industry trends, macroeconomic dynamics, and our investments in growth. These factors are discussed below.

Key Business Drivers. The key drivers of our business include our ability to attract and retain revenue generating headcount across our service lines, the productivity of these employees, and industry volumes in these areas. Volumes are largely a factor of economic and job growth, interest rates, the demand for commercial real estate as an investment, and the need for related debt and equity financing. Demand for our services is also influenced by secular trends with respect to outsourcing and other services we provide.

Attracting and Retaining Revenue-Generating Headcount. Over the twelve months ended June 30, 2026, we continued to solidify what we believe is our position as the platform of choice for many top professionals. We continue to attract some of the most prolific and experienced client-facing professionals in countries including the U.S., U.K., France, Germany, India, Italy, South Korea, Canada, and Singapore. We believe that these additions further demonstrate the strength of our global brand, and the value of our substantial investments in data analytics, technology, and talent. Our revenue-generating headcount in the U.S. was flat or up modestly year-on-year on a net basis over the last several quarters. Therefore, strong productivity gains were the primary driver of our double-digit percentage year-on-year U.S. revenue growth in second quarter and first half of 2026. We increased both the number of non-U.S. offices and our international revenue-generating headcount by mid-double-digit percentages year-on-year in the second quarter of 2026. As with nearly all newly hired professionals, these recent additions are expected to take at least 6 to 18 months to produce meaningful fees, although we generally record related expenses beginning in their first quarter with the Company. As more of Newmark’s newer team members ramp up, we expect to further improve our productivity and earnings over time, all else equal.

Continued Trends with Respect to Management Services, Servicing Fees and Other. Many of our Management Services offerings continue to benefit from increased outsourcing by corporations and other occupiers, owners of real estate, lenders, and investors. We expect these outsourcing trends to persist for the foreseeable future, which should benefit our recurring revenue businesses as we continue to invest in areas including property, project, and facilities management, as well across our growing suite of managed services offerings. Between September 2025 and June 2026, our investments in recurring revenue businesses include the Company’s acquisitions of the Altus Appraisal platform, Catella, and RealFoundations, as well as the organic launches of our property and facilities management businesses in India and our new fund administration service line. We believe these recent investments will help drive stable and predictable revenue and earnings growth over time.

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Additionally, we operate a high margin and growing loan servicing and asset management business focused on GSE/FHA loans, as well as on bank, private credit, and commercial mortgage-backed securities clients. We expect this business to benefit as the overall amount of commercial and multifamily debt outstanding increases, we continue to gain origination market share, and we drive further cross selling between service lines. As of June 30, 2026, our overall loan servicing and asset management portfolio grew by 20.5% year-on-year to $219.3 billion (of which 62.2% was limited servicing and asset management, 37.0% was higher margin primary servicing, and 0.7% was special servicing). We expect our overall portfolio to continue providing a steady stream of income and cash flow over the life of the serviced loans.

These factors, combined with our ability to increase revenue synergies between our service lines, enabled us to grow Management Services, Servicing Fees and Other revenues by an approximately 16% CAGR between 2017 and 2025, and to increase these recurring revenues by 17.7% year-on-year in the quarter ended June 30, 2026.

Trends in GDP and Job Growth. Commercial real estate leasing activity has historically been positively correlated with job creation, particularly with respect to office-based employment, and with GDP growth. Unless otherwise noted, all of the following economic statistics are from Bloomberg, including interest rate futures market data and consensus estimates based on their respective July 13, 2026 U.K. and July 24, 2026 U.S. surveys of economists.

According to a preliminary estimate by the Bureau of Economic Analysis, U.S. GDP increased at an annualized rate of 1.5% in the second quarter of 2026, after having expanded 2.1% in 2025 and 2.8% in 2024. According to the Wall Street Journal, U.S. GDP growth was led by increased capital expenditures on categories closely tied to AI, which may have contributed more than half of all GDP growth in the quarter. While higher consumer spending also contributed to the rise, these factors were partially offset by lower federal spendings, private inventory investment, nonresidential structure investment, and net exports. While U.K. GDP for the quarter has not yet been released, the consensus is for it to grow by 0.2% year-on-year, after having expanded 1.3% in 2025 and 1.1% in 2024.

According to a revised estimate by the Bureau of Labor Statistics, the seasonally adjusted monthly average of U.S. non-farm payroll employment increased by approximately 77,000 in the second quarter of 2026. In comparison, the monthly average grew by 10,000 and 122,000 in full years 2025 and 2024. The June 2026 U.S. unemployment rate (based on U-3) was 4.2% compared with 4.1% a year earlier. Per the Office for National Statistics, the comparable U.K. unemployment rate as of May 2026 (the most recent data available) was 4.9% versus 4.7% a year earlier.

Interest Rate Environment. Commercial real estate capital markets transactions involving financing generally utilize medium- or long-term debt, and the interest rates for such debt are influenced by movements in benchmark rates with similar tenors, including U.S. Treasuries. Such benchmark rates can often be meaningfully impacted by actual or anticipated movements in key short-term rates, such as the Fed Funds Target rate. In addition, a portion of commercial and multifamily mortgages involve floating interest rates tied to short-term benchmarks. Sudden changes in short term interest rates can therefore have pronounced effects on commercial mortgage origination and investment sales volumes.

The ten-year U.S. Treasury yield increased by approximately 150 and 240 basis points quarter-on-quarter and year-on-year, respectively to 4.7% as of June 30, 2026. The ten-year U.K. Gilt yield declined by approximately 160 basis points quarter-on-quarter and increased by nearly 270 basis points year-on-year to 4.8% over the same timeframe. The year-on-year increases are mainly due to the sharp rise in prices for oil, natural gas, and other commodities due to the recent Middle East conflict and the closure of or disruption to the Strait of Hormuz. For context, ten-year U.S. Treasury and ten-year U.K. Gilt yields still remain below their 50-year average through December 31, 2025 of approximately 5.8% and 7.0%, respectively.

For the month ending June 30, 2026, the U.S. and U.K. consumer price indices were up 3.5% and 2.8%, respectively, versus a year earlier. Inflation has both been higher than the 2% targets set by both the FOMC and MPC since June 2021, and the headline figures in both countries have been elevated in recent months due largely to the aforementioned increase in energy prices. The surveyed economists continue to expect inflation to remain above these targets for at least the next two calendar years. Concerns about continued U.S. GDP growth, above-target inflation, and a potentially slowing job market may present a challenge to the FOMC's dual mandate. This has led more economists to expect the central bank to either maintain or possibly raise short term rates in the near term. The U.K. has experienced many of these same issues, albeit with lower GDP and labor productivity growth and, in most recent periods, higher inflation. As a result, both economists and futures markets expect short-term yields in both countries to be higher for the foreseeable future. The futures market is currently pricing in moderate short term benchmark rate hikes in the U.S., U.K., and Eurozone through at least the second quarter of 2027.

Despite the possibility of flat or rising short term rates, other metrics that are inversely correlated with easier availability of credit for real estate investors remain well below their five year averages in the U.S., and at or below average in the U.K. and Eurozone. We believe this is most positive for commercial real estate capital markets transactions in the U.S., and generally positive for them in the U.K. and Eurozone. These metrics include interest rate volatility as measured by the ICE

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BofA MOVE Index and credit spreads as indicated by the Bloomberg U.S. Corp BBB/Baa - Treasury 10 Year Spread, as well as similar metrics with respect to the U.K. and Eurozone. Given relatively low interest rate volatility and narrow credit spreads in the U.S., we believe current market conditions remain favorable for a continued recovery of U.S. industry capital markets volumes, and to a lesser extent in the U.K. and Continental Europe. Because of Newmark's ongoing investments in talent, and our recently hired revenue generating professionals have yet to fully ramp up, we expect to gain further global market share across our commission-based businesses over the near- and medium-term.

Industry Leasing Activity. Unless otherwise stated, all industry leasing data is from Newmark Research and/or CoStar, is preliminary, and is subject to possible future revisions. Office leasing remains the majority of activity for both Newmark and the industry.

U.S. industry office leasing activity (for deals over 10,000 square feet) totaled just over 55 million square feet in the second quarter of 2026. This represented a 9.1% improvement year-over-year, but was roughly 30% below the average for 2018 and 2019. The continuing recovery was geographically diverse, led by New York

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Overview

Newmark is a leading commercial real estate advisor and service provider to large institutional investors, global corporations, and other owners and occupiers. We offer a diverse array of integrated services and products designed to meet the full needs of our clients.

Business Environment

There are several factors that impact results across our three main revenue sources (Management Services, Servicing Fees and Other; Leasing and Other Commissions; and Capital Markets), including both secular and cyclical industry trends as well as macroeconomic dynamics and our investments in growth. These factors are discussed below.

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Key Business Drivers

The key drivers of our business include our ability to attract and retain revenue generating headcount across our service lines, the productivity of these employees, and industry volumes in these areas. Volumes are largely a factor of economic and job growth, interest rates, and the demand for commercial real estate as an investment and for debt financing. In addition, demand for our services is influenced by secular trends with respect to outsourcing and other services we provide.

Attracting and Retaining Revenue-Generating Headcount. During 2025, we continued to solidify what we believe is our position as the platform of choice for many top professionals. In countries including the U.S., U.K., France, Germany, India, South Korea, and Singapore, we attracted some of the most prolific and experienced client-facing professionals. We believe that these additions further demonstrate the strength of our global brand, and the value of our substantial investments in data, analytics, and talent. Our revenue-generating headcount across Capital Markets, Leasing and Other Commissions, and V&A in the U.S. was flat or up modestly year-on-year on a net basis at the end of each of the five quarters ended December 31, 2024, through December 31, 2025. Therefore, productivity gains were the primary driver of our strong quarterly and year-to-date U.S. commission-based revenue growth. We increased both the number of non-U.S. offices and our international revenue-generating headcount by double-digit percentages year-on-year in more recent quarters, albeit from smaller bases. As with nearly all newly hired professionals, these international additions are expected to take at least 6 to 18 months to produce meaningful fees, although we generally record related expenses beginning in their first quarter with the Company. As more of Newmark’s recently added team members ramp up, we expect to further improve our productivity and earnings over time, all else equal.

Continued Trends with Respect to Management Services, Servicing Fees and Other. Many of our Management Services offerings continue to benefit from increased outsourcing by corporations and other occupiers, owners of real estate, lenders, and investment funds. We expect these outsourcing trends to persist for the foreseeable future, which should benefit our recurring revenue businesses as we continue to invest in areas including property, project, and facilities management, as well across our growing suite of managed services offerings. Our most recent investments in recurring revenue businesses include the Company’s acquisitions of Catella and RealFoundations and the launch of our property and facilities management businesses in India, all in the fourth quarter of 2025, as well as starting our new fund administration business in September 2025. We believe these newest offerings in Management Services, Servicing Fees and Other will help drive stable and predictable revenue and earnings growth over time.

Additionally, we operate a high margin and growing loan servicing and asset management business focused on GSE/FHA loans, as well as on bank, private credit, and commercial mortgage-backed securities clients. We expect this business to benefit as the overall amount of commercial and multifamily debt outstanding increases, we continue to gain origination market share, and we drive further cross selling between service lines. As of December 31, 2025, our loan servicing and asset management portfolio grew by 15.2% year-on-year to a record $211.2 billion (of which 63.6% was limited servicing and asset management, 35.6% was higher margin primary servicing, and 0.8% was special servicing). We expect our overall portfolio to continue providing a steady stream of income and cash flow over the life of the serviced loans.

These factors, combined with our ability to increase revenue synergies between our service lines, enabled us to grow Management Services, Servicing Fees and Other revenues by a double digit CAGR between 2017 and 2025, and to increase these recurring revenues by 12.4% over the twelve months ended December 31, 2025.

Trends in GDP and Job Growth. Commercial real estate leasing activity has historically been positively correlated with job creation, particularly with respect to office-based employment, and with GDP growth. Unless otherwise noted, all of the following economic statistics are from Bloomberg, including consensus estimates based on their respective February 16, 2026 U.K. and February 20, 2026 U.S. surveys of economists.

According to the Bureau of Economic Analysis, U.S. GDP increased by 2.2% in 2025 after having expanded by 2.8% in 2024 and 2.9% in 2023. The Bureau stated that: “The increase in real GDP in 2025 primarily reflected increases in consumer spending and investment.” With respect to the latter, investments in artificial intelligence, particularly in data centers, made up 39% of all U.S. GDP growth over the first nine months of 2025, according to the Federal Reserve Bank of St. Louis. According to the Office for National Statistics, U.K. GDP increased by 1.4% year-on-year in 2025, after having expanded by 1.1% and 0.3% in 2024 and 2023.

According to the Bureau of Labor Statistics, seasonally adjusted monthly average of U.S. non-farm payroll employment increased by approximately 15,000 in 2025. In comparison, the monthly average grew by 122,000 and 210,000 in full years 2024 and 2023. The December 2025 U.S. unemployment rate (based on U-3) was 4.4% compared with 4.1% a year earlier. Per the Office for National Statistics, the comparable U.K. unemployment rate as of December 2025 was 5.2% versus 4.4% a year earlier.

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Interest Rate Environment. Commercial real estate capital markets transactions involving financing generally utilize medium- or long-term debt, and the interest rates for such debt are influenced by movements in benchmark rates with similar tenors, including U.S. Treasuries. Such benchmark rates can often be meaningfully impacted by actual or anticipated movements in key short-term rates, such as the Fed Funds Target rate. In addition, a portion of commercial and multifamily mortgages involve floating interest rates tied to short-term benchmarks. Sudden changes in short term interest rates can therefore have pronounced effects on commercial mortgage origination and investment sales volumes.

The ten-year U.S. Treasury yield increased by approximately two basis points quarter-on-quarter and decreased by 40 basis points year-on-year to 4.2% as of December 31, 2025. The ten-year U.K. Gilt yield decreased by approximately 20 basis points quarter-on-quarter and by 6 basis points year-on-year to 4.5% over the same timeframe. For context, ten-year U.S. Treasury and ten-year U.K. Gilt yields still remain below their 50-year average through December 31, 2025 of approximately 5.8% and 7.0%, respectively.

For the month ending December 31, 2025, the most commonly cited U.S. and U.K. inflation measures were up 2.7% and 3.6%, respectively, versus a year earlier. They both remained higher than the 2% targets set by both the FOMC and MPC. The surveyed economists expect inflation to remain above these targets for at least the next two calendar years. Concerns about expectations for strong GDP growth, above-target inflation, and a possibly stagnant job market may present a challenge to the FOMC's dual mandate. This have reduced clarity in terms of how fast the central bank will lower short term rates. The U.K. has experienced many of these same issues, albeit with lower GDP and labor productivity growth. As a result, both economists and the futures markets expect short-term yields in both countries to be higher for the foreseeable future compared with the ultra-low interest rate period from the fourth quarter of 2008 through the first quarter of 2022.

In addition, other metrics that are inversely correlated with easier availability of credit for real estate investors remain well below long term averages, which is positive for commercial real estate capital markets transactions. These metrics include interest rate volatility as measured by the ICE BofA MOVE Index and credit spreads as indicated by the Bloomberg U.S. Corp BBB/Baa - Treasury 10 Year Spread, as well as similar metrics with respect to the U.K. and Eurozone. Given the stable interest rate environment and historically narrow credit spreads in the major markets in which Newmark operates, we believe current market conditions remain favorable for a continued recovery of industry capital markets volumes.

Industry Leasing Activity. Unless otherwise stated, all industry leasing data is from Newmark Research and/or CoStar. While industrial and retail have increased as a percentage of leasing revenues since 2019, office remains the majority of activity for both Newmark and the industry.

U.S. new office leasing activity (for deals above 10,000 square feet and excluding lease renewals) improved by approximately 7% and 10%, respectively in the fourth quarter and full year 2025. This recovery was relatively uneven, with New York City, Dallas-Fort Worth, Houston, and the San Francisco Bay Area driving much of this national improvement, although San Francisco continues to have one of the highest vacancy rates among major U.S. markets. Class A leasing activity continued to be strongest nationally, although demand edged higher among Class B and Class C buildings in the second half of 2025, indicating demand for space may be broadening. With respect to the U.K., fourth quarter 2025 was among the strongest in the past three years with respect to new office leasing activity, with London leading the demand recovery. U.K. net absorption was up by 4.5 million square feet for full year 2025, after having been negative every period from the first quarter of 2020 through the second quarter of 2025. With the pipeline of new office construction expected to drop off dramatically beginning this year in Newmark's key markets, the ongoing enhancement of Class B office properties, and the conversion of obsolete space into multifamily and other uses, we expect office fundamentals to continue to improve.

We expect demand for office space to continue to be supported by the reset in values due to near-term debt maturities. We also continue to see increased need for high quality office space in an increasing number of markets, led by new demand driven by companies in technology, including AI, and financial services, as well as ongoing return-to-workplace plans. Placer.ai data for December 2025 indicates that in-person attendance in the U.S. increased to an average of 66.9% of December 2019 pre-pandemic levels versus 60.8% a year earlier. This represented a year-on-year improvement in attendance of 10.0%. While Miami, Dallas, and New York City continue to lead in terms of in-person attendance, the national year-on-year improvement was led by San Francisco, Dallas, and Boston among major markets.

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New U.S. industrial leasing activity continued its momentum in the fourth quarter of 2025, growing by more than 20% year-on-year, led by large modern warehouses and distribution centers. Net absorption was stronger in the second half of 2025 and was 62 million square feet in the fourth quarter, which was the best quarterly performan

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