The group highlighted “heightened levels of geopolitical volatility” and significant uncertainty around the impact of the conflict in the Middle East on interest rates.
Its Transactional business, which provides capital and leasing advisory services to commercial and residential investors and occupiers, delivered a solid performance in Q1, according to Savills. Across EMEA, both commercial capital markets and leasing volumes are performing in line with expectations.
Meanwhile, the group’s Residential Transactional Advisory business, within its key UK market, has seen greater caution among both buyers and sellers since the onset of the Middle East conflict. This has resulted in longer completion timeframes. Transactions agreed in Q1 increased 1% year on year driven by a 13% increase in the London market, offsetting reduced activity outside the capital.
Savills is predicting reduced transaction levels to continue in the UK market, and for the slowdown in sales activity in the Middle East to temper the performance of its growing International Residential business.
In the Middle East, roughly half of the region’s underlying profit is transactional and primarily from residential sales, which have slowed materially during the crisis. The remainder of the business is predominantly consultancy and property management activities, which the group said remained resilient. In total, the Middle East represented around 5% of group underlying profit before tax in FY25.
The Property and Facilities Management and Consultancy businesses continue to perform well and benefit from the restructuring activities undertaken last year, which are positively affecting profitability in line, according to the trading update.
Savills Investment Management has performed in line with expectations and also benefited from last year’s restructuring activities. In March, Savills acquired real estate investment bank Eastdil Secured in a blockbuster £827m deal. The deal is set to complete around the end of July.
Joe Spooner, equity research analyst at Shore Capital, said: “In FY25, the group’s Q2 and Q3 were soft on tariff uncertainty, which was digested by Q4, the key seasonal quarter, when client confidence to transact returned for a strong year-end.
“Depending on how and when the current Middle East situation resolves, FY26 could ultimately mirror FY25’s shape. As we detailed in our recent note, we think the market has priced Savills’ shares for a near-trough scenario but assess recent news from peers and now Savills itself as being more supportive – hence our ‘buy’ rating.”
