Business Description
CBRE is the world's largest commercial real estate services and investment firm, providing a comprehensive range of services to real estate investors and occupiers worldwide. The company operates through three main business segments: Advisory Services, Global Workplace Solutions (GWS), and Real Estate Investments (REI) . CBRE offers services such as property leasing, capital markets, mortgage servicing, property management, valuation, integrated outsourcing, investment management, and development services .
- Global Workplace Solutions (GWS) - Provides integrated outsourcing services, including facilities and project management, primarily to occupiers of real estate, demonstrating consistent growth across market cycles .
- Advisory Services - Offers property leasing, capital markets (property sales and mortgage origination), mortgage servicing, property management, and valuation, with transactional components being more cyclical and other services more resilient to macroeconomic conditions .
- Real Estate Investments (REI) - Involves investment management and development services, focusing on the U.S., U.K., and Continental Europe, managing assets under management and development projects to diversify revenue streams .
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Q3 2024 Summary
What went well
- Significant Exposure to the Data Center Market: CBRE manages between 700 and 800 data centers through its services business and is involved in project management of over 110 hyperscale data centers via Turner & Townsend . Additionally, Trammell Crow Company's expertise in identifying logistics land sites suitable for data center development is leading to strong financial returns .
- Strategic Value of Trammell Crow Company: Retaining Trammell Crow Company enhances CBRE's growth prospects due to its ability to generate high returns and its productive synergy with other CBRE businesses . TCC was instrumental in creating a $5 billion fund in the Investment Management business and is involved in significant projects like $2 billion-plus manufacturing plants .
- Capacity to Capitalize on Market Recovery: CBRE has considerable capacity in its mortgage origination and investment sales teams, allowing it to grow without significant rehiring . The company is investing in both its resilient and transactional businesses, maintaining market leadership in capital markets and leasing .
What went wrong
- Recovery in transactional businesses is heavily dependent on uncertain external factors, such as interest rate stabilization and buyer-seller psychology, which may hinder growth .
- CBRE is not considering spinning off Trammell Crow Company, which could lead to a conglomerate discount and limit shareholder value creation .
- Lack of specific strategic initiatives in the data center sector may prevent CBRE from fully capitalizing on this growth opportunity .
Q&A Summary
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Capital Markets Recovery Expectations
Q: How steep will capital markets recover in 2025?
A: Management expects a steady capital markets recovery in 2025 rather than a steep one. Buyers and sellers have largely come together for most asset classes except office. There is debt available now and increased interest in multifamily, with slight cap rate compression in multifamily and industrial. They anticipate steady improvement next year but not a precipitous one. ( , ) -
Growth in Resilient Business Lines
Q: Is double-digit growth in resilient lines organic or M&A-driven?
A: Management expects double-digit growth in resilient business lines over the near, medium, and long term, primarily driven by organic growth in the low double-digit range, supplemented by M&A. They see a growing total addressable market, especially in outsourcing, and have significant opportunities in markets like India and Japan. Resilient lines are expected to deliver $1.8 billion of SOP this year, growing at double-digit rates. ( ) -
Leasing Outlook
Q: How do you view office leasing growth prospects?
A: Management sees sustained strength in office leasing, with recent success driven by occupiers targeting prime space first, then moving to B and B+ buildings. They anticipate a continued slow return to the office but not to pre-COVID levels. They believe office space remains important to occupiers' future, and expect leasing success to continue into next year and beyond. ( ) -
Margin Expansion and Cost Actions
Q: Is margin expansion in GWS fully reflected, or more to come?
A: The majority of cost actions were implemented across Q2 and Q3, so the full run-rate impact is not yet seen. Margins in GWS are expected to improve over last year and continue improving into next year. Management anticipates steady improvement through resetting the cost base, focusing on higher-margin contracts, and M&A in technical services. ( , ) -
Share Buybacks and Capital Allocation
Q: How do you prioritize acquisitions versus share buybacks?
A: Management continues to balance M&A with share buybacks when it makes sense. Despite the higher share price and valuation, they remain interested in buybacks and believe the stock is trading at a significant discount to intrinsic value. They will consider more buybacks than in the past if the valuation remains attractive. ( )Q: Thoughts on starting a regular quarterly dividend?
A: They currently prefer the flexibility of buybacks and don't think a dividend is necessary, but it's something they evaluate over time. ( ) -
Data Center Opportunities
Q: What are CBRE's opportunities in the data center ecosystem?
A: CBRE has significant exposure to data centers across its businesses. Trammell Crow Company is capitalizing on land opportunities suitable for data centers. Turner & Townsend is project managing over 110 hyperscale data centers. CBRE manages between 700 and 800 data centers on behalf of occupiers. They recently acquired Direct Line, enhancing their capabilities. They have a data center sales business and are exploring strategies to extract more value in this space. ( , ) -
Rehiring in Capital Markets
Q: Do you need to rehire in capital markets to support growth?
A: Management indicates they have considerable capacity in mortgage origination and investment sales teams. While they are adding talent, they don't need to rehire to grow significantly from current levels. They continue investing in their transactional businesses and expect to add talent to both leasing and capital markets, but it's not necessary for growth. ( ) -
GWS Pipeline and Contracts
Q: Can you discuss GWS pipeline, first-generation vs existing?
A: CBRE is seeing an increase in first-generation outsourcing contracts, which take longer to convert but show significant progress. There's also significant progress in expansions and new wins within the existing client base. Growth often comes from expansions due to vast opportunities within large occupiers where CBRE already has relationships. ( ) -
Potential Spin-off of Trammell Crow
Q: Would you contemplate spinning off Trammell Crow?
A: Management is not considering divesting Trammell Crow Company. It generates high returns, interfaces productively with other parts of CBRE, and creates opportunities like seeding investment funds and collaborating on large projects. Trammell Crow also generates significant cash for investment across CBRE. ( ) -
Loan Servicing Business
Q: Why was loan servicing growth flat this quarter?
A: The underlying growth in loan servicing is 5%, but reported growth appears lower due to moving some escrow income from loan servicing to the commercial mortgage origination line. ( )
Key Metrics
Revenue by Segment - in Millions of USD | FY 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | FY 2014 | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | FY 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | FY 2016 | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | FY 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | FY 2018 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | FY 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | FY 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | FY 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Americas | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
EMEA | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Asia Pacific | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Global Investment Management | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Development Services | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Advisory Services | 1,853.9 | 2,041.7 | 2,012.8 | 2,590.6 | 8,499 | 1,904 | 2,218 | 2,395 | ||||||||||||||||||||||||||||||||||||||||||||||
- Leasing | 708.7 | 813.9 | 827.5 | 1,155.9 | 3,506 | 739 | 884 | 984 | ||||||||||||||||||||||||||||||||||||||||||||||
- Sales | 367.4 | 397.7 | 369.8 | 476.1 | 1,611 | 326 | 386 | 422 | ||||||||||||||||||||||||||||||||||||||||||||||
- Property Management | 441.2 | 477.1 | 461.1 | 528.6 | 1,908 | 490 | 555 | 560 | ||||||||||||||||||||||||||||||||||||||||||||||
- Valuation | 165.6 | 179.7 | 163.1 | 207.6 | 716 | 167 | 184 | 178 | ||||||||||||||||||||||||||||||||||||||||||||||
- Mortgage Origination | 70.9 | 32.6 | 36.9 | -2.4 | 138 | 30 | 44 | 44 | ||||||||||||||||||||||||||||||||||||||||||||||
- Loan Servicing | 77.5 | 18.1 | 19.4 | -42 | 73 | 20 | 22 | 16 | ||||||||||||||||||||||||||||||||||||||||||||||
Global Workplace Solutions | 5,337.7 | 5,426.1 | 5,648.7 | 6,102.5 | 22,515 | 5,809 | 5,944 | 6,346 | ||||||||||||||||||||||||||||||||||||||||||||||
- Facilities Management | 1,395.2 | 3,686.5 | 3,843.3 | 6,28 | 15,205 | 4,066 | 4,127 | 4,370 | ||||||||||||||||||||||||||||||||||||||||||||||
- Project Management | 734.8 | 1,739.5 | 1,805.3 | 3,030.4 | 7,310 | 1,743 | 1,817 | 1,976 | ||||||||||||||||||||||||||||||||||||||||||||||
Real Estate Investments | 223.8 | 255.7 | 210.4 | 262.1 | 952 | 228 | 232 | 302 | ||||||||||||||||||||||||||||||||||||||||||||||
- Investment Management | 147.5 | 151.3 | 136.8 | 156.4 | 592 | 149 | 149 | 196 | ||||||||||||||||||||||||||||||||||||||||||||||
- Development Services | 76.4 | 102.9 | 66.5 | 99.2 | 345 | 77 | 83 | 104 | ||||||||||||||||||||||||||||||||||||||||||||||
Corporate, Other, and Eliminations | -4.3 | -3.5 | -3.8 | -5.4 | -17 | -6 | -3 | -7 | ||||||||||||||||||||||||||||||||||||||||||||||
Total Revenue | 7,411.1 | 7,719.9 | 7,868.0 | 8,95 | 31,949 | 7,935 | 8,391 | 9,036 | ||||||||||||||||||||||||||||||||||||||||||||||
Revenue by Geography - in Millions of USD | FY 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | FY 2014 | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | FY 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | FY 2016 | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | FY 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | FY 2018 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | FY 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | FY 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | FY 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
United States | 4,144.6 | 4,211.1 | 4,274.409 | 4,827.89 | 17,458 | 4,422 | 4,670 | 5,210 | ||||||||||||||||||||||||||||||||||||||||||||||
United Kingdom | 995.4 | 1,056.0 | 1,100.462 | 1,241.14 | 4,393 | 1,085 | 1,195 | 1,257 | ||||||||||||||||||||||||||||||||||||||||||||||
All other countries | 2,271.1 | 2,452.8 | 2,493.175 | 2,880.93 | 10,098 | 2,428 | 2,526 | 2,569 | ||||||||||||||||||||||||||||||||||||||||||||||
Americas | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Europe, Middle East, and Africa (EMEA) | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Asia Pacific | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Global Investment Management | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Development Services | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Total Revenue | 7,411.1 | 7,719.9 | 7,868.046 | 8,949.95 | 31,949 | 7,935 | 8,391 | 9,036 | ||||||||||||||||||||||||||||||||||||||||||||||
KPIs - Metric | FY 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | FY 2014 | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | FY 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | FY 2016 | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | FY 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | FY 2018 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | FY 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | FY 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | FY 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
**AUM - Funds** | 66.0 | 64.8 | 64.2 | 65.3 | - | 64.2 | 64.5 | 67.0 | ||||||||||||||||||||||||||||||||||||||||||||||
**AUM - Separate Accounts** | 72.8 | 72.9 | 71.3 | 72.8 | - | 70.8 | 69.1 | 71.3 | ||||||||||||||||||||||||||||||||||||||||||||||
**AUM - Securities** | 10.1 | 9.9 | 8.7 | 9.4 | - | 9.0 | 8.9 | 10.0 | ||||||||||||||||||||||||||||||||||||||||||||||
**Unpaid Principal Balances** | 39.5 | 40.3 | 41.1 | 41.5 | - | 42.1 | 42.9 | 43.8 | ||||||||||||||||||||||||||||||||||||||||||||||
**Subject to Loss Sharing** | 35.8 | 36.8 | 37.5 | 38.0 | - | 38.7 | 39.5 | 40.4 |
Executive Team
Questions to Ask Management
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Given your assertion that CBRE doesn't need a capital markets recovery to surpass prior peak earnings in 2025, what specific strategies are you implementing to ensure growth in your resilient businesses if the capital markets recovery is slower than expected?
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You mentioned having considerable capacity in your mortgage origination and investment sales teams without the need to add talent materially; how do you plan to balance this with investing in growth and ensuring you aren't understaffed if there's a sharp uptick in capital markets activity?
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With the integration of the CBRE project management business with Turner & Townsend expected to start 2025 with considerable momentum, what challenges do you anticipate in merging these operations, and how will you address potential integration risks that could affect projected growth?
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Office leasing revenue increased significantly, fueled by accelerated demand; however, considering the uncertainties around return-to-office trends, how sustainable is this growth, and what are your expectations for office leasing activity if remote work continues to influence occupier decisions?
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Considering that the development arm like Trammell Crow Company can introduce earnings volatility and potentially contribute to a conglomerate discount, have you evaluated strategic options such as spinning off or restructuring to unlock shareholder value, especially given real estate asset managers' higher trading multiples?
Past Guidance
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: FY 2024
- Guidance:
- Full Year Core EPS: Raised to $4.95 to $5.05.
- Advisory Segment: Over 20% SOP growth expected.
- GWS Segment: SOP growth in the high teens range.
- REI Segment: Multiple development asset sales anticipated in Q4.
- Capital Markets: Investment sales revenue expected to grow by 30% in Q4.
- Overall Earnings: Confidence in achieving record EPS in 2025 .
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: FY 2024
- Guidance:
- Advisory Segment: Mid- to high teens SOP growth.
- GWS Segment: Mid-teens net revenue growth; SOP margin better than 11.3% from 2023.
- REI Segment: Improved SOP outlook due to large development asset sales in Q4.
- Overall Core EPS: Increased to $4.70 to $4.90.
- Fourth Quarter Expectations: Over 45% of full year EPS expected.
- Longer-term Outlook: Confidence in record EPS in 2025 .
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: FY 2024
- Guidance:
- Core EPS: Expected to be $4.25 to $4.65.
- GWS Segment: Mid-teens SOP growth; revenue growth back-end loaded.
- Advisory Services: Mid-teens SOP growth.
- REI Segment: Slight SOP decline expected.
- Free Cash Flow: Approximately $1 billion.
- Tax Rate: Over 19%, excluding one-time benefits.
- EBITDA Margins: Expected to increase.
- Revenue Growth in GWS: Nearly $900 million anticipated .
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: FY 2024
- Guidance:
- Core EPS: $4.25 to $4.65.
- Advisory Segment: Mid- to high single-digit net revenue growth; mid-teens SOP growth.
- Capital Markets Revenue: Mid-single digits growth.
- Leasing: Modest growth.
- Remaining Advisory Business Lines: Low double-digit net revenue growth.
- GWS Segment: Mid-teens SOP growth.
- REI Segment: SOP slightly below 2023.
- Investment Management: Modest operating profit increase.
- Free Cash Flow: At least $1 billion.
- Net Leverage: Expected to end 2024 around one turn.
- Cost Savings: $150 million run rate cost savings initiative .
Competitors
Competitors mentioned in the company's latest 10K filing.
- JLL, a global commercial real estate services company publicly traded in the U.S.
- Colliers International Group Inc. (CIGI), a company with significant commercial real estate or real estate capital markets businesses
- Cushman & Wakefield plc (CWK), a company with significant commercial real estate or real estate capital markets businesses
- ISS A/S (ISS), a company with significant commercial real estate or real estate capital markets businesses
- Marcus & Millichap, Inc. (MMI), a company with significant commercial real estate or real estate capital markets businesses
- Newmark Group Inc. (NMRK), a company with significant commercial real estate or real estate capital markets businesses
- Savills plc (SVS.L), a company with significant commercial real estate or real estate capital markets businesses
- Walker & Dunlop, Inc. (WD), a company with significant commercial real estate or real estate capital markets businesses
Latest news
Recent developments and announcements about CBRE.
Financial Reporting
- New BOE Segment: Combines CBRE's Enterprise Facilities Management, Local Facilities Management, Property Management, and Industrious.
- Revenue Growth: Industrious has achieved a compound annual revenue growth rate of over 50% since 2021, with a footprint spanning 200+ units across 65+ cities.
- Leadership Updates: Jamie Hodari, CEO and co-founder of Industrious, will lead the BOE segment as CEO and Chief Commercial Officer.
Earnings Report
CBRE Releases Preliminary Full-Year 2024 Revenue Results and Announces New Business Segment
On January 14, 2025, CBRE Group, Inc. announced its preliminary full-year 2024 revenue results for its newly created Building Operations & Experience (BOE) segment. This segment integrates building operations, workplace experience, and property management to deliver scalable solutions for various facilities, including offices, data centers, and warehouses. The BOE segment generated approximately $20 billion in combined revenue in 2024, reflecting CBRE's commitment to innovation and operational excellence.
Additionally, CBRE disclosed its acquisition of Industrious National Management Company, LLC, a leader in flexible workplace solutions. The acquisition, valued at approximately $800 million, is expected to be immediately accretive to CBRE's 2025 core EBITDA and free cash flow. This move underscores CBRE's confidence in the growth potential of the flexible workplace market and its strategy to enhance workplace experience and operations.
Key Highlights:
This strategic development positions CBRE to capitalize on secular trends in workplace flexibility and operational efficiency, reinforcing its leadership in the commercial real estate sector.
Corporate Leadership
Leadership Change
Vincent Clancy is joining the CBRE Board of Directors. He is the CEO and Chair of Turner & Townsend, which has been a majority-owned subsidiary of CBRE since 2021. Clancy has been with Turner & Townsend since 1989 and has led the company to significant growth. Under his leadership, the company's revenue increased from $225 million in 2008 to over $1.9 billion in 2023. Clancy's appointment follows the completion of CBRE's plan to combine its project management business with Turner & Townsend, creating a unified project management business.
Board Change
Vincent Clancy has joined the CBRE Board of Directors as of January 2, 2025. He is the CEO and Chair of Turner & Townsend, a majority-owned subsidiary of CBRE. Clancy brings over 35 years of experience in program and project management, with significant contributions to Turner & Townsend's growth.
Leadership Change
Adam Gallistel and Andy Glanzman have been named Co-Chief Executive Officers of CBRE Investment Management. Gallistel will focus on investment strategy and performance, joining from GIC on April 1, 2025. Glanzman will handle business strategy and operations, effective immediately. Daniel Queenan, the previous CEO of Real Estate Investments, will now lead the Trammell Crow Company as CEO .
Financial Actions
Debt Issuance
On December 2, 2024, CBRE Services, Inc., a wholly-owned subsidiary of CBRE Group, Inc., established a commercial paper program allowing it to issue up to $3.5 billion in short-term, unsecured, and unsubordinated commercial paper notes. These notes are guaranteed by CBRE Group, Inc. on an unsecured and unsubordinated basis. The proceeds from these notes are intended for general corporate purposes. This program is backed by the company's unsecured revolving credit facility, ensuring liquidity support. The issuance of these notes could potentially increase the company's liabilities, impacting its balance sheet by adding short-term debt obligations. However, since the notes are unsecured, they do not affect the company's asset base directly but could influence its financial health by increasing leverage ratios if fully utilized .