Guidance Increase and Drivers
Q: How much of guidance raise is due to development gains?
A: Emma explained that they increased their full-year core EPS guidance to $4.70 to $4.90, up from $4.25 to $4.65 previously, driven by higher revenue and SOP in each segment. Approximately half of the guidance increase comes from the REI segment, primarily due to large development asset sales expected to be completed in Q4, signaling an upturn in this business.

Transaction Activity Outlook
Q: What are you seeing in transaction activity and pipelines?
A: Bob noted that CBRE believes their advisory segment is on the cusp of an inflection point. They saw 13% growth in U.S. leasing revenue and a 20% increase in mortgage origination fees in Q2, exceeding expectations. Leasing momentum has continued into July, supported by a pickup in demand in many large U.S. office markets. Emma added that property sales revenue declined only 2% on a local currency basis, indicating stabilization.

GWS Margins and Sustainability
Q: Is second-half margin improvement sustainable for GWS?
A: Emma stated that GWS net SOP margin improved by 20 basis points from Q1 to 10.1%, better than expected due to decisive cost actions. They expect full-year margin expansion in GWS, with margins higher in the second half, but not yet reaching their longer-term target run rate. Going into next year, the run rate will be even higher than where they get to for the full year.

Turner & Townsend Strategy
Q: Would you consider spinning off Turner & Townsend?
A: Bob emphasized that while Turner & Townsend is different from traditional commercial real estate businesses, it fits nicely within CBRE due to significant synergies. Since CBRE acquired a 60% ownership in November 2021, Turner & Townsend's net revenue has grown at a compounded rate of nearly 20%. CBRE has no plans to spin it off and sees great long-term value as part of the company.

Capital Deployment Priorities
Q: How do you weigh M&A versus share buybacks?
A: Emma explained that CBRE prioritizes M&A, focusing on strategic, highly accretive acquisitions that drive strong returns exceeding a hurdle rate above mid-teens. If they don't have significant M&A opportunities, they will buy back shares. In the quarter, they repurchased $50 million worth of shares at an average price of $87.

Office Leasing Trends
Q: Is increased demand in all office types or just Class A?
A: Bob noted that Class A office space is especially attractive due to companies focusing on employee experience and productivity. Beyond New York, they are seeing considerable pickup in tech markets like the Bay Area and Austin, driven by AI activity.

REI Development Gains Sustainability
Q: Are development gains sustainable or one-time?
A: Emma indicated they expect to generate as much as $750 million in profits from development over the next four years, with significant earnings embedded in their in-process and pipeline portfolio of nearly $32 billion. Bob added that this does not depend on good luck with asset transitions; it's based on their asset-by-asset review.

Investment Management Fundraising
Q: What are you seeing in fundraising and AUM trends?
A: Emma stated they have seen a pickup in activity, expecting increased appetite for both core and enhanced return strategies. AUM is now more than $142 billion, with $3.6 billion raised thus far in the year.

Talent Retention and Cost Containment
Q: How are you balancing cost cuts with talent retention?
A: Bob explained that CBRE focuses on eliminating costs that don't contribute to success while investing aggressively in areas that do, such as good office space, technology, and talent. They have a transformation office focused on making long-term sustainable changes, aiming for consistent operating leverage over time.