EPS Guidance
Q: Can you discuss any drags on EPS from corporate expenses?
A: Management expects EPS slightly above the midpoint of their range, with some conservatism due to volatile rates. Corporate expenses will tick up slightly, mainly because bonuses and discretionary compensation will reset to levels aligned with improved financial performance.

2025 Outlook
Q: Has your confidence in returning to peak EPS by 2025 changed?
A: Management maintains strong visibility into returning to peak EPS levels by 2025. They do not need transactional SOP to return to prior peak levels to achieve this, and confidence has not declined since last quarter. The main risk is a delayed recovery this year, which could make the hurdle higher next year.

Capital Allocation
Q: Where do share buybacks fit into your capital deployment plans?
A: The company balances M&A, co-investments in REI, and share buybacks. Currently, they favor M&A due to attractive opportunities like the J&J acquisition, which offers returns well above the cost of capital and is more accretive than buybacks. The M&A pipeline is building, and they expect the focus on M&A to continue this year.

Cost Savings Impact
Q: Are cost savings initiatives factored into your outlook?
A: Yes, $150 million of run-rate cost savings are embedded, primarily within the advisory segment. About half will be realized this year, resulting in approximately 100 basis points of margin expansion in advisory. These savings largely offset higher bonuses and profit-sharing tied to improved financial performance.

Margin Expectations
Q: How are you thinking about margins in advisory and GWS?
A: Advisory margins are expected to improve by about 100 basis points in 2024 due to cost reductions and transaction recovery. GWS margins should remain steady or increase slightly, with the J&J acquisition being slightly accretive. A gradual margin increase is expected as they continue to differentiate the business.

M&A Appetite
Q: Are you pursuing other large acquisitions after J&J?
A: M&A is fundamental to CBRE's growth strategy. They have a strong balance sheet and are committed to building the business through smart acquisitions that align with their right to win in secularly favored areas. Expect continued M&A activity, but they won't force deals that aren't financially prudent or are hard to integrate.

Capital Markets Outlook
Q: How is capital markets activity trending, and how dependent is it on rates?
A: After significant declines in 2023, activity decelerated less in Q4, with December showing single-digit declines. For 2024, they expect mid-single-digit global growth in capital markets activity, assuming no significant uplift. Improvement is dependent on interest rate trends; faster recovery or lower rates could present upside.

Office Leasing Outlook
Q: What gives you confidence that office leasing has bottomed?
A: Management believes office leasing has stabilized despite lower occupancy and persistent remote work trends. There is widespread corporate pressure to bring employees back, and companies are investing in Class A spaces to enhance employee experience. Class A buildings are seeing record rents, while lower-quality buildings struggle. They anticipate the office asset class to remain significant with better future prospects.

Multifamily Market
Q: Do you expect issues in multifamily volumes or Trammell Crow returns?
A: Although there is pressure in multifamily due to recent developments and cost of leverage, management is bullish long-term. Trammell Crow is underwriting new projects at returns consistent with historical levels. They expect the market to self-correct over the next couple of years, with factors like high mortgage costs driving rental demand.

Transactional Margins
Q: What are incremental margins on the transactional side?
A: Incremental margins in the transactional business are in the low to mid-30% range across capital markets and leasing. A 5% change in leasing results in a 3% change in EPS, while a 5% change in sales leads to a 2% EPS change.

REI Development Returns
Q: How are development costs and return hurdles trending in REI?
A: Development costs are coming under control, with stabilization in cap rates and rental rate growth. CBRE is underwriting projects with spreads that should deliver profitability consistent with historical levels. They have secured a significant volume of development sites with attractive returns due to reduced competition and their strong balance sheet.

Infrastructure Focus
Q: Is infrastructure a strategic target for M&A or investment?
A: CBRE recognizes the blurred lines between real estate and infrastructure, with exposure in areas like data centers. They have capabilities through Turner & Townsend and Trammell Crow in infrastructure-related services and development. Over time, they aim to do more in infrastructure, but real estate remains their core business for now.