Dive Brief:
- CBRE reported strong growth in the second quarter of 2024, exceeding expectations across all three of its business segments, amid leasing revenue growth in the Americas and revenue growth in its Global Workplace Solutions business.
- The company’s facilities management net revenue grew 18% year over year to almost $1.7 billion, according to the company’s second quarter earnings presentation. CBRE committed nearly $300 million to facilities management mergers and acquisitions in the second quarter, including the acquisition of Direct Line Global and a local facilities management business in Canada, CBRE Chief Financial Officer Emma Giamartino said on an earnings call Thursday.
- “You should expect to see us do more deals in the facilities management space and other spaces that you didn't expect, because they aren't highly visible by others in the market,” CBRE CEO Bob Sulentic said on the call.
Dive Insight:
CBRE’s overarching GWS business grew net revenue 16% year over year to nearly $2.55 billion, led by strong business wins, and a healthy balance of new clients and expansions, according to the company’s second quarter earnings presentation. In addition to strong sales conversions, the firm’s GWS pipeline is up more than 6% year-to-date, led by the technology and energy sectors, it said.
The company believes its facilities management business has a low-level-digit organic revenue growth trajectory for the very long term, supported by both global enterprise clients and its local business, Giamartino said on the call.
The GWS segment’s project management net revenue grew 11% year over year to $850 million in the second quarter. This growth was led by continued strength from Turner and Townsend, CBRE’s majority-owned subsidiary that provides program management, cost consultancy and project management services globally. Last month, CBRE announced plans to combine its project management business with Turner and Townsend, creating a business with “more than 20,000 employees serving clients in over 60 countries,” Sulentic said in a statement at the time.
“The combination of Turner and Townsend and CBRE project management will create significant revenue synergies between the two businesses [and] client bases, yield cost synergies [and] economies of scale and eliminate redundant functions,” Sulentic said on the second quarter earnings call. Turner and Townsend manages large, complex programs in infrastructure, natural resources and green energy sectors that span many years and include an array of individual projects, Sulentic noted.
Sulentic said that the company’s local facilities management business, originally started with a focus on the UK in 2013, is now a global business that reached $3.1 billion in gross revenue in 2023. “The business has significant headroom, especially in North America,” Giamartino said.
Within CBRE’s Advisory Services business, U.S. office leasing revenue grew in the double digits, led by strength in New York, according to CBRE’s second quarter earnings presentation. The firm’s Advisory Services business showed growth in every line of business, except property sales, which showed signs of stabilizing, declining only 2% globally in local currency, CBRE said.
“We have seen evidence of valuation stabilizing in certain preferred asset classes in the U.S. and Europe. Investor sentiment continues to improve with increased appetite for both core and enhanced return strategies,” Giamartino said on the call.
“Class A office space is really attractive now, because so many companies are focused on the experience [and] productivity of their employees,” Sulentic added, noting that the firm is seeing a pickup in leasing activity in the New York, Bay Area and Austin, Texas tech markets, driven by artificial intelligence.
The company forecasts mid- to high-teens growth in segment operating profit for its advisory services business and stronger than expected transaction activity and mid-teens growth in net-revenue for the GWS segment for the full fiscal 2024 year. CBRE’s consolidated full-year net segment operating margin is expected to surpass the 11.3% achieved in 2023, due to the positive impact of facilities management acquisitions in the second quarter as well as cost-saving measures, Giamartino said.
