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CBRE sees ‘inflection point’ for advisory business

News

Tim Burke

26 July 2024

Investment/finance

CBRE’s chief executive believes the agency’s advisory business is “on the cusp of an inflection point” as real estate markets recover.

On an analyst call following CBRE’s second-quarter results, Bob Sulentic said that all three of the group’s business segments – advisory services, global workplace solutions and real estate investments – “outperformed expectations for both net revenue and segment operating profits”.

The agency has boosted its guidance for full-year earnings per share to a range of $4.70 to $4.90, up from $4.25 to $4.65.

On the advisory side, Sulentic said the firm’s investment sales brokers and mortgage brokers “are more active and have stronger pipelines than they did before”.

“[In] our work with office tenants, where we measure through all kinds of different mechanisms and surveys, sentiment has gotten better,” he said. “So we have this anecdotal evidence from the second quarter and then third quarter, and then we have more technical evidence that causes us to think that we may well have gone through an inflection point on transactions that’s going to impact leasing, that’s going to impact sales, that’s going to impact mortgage brokerage, and it’s going to have a really nice impact in the fourth quarter on the profitability of our development business.”

Chief financial officer Emma Giamartino added: “In the US, we are seeing the greatest strength in office leasing. Industrial has been declining slightly, but office is more than making up for that. And so continuing into July, we are seeing early signs of accelerating growth within leasing. We think that would be a great outcome, so we are expecting that to continue through the remainder of the year.”

She continued: “On the sales side, we do see strong signs that the sales market is stabilising. Globally, we are still seeing declines, but you could argue that it’s relatively flat globally. Our [sales] revenue in the quarter was only down 2% on a local currency basis. And we are actually seeing going into July – and again, it’s very early, so we are not going to call anything – but we are starting to see an uptick in activity in the US sales market.”

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CBRE’s chief executive believes the agency’s advisory business is “on the cusp of an inflection point” as real estate markets recover. On an analyst call following CBRE’s second-quarter results, Bob Sulentic said that all three of the group’s business segments – advisory services, global workplace solutions and real estate investments – “outperformed expectations for both net revenue and segment operating profits”. The agency has boosted its guidance for full-year earnings per share to a range of $4.70 to $4.90, up from $4.25 to $4.65. On the advisory side, Sulentic said the firm’s investment sales brokers and mortgage brokers “are more active and have stronger pipelines than they did before”. “[In] our work with office tenants, where we measure through all kinds of different mechanisms and surveys, sentiment has gotten better,” he said. “So we have this anecdotal evidence from the second quarter and then third quarter, and then we have more technical evidence that causes us to think that we may well have gone through an inflection point on transactions that’s going to impact leasing, that’s going to impact sales, that’s going to impact mortgage brokerage, and it’s going to have a really nice impact in the fourth quarter on the profitability of our development business.” Chief financial officer Emma Giamartino added: “In the US, we are seeing the greatest strength in office leasing. Industrial has been declining slightly, but office is more than making up for that. And so continuing into July, we are seeing early signs of accelerating growth within leasing. We think that would be a great outcome, so we are expecting that to continue through the remainder of the year.” She continued: “On the sales side, we do see strong signs that the sales market is stabilising. Globally, we are still seeing declines, but you could argue that it’s relatively flat globally. Our [sales] revenue in the quarter was only down 2% on a local currency basis. And we are actually seeing going into July – and again, it’s very early, so we are not going to call anything – but we are starting to see an uptick in activity in the US sales market.”