CBRE(CBRE)2023-10-27 18:12Financial Data and Key Metrics Changes - The company has lowered its expectations for 2023 core EPS to a mid-30% decrease from the previously anticipated 20% to 25% decline, primarily due to interest rate-sensitive businesses [71][98] - The resilient and secularly favored businesses generated over 7 million, reflecting few U.S. development asset sales and lower operating profit in the Investment Management business [86] Market Data and Key Metrics Changes - Leasing revenue declined by 23% in the U.S., with the number of leases completed down only 10%, indicating a cautious market [76] - APAC showed the best relative performance in advisory services with revenue up 3%, led by strong growth in Japan [74] - Economic uncertainty continues to delay occupier decision-making, particularly for large office and industrial deals [75] Company Strategy and Development Direction - The company is focused on co-investments in value-add opportunistic and development strategies, committing over 350 million year-to-date [72] - M&A opportunities are being evaluated across all business lines, with a focus on resilient and cyclically favored areas, while maintaining discipline around pricing [93][104] - The company is committed to reducing costs across its lines of business, targeting 150 million in reductions primarily in transactional areas [96] Management's Comments on Operating Environment and Future Outlook - Management believes the recovery in capital markets will take longer than initially anticipated, now expected in the second half of next year [71][32] - There is significant capital on the sidelines ready to enter commercial real estate once interest rates stabilize and valuations are perceived to have bottomed out [9][32] - The company anticipates that 2023 will be the trough for earnings, with meaningful growth expected in 2024 [99] Other Important Information - The company has committed almost $200 million year-to-date in co-investment capital to support higher return strategies [88] - The GWS pipeline reached a new record, with one-third coming from first-generation outsourcing clients, reflecting increased interest in reducing occupancy costs [84] Q&A Session Summary Question: What are the revenue trends between office versus industrial leasing? - Office leasing is performing in-line with expectations, with a mid-15% decline anticipated, while industrial leasing is slightly below expectations due to large occupiers resetting their space [2][10] Question: What is the outlook for leasing revenues in 2024? - Management does not expect a decline in leasing revenues next year to be greater than this year, with confidence in GWS delivering double-digit growth [10][14] Question: How is the company approaching M&A in the current environment? - The company is looking broadly across its business for M&A opportunities but is being disciplined about pricing due to increased costs of capital and valuation gaps [93][104] Question: What is the impact of economic uncertainty on GWS growth? - Economic slowdowns typically lead companies to focus on cost savings, which can benefit GWS as businesses seek to outsource real estate operations [51][52] Question: How does the company view the macroeconomic environment affecting its outlook? - Management believes that uncertainty around interest rates is a significant factor affecting decision-making and that a recovery in transactions is expected in the second half of next year [31][45]