CBRE (formerly CB Richard Ellis Group) is all about location, location, location -- not to mention ubicación, l'emplacement, posizione, and Standort. One of the world's largest commercial real estate services companies, CBRE provides property and facilities management, leasing, brokerage, appraisal and valuation, asset management, financing, and market research services from around 370 offices worldwide, and manages 1.5 billion sq. ft. of commercial space for third-party owners and occupants. Subsidiary Trammell Crow provides property development services for corporate and institutional clients, primarily in the US. CBRE Global Investors manages real estate investments for institutional clients.
CBRE operates in five segments: the Americas; Europe, the Middle East, and Africa (EMEA); the Asia/Pacific region; global investment management (handled by CBRE Global Investors); and development services (handled by Trammell Crow).
The Americas division, which includes the US, Canada, and Latin America, is its largest, accounting for nearly 60% of all sales. The next largest is the EMEA division (25% of revenue), which operates in over 40 countries in the region, with its largest operations in France, Germany, Italy, the Netherlands, Spain and the UK. Its Asia Pacific segment (10% of revenue) operates in more than a dozen countries mostly in Greater China, India, Japan, Singapore, South Korea, Thailand and Vietnam. CBRE Global Investors (5% of revenue) manages investments for pension funds, insurance companies, sovereign wealth funds, foundations, endowments, and other institutional investors targeting diversification through real estate investment.
Most of CBRE's revenue comes from management fees on a contractual or per-project basis and from transaction-based commissions. About 46% of its 2014 revenue came from its fee-for-service business, which included property and facilities management, mortgage loan servicing, and investment management.
The US is California-based CBRE's largest market, accounting for more than 55% of its revenue, with transactions originating in California accounting for about 10% of total revenue in 2014. The UK market represents nearly 20%. The global real estate services firm is active in around 70 countries worldwide, including Bahrain, Brazil, Canada, China, Indonesia, Korea, Russia, South Africa, Thailand, and Vietnam.
Sales and Marketing
CBRE reported that it received business from 85 of the Fortune 100 companies during 2014. Some of its customers included Citigroup, Cobalt Capital Partners, CW Capital Asset Management LLC, Fairmont Hotels and Resorts, K2M, Microsoft, Standard Chartered Bank, Intercontinental Exchange Group, Korea Post, and Sprint, among others.
CBRE has been ramping up its advertising spend in recent years. The firm spent $55.6 million on business promotion and advertising costs in 2014, up from $49.4 million and $43.7 million in 2013 and 2012, respectively.
CBRE's revenues and profits have been rising over the past several years as commercial real estate markets have improved with strengthened economies around the world. Lower vacancies and higher property valuations have also led to higher rental rates; all of which have created a more favorable business environment for CBRE.
The firm's revenue jumped 26% to a record $9.05 billion in 2014, driven by higher property, facilities and project management fees (up 16%), increased sales (up 19.7%), and leasing (up 16.2%) activity. Most of the revenue growth came from its EMEA division, which nearly doubled its income during the year thanks to its 2013 Norland acquisition and overall stronger business growth in the region. The America's division grew by 16% thanks to higher property, facilities, and project management fees, as well as improved leasing, sales and commercial mortgage brokerage activities. Asia Pacific income grew by 11% thanks to better performance in several countries, most notably in Australia, India, and Japan (in the properties, facilities and project management, and sales and leasing businesses).
Higher revenue in 2014 drove CBRE's net income up 53% to $484 million. The firm's operating cash levels fell 11% to $662 million despite higher earnings, mostly due unfavorable working capital changes related to an increase in receivables.
CBRE expects acquisitions to continue to drive growth. The firm is continuing to expand its already considerable geographic reach and broaden its service offerings by making fill-in acquisitions in regional markets that complement or expand existing operations. CBRE's strategy is to be the leading firm in each of its major business lines.
Trends that began in 2010 have continued to favor CBRE's global growth aspirations. Commercial real estate markets have stabilized. Vacancy rates have decreased, rents have stabilized or edged up, credit is more widely available, and property sales and leasing activity is increasing.
Mergers and Acquisitions
In 2015, bought Johnson Controls' enterprise facilities management provider Global Workplace Solutions, the largest facilities manager outside of the US, complementing its firm grip on facilities management in the Americas market. CBRE Global Workplace Solutions, as the acquired unit is now called, serves a blue-chip roster of large occupiers mostly in the financial services, healthcare, industrial/manufacturing, life sciences, technology, and communications industries.
Also that year, CBRE purchased PKF Consulting, a leading advisory, consulting, and research firm in Canada that specialized in the Canadian hospitality and tourism industries, following its acquisition of PKF Consulting USA in 2014. Other 2015 acquisitions included the purchase of a Texas-based commercial real estate firm specializing in retail services; and US-based systems integrator and energy management services provider Environmental Systems Inc (ESI).
During 2014, CBRE boosted its service offerings after making 11 in-fill acquisitions around the world, including: its purchase of technical and economic consulting firm VALTEQ Gesellschaft mbH and its subsidiaries (which it integrated into its Building Consultancy group in Germany and the larger European region); its acquisition of former affiliate companies in Thailand, Greenville, South Carolina, Louisville (Kentucky), Oklahoma City, and Tulsa (Oklahoma); a Chicago-based commercial real estate service provider; a New York-based valuation and advisory business; a consulting and advisory firm in the US hotels sector; a Swiss shopping center management leasing and consulting company; and project management companies in Germany (Preuss Gesellschaft mbH and its subsidiaries) and Austria.
In 2013, CBRE acquired technical engineering services firm Norland Managed Services Ltd., which specialized in commercial buildings in the UK and Ireland and had a growing customer base in the US and Singapore.
The firm also in 2013 purchased The CAC Group, a top commercial real estate services firm based in San Francisco. The move made CBRE the #1 provider of commercial property management and leasing in the market. CBRE also bought property and asset management specialist SOGESMAINT-CBRE to build on its previous acquisitions in the Netherlands, the Czech Republic, Slovakia, Poland, Latvia, and Lithuania. Additionally, in 2013 CBRE acquired commercial real estate services business Resource Estate Partners and TPA Realty Services, both based in Atlanta, where it's working to boost its market share.
CBRE in 2011 made one of its largest deals in several years. The company bolstered its global real estate investment management business with the acquisition of ING Groep's real estate investment management operations for some $940 million. The Dutch firm's real estate investment management business in Asia and Europe was merged into CBRE Global Investors and more than doubled the size of the unit. The transaction also included US-based Clarion Real Estate Securities and interests in commercial real estate co-investments. (The ING deal helped boost CBRE's investment management revenue by more than 60% in 2012.)