CBRE (formerly CB Richard Ellis Group) is all about location, location, location -- not to mention ubicación, l'emplacement, posizione, and Standort. As the world's largest commercial real estate services companies by revenue, CBRE provides property and facilities management, leasing, brokerage, appraisal and valuation, asset management, financing, and market research services from more than 400 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 57% of sales during 2015. The next largest is the EMEA division (28% 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 (4% 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. The majority of its revenue during 2015 came from its fee-for-service business, which included property and facilities management, mortgage loan servicing, and investment management.
California-based CBRE Group generated 55% of its revenue from the US during 2015, while the UK market represented another 18% of the broker's revenue. The global real estate services firm is also active in 60-plus other countries worldwide, including China, France, Germany, Ireland, the Netherlands, Spain, Switzerland, South Korea, and Thailand.
Sales and Marketing
CBRE reported that it received business from more than 90 of the Fortune 100 companies during 2015. 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 $62.7 million on business promotion and advertising costs in 2015, up from $55.6 million and $49.4 million in 2014 and 2013, 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 20% to a record $10.8 billion in 2015, driven by higher property, facilities and project management fees (up 16%), increased sales (up 18%), and leasing (up 15.5%) activity. Most of the revenue growth came from its Americas division, which grew 19% mostly thanks to higher fee-based management income. Meanwhile, the EMEA division's revenue grew by 28% thanks to the 2015 acquisition of Global Workforce Solutions (GWS). Asia Pacific income grew 17% thanks to the division's mid-2014 acquisition of a former affiliate in Thailand and thanks to contributions from the GWS acquisition.
Higher revenue in 2015 drove CBRE's net income up 13% to $547 million. The firm's operating cash levels fell 1% to $652 million despite higher earnings, mostly as the company paid more in bonuses and commissions and increased its real estate held for development.
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, paid $1.5 billion to buy Johnson Controls' enterprise facilities management provider Global Workplace Solutions (GWS), 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 in 2015, 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.
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.)