The chief executive of CBRE sees pressure on the office market lessening as the Covid-19 vaccine rollout progresses and companies begin to reopen the workplace – but he said there will be no return to the sector’s pre-pandemic state.
On a call with analysts to discuss the agency’s first-quarter results, president and chief executive Bob Sulentic stood by an earlier estimate that once the pandemic passes office occupancy will stand at around 85% of pre-pandemic levels.
“We are intensely engaged with occupiers here in the US and around the world. We believe that the office will never be quite what it was prior to the pandemic. But we also believe it will be very different than it is today,” he said.
“There will certainly be a hybrid scenario where there will be some work from home, some work from flex space, and then, of course, some work from offices. We think the configuration of offices will change, and that will create some real opportunity for us to do work for our clients.”
Occupiers are picking up the pace with which they look at making new real estate decisions, he added, with only the best buildings in focus: “More and more of them are deciding to have to address it. Better-quality buildings with better infrastructure, better HVAC systems, better circulation around the building, better elevator systems, are going to be in more demand as a result of this circumstance for very obvious reasons.”
CBRE posted a strong set of quarterly results, including record first-quarter revenue, and Sulentic highlighted the UK as an area of “solid growth” helping to offset a more muted performance in the Americas.
The chief executive now expects the agency’s earnings per share in 2021 to surpass the 2019 level despite “continued pressure” on the office market. That pressure is likely to lessen as the year progresses, he added. “We strongly believe the pressures on office will recede from today’s extreme levels, as vaccine rollouts continue, and companies settle into new normal work regimes.”
Until then, the team said, other sectors are helping to make up any shortfall in office activity. Chief financial offer Leah Sterns said: “Surging demand for warehouse, industrial distribution, life sciences, as well as digital infrastructure, are certainly helping to mitigate the acute declines that we’re seeing across office.
“We have positioned ourselves to be aligned with those very important areas of demand in the market today.”
On the M&A outlook following the company’s investment in flexible officer provider Industrious, Sulentic said more targets are in CBRE’s sights.
“We have a substantial M&A pipeline and pipeline of alternatives or investment opportunities that we would characterise more as sponsorship-type opportunities where we could invest in a company and then help that company be more successful and it would be on its own,” he said. “You should expect to see us make some very nice investments over the coming months.”
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