Over the past two decades, CBRE has spent some £5bn on acquiring significant stakes in property firms and with its £960m acquisition of a 60% stake in London-based project manager Turner & Townsend this week, the firm is increasingly breaking away from the “agent” mould it has traditionally been cast in.
CBRE president and chief executive Bob Sulentic describes the business as “a very large commercial real estate services firm, now increasingly a real assets firm”.
He tells EG that this latest deal further underlines its strategy to become a key operator across four dimensions: asset types, leading into real assets and infrastructure; services, where cost consultancy has been added to conventional broker services such as facilities management; client types; and geographies.
“Those four dimensions offer us the ability to move into areas with secular tailwinds, and this combination is particularly powerful,” says Sulentic.
Wave of opportunity
Crucially for Sulentic, the deal leverages a “tidal wave of opportunity” created by client demand for carbon neutrality in commercial real estate. This same demand prompted a SPAC sponsored by CBRE to enter into a business combination earlier this month with Connecticut-based solar power provider Altus Power, a transaction with implied equity value of $1.6bn (£1.1bn). These factors promise to set CBRE apart from the competition.
“We have a very strong project management business, but that business has been tied directly to our brokerage business… and to our facilities management business,” adds Sulentic.
“T&T is a big, complex projects business. It’s infrastructure, green energy – it goes well beyond anything we do in those areas, and those are in big demand with our clients. If we are able to put these two businesses together, we would have very little overlap and would dramatically add to the capability set we could offer to the clients we have around the world.”
Where overseas markets are concerned, Sulentic outlined “some, but minimal” overlap between CBRE and T&T, adding that the partnership will give CBRE greater access to growing marketplaces in Asia and the Middle East. CBRE’s own presence covers more than 100 countries, while T&T operates across 46. Client-wise, T&T will give CBRE more access to government bodies, in particular.
The operating agreement has been “several years” in the making, says Sulentic, adding that the timing was largely driven by T&T.
Significant demand
“We see a really strong market ahead of us,” says Vincent Clancy, chairman and chief executive at T&T. “We are entering a phase where we are seeing demand ramp up for capital programmes around the world.” He adds that scale was “a big factor” for the 7,000-employee firm.
“We are seeing a big increase in corporate activity in response to changing business models, particularly around digital,” says Clancy.
“We are seeing cities having to rebuild themselves and a big uptick in infrastructure expenditure. And we are entering a period when the world will transition to zero carbon, which will create significant demand from a project management point of view.
“We have been looking for a long time at how we step-change our capability and ramp up to [take advantage of] the opportunity. The partnership with CBRE was an amazing way for us to achieve a number of goals for future expansion.”
The deal is scheduled to complete before the end of the year.
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