If CBRE grows at the same rate over the next decade as it has done over the past one, it will be posting full-year revenues of £16.9bn come February 2025.
In today’s terms, that would make it the 102nd-largest economy in the world, sandwiched between Estonia and Zambia.
A decade ago, when CBRE first listed, its current scale was scarcely imaginable.
Indeed its global revenues on listing in 2004 were roughly the same as those generated in Europe, the Middle East and Africa alone last year and the services it offers and the markets in which it operates are broader than 10 years ago.
So what will it – and the other big agents – look like come 2025?
Just how big can the big boys get and what will that mean for everyone else?
Shape-shifting services
EMEA executive chairman Mike Strong has overseen much of this revolution.
As he points out, if there has been one big shift in the shape of CBRE over the past 10 years – other than its obvious geographic expansion – it has been the change in the nature of the services that generate most of its revenues.
In 2006 71% of the company’s earnings came from transactional work including leasing and capital markets advice. Last year that figure was 47%.
Wholesale real estate corporate outsourcing was in its infancy in 2006, accounting for just 27% of CBRE’s income.
Even today it is probably only a teenager, with “at most” 25% of corporates now fully signed up to the idea, according to Strong. Yet it now accounts for 51% of CBRE’s group revenues.
This emphasis on outsourcing was highlighted by the company’s last major acquisition, Norland, an engineering services firm, which has allowed CBRE to bundle ever more services into a single contract, and sums up the direction of travel.
But if the company has got a lot more corporate in its outlook and its offering, it hasn’t done so in its management, according to Strong.
A cursory look at the management of the top landlords highlights how the faces at the top of listed real estate businesses have changed, with career bankers replacing chartered surveyors, bringing with them the financial wizardry that shareholders demand.
But not so at the agents, it seems.
CBRE is now and always will be run by agents, according to Strong, who has himself spent 42 years at the firm.
That broker-led approach has shaped CBRE’s growth over the past decade, with the company growing in large part through acquisitions of niche agents.
It is a trend likely to continue in the next 10 years, with CBRE set on filling gaps in its geographic and service offering, expanding the services offered by Norland out across the rest of Europe.
That push to provide a full service has seen the company grow substantial teams in what might once have been considered non-core areas.
“We have got currently 500 people around our global organisation looking at nothing else but research,” Strong says.
But despite this function creep, even the biggest property agents remain relatively narrow compared with the big four professional advisers.
CBRE’s global revenues in 2014 scarcely surpassed those generated by PwC’s accounting division alone. And while that may not be a wholly fair comparison, it does provide a useful indicator of future growth aspirations.
The market share of the big four accountants is enormous compared with property agents, with just four companies acting for 98 of the FTSE 100.
“The demand for real estate advisory services has not polarised in the same way as it has in accountancy,” says Strong, who is also chairman of the Managing Partners’ Forum, a group which brings together the leaders of professional services firms.
“The actual market for real estate services is still fundamentally fragmented even though you’ve got a small number of big firms. So that will tell you that there’s plenty of headroom for further market share gains and probably further consolidation in our industry,” he adds.
This need for investment is likely to mean that all those at the top table will be public companies by 2025, given the access to diverse sources of funding that listing provides, Strong says. “I find it difficult to see from here that the major estate firms will be private,” he adds.
But he does believe there will continue to be a place for quality niche agents.
And CBRE will continue to have an appetite to acquire the best of them.
Acquiring criticism
One criticism that is occasionally levelled at CBRE in fact is that it has been too set on growing by acquisition and that it has been unduly focused on revenue growth while overlooking profitability.
In EMEA alone CBRE has bought 47 businesses in the past 10 years, and while many of them remain intact inside the green machine, there are some that seem to have disappeared.
But Strong rejects this accusation, insisting the majority of the businesses the company has acquired remain part of the firm and have added to its bottom line.
“We didn’t start an M&A programme to buy revenue and EBITDA,” he says.
“Our M&A programme was all about enhancing our service to customers so if you go back to number one of 47, fundamentally it was about completing our geographical footprint.
“Where we bought transacting businesses, we integrated them, so today you can’t point to exactly what it was because the key is to integrate them and also to never forget what made these people successful, to give them space to continue being entrepreneurs.”
In 2013 the company restructured its UK and EMEA management, putting a succession plan in place.
Was the reshuffle a precursor to his own retirement? “Inevitably that day will come at some point,” he says.
“The important thing is we’ve got a fantastic management team here and we’re very focused on our succession planning, so when the day comes the business will be in good hands.”
