CBRE has grown its revenue by more than 10% in the third quarter of 2022, compared with the same period last year, thanks to the strong performance of its real estate investment business.
For the three-month period to 30 September, CBRE’s revenue totalled $7.5bn (£6.5bn), versus $6.8bn in Q3 2021 – a 10.8% increase. Net income also increased, but at the slower pace of just 2.5% to $447m from $436m year-on-year.
The growth was driven by the firm’s global workplace solutions segment, which delivered revenue increase of 16.2% in Q3 2022 at $4.84bn. The figure, however, includes $325m of income from Turner & Townsend, in which CBRE bought a 60% interest, last November. Without that, revenue growth totalled 8%.
CBRE noted that project management revenue growth was particularly strong during the quarter, even before the Turner & Townsend contributions, driven by office space redesigns and fit outs. Meanwhile, revenue growth from the facilities management offering was supported by expansion of existing clients, notably in the technology sector.
Real estate investment was the second-best performing segment during Q3, achieving revenue growth of 15% to $258m.
The in-process portfolio, two thirds of which comprises industrial assets, ended Q3 at $19.5bn, up by $200m from Q2. The development pipeline increased by $2bn quarter-on-quarter to $13.5bn, a record level for the firm.
In the investment management segment, revenue rose 9% year-on-year to $147m, driven by higher asset management fee revenue, which rose by 9% on the previous year, while incentive fees were up 23%.
In the advisory services segment, growth was less marked, recording a move of just 0.9% to $2.43bn from $2.41bn in Q3 2021. While the Americas paced the growth, with leasing revenue up 19%, mostly driven by offices, foreign currency headwinds masked strong growth in overseas markets.
For capital markets, CBRE warned that a constrained capital environment caused global sales revenue to fall by 11% in Q3 2022, with global sales revenue declining across all major property types, except retail.
Elsewhere, loan servicing revenue slipped 1% despite the servicing portfolio edging up 1% in Q3 from Q2 2022 to $350bn. Property management net revenue rose 4% and valuation revenue was flat.
CBRE president and chief executive Bob Sulentic said: “In contrast with last year’s strong third quarter, the capital markets environment weakened materially after Labor Day [5 September], causing both sales and loan originations to fall sharply.
“Unlike sales and financing, leasing performed very well, led by office. Parts of our business that are more resilient or secularly favoured, including occupier outsourcing, valuations, property management, loan servicing, investment management and project management, posted solid results for the quarter.”
Looking ahead, CBRE warned on market uneasiness and proposed a $400m cost reduction plan, with the first savings of $175m expected to be achieved by the year-end. About $300m of reductions are proposed to be permanent in nature, predominantly related to headcount, with remaining $100m to come from flexible expenses such as travel and entertainment and marketing.
The firm has limited new hires since the start of the year, eliminated non-client related travel and entertainment, and reduced other discretionary expenditures.
Emma Giamartino, global group president, chief financial and investment officer, said: “We are prepared to go further if we decide more reductions are needed. While achieving these cost efficiencies, we will continue to make very targeted organic investments into areas where we expect a high return.”
CBRE noted it plans to invest “more aggressively” utilising free cash flow and balance sheet during periods of market weakness.
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