Q4 2025 CBRE Group Inc Earnings Call

February 12, 2026

Speaker #1: Greetings and welcome to the CBRE fourth quarter 2020 Earnings Conference Call and webcast At this time , all participants are in listen only mode A question and answer session will follow the formal presentation .

Chandni Luthra: Greetings, and welcome to the CBRE Q4 2025 Earnings Conference Call and Webcast. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. You can be placed in the question queue at any time by pressing star one on your telephone keypad. We ask that you please ask one question, one follow-up, then return to the queue. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star zero. It's now my pleasure to turn the call over to Chandni Luthra, Global Head of FP&A and Investor Relations. Please go ahead.

Operator: Greetings, and welcome to the CBRE Q4 2025 Earnings Conference Call and Webcast. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. You can be placed in the question queue at any time by pressing star one on your telephone keypad. We ask that you please ask one question, one follow-up, then return to the queue. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star zero. It's now my pleasure to turn the call over to Chandni Luthra, Global Head of FP&A and Investor Relations. Please go ahead.

Speaker #1: You may be placed in the question queue at any time by pressing star one on your telephone keypad . And we ask that you please ask one question , one follow up , then return to the queue .

Speaker #1: As a reminder , this conference is being recorded . If anyone should require operator assistance , please press star Zero . It's now my pleasure to turn the call over to Chandni Luthra global Head of Fpna and Investor Relations .

Speaker #1: Please go ahead

Speaker #2: Good morning everyone , and welcome to Cbre's fourth quarter 2020 Earnings Conference Call . Earlier today , we posted a presentation deck on our website that you can use to follow along with our prepared remarks and an Excel file that contains additional supplemental materials Today's presentation contains forward looking statements , including , without limitation , statements concerning our business outlook , business plans , seasonality , and capital allocation strategy , as well as our earnings and cash flow outlook .

Chandni Luthra: Good morning, everyone, and welcome to CBRE's Q4 2025 earnings conference call. Earlier today, we posted a presentation deck on our website that you can use to follow along with our prepared remarks and an Excel file that contains additional supplemental materials. Today's presentation contains forward-looking statements, including, without limitation, statements concerning our business outlook, business plans, seasonality, and capital allocation strategy, as well as our earnings and cash flow outlook. These statements involve risks and uncertainties that may cause actual results and trends to differ materially. For a full discussion of the risks and other factors that may impact these statements, please refer to this morning's earnings release and our SEC filings. We've provided reconciliations of the non-GAAP financial measures discussed on our call to the most directly comparable GAAP measures, together with explanations of these measures in our presentation deck appendix.

Speaker #2: These statements involve risks and uncertainties that may cause actual results and trends to differ materially . For a full discussion of the risks and other factors that may impact these statements , please refer to this morning's earnings release and our SEC filings .

Speaker #2: We've provided reconciliations of non-GAAP financial measures discussed on our call to the most directly comparable GAAP measures , together with explanations of these measures in our presentation deck , appendix Throughout our remarks , when we cite financial performance relative to expectations , we are referring to actual results against the outlook we provided on our third quarter 2020 earnings call in October .

Chandni Luthra: Throughout our remarks, when we cite financial performance relative to expectations, we are referring to actual results against the outlook we provided on our Q3 2025 earnings call in October, unless otherwise noted. Also, as a reminder, our resilient businesses include facilities management, project management, property management, loan servicing, valuations, other portfolio services, and recurring investment management fees. Our transactional businesses comprise property sales, leasing, mortgage origination, carried interest and incentive fee in the investment management business, and development fees. I'm joined on today's call by Bob Sulentic, our Chair and CEO, and Emma Giamartino, our Chief Financial Officer. Now please turn to slide 3 as I turn the call over to Bob.

Speaker #2: Unless otherwise noted Also , as a reminder , our resilient businesses include facilities Management , project management , property management , loan servicing , valuations , other portfolio services and recurring investment management .

Speaker #2: Fee . Our transactional businesses comprise property sales , leasing , mortgage origination , carried interest and incentive fee in the investment management business and development fee I'm joined on today's call by Bob Sulentic , our chair and CEO , and Emma Giamartino , our chief Financial officer Now , please turn to slide three .

Speaker #2: As I turn the call over to Bob

Speaker #3: Thank you . And good morning , everyone . We had a strong end to 2025 . Fourth quarter revenue and core EPs rose by double digits , with both reaching their highest levels ever for CBRE .

Bob Sulentic: Thank you, Chandni, and good morning, everyone. We had a strong end to 2025. Q4 revenue and Core EPS rose by double digits, with both reaching their highest levels ever for CBRE. Our strength was broad-based. We saw significant gains in sales and leasing in the US and much of the rest of the world, and our resilient businesses continued to post double-digit revenue growth, a trend we see continuing. From a strategic perspective, we continued to build businesses that are benefiting from secular tailwinds. An example is the Pierce Services acquisition in November, which expanded our technical services capabilities in the digital infrastructure market. Our data center solutions business is another example. We've created an integrated offering for the most important hyperscalers.

Speaker #3: Our strength was broad based saw significant gains in sales and leasing in the US , and much of the rest of the world , and our resilient businesses continued to post double digit revenue growth .

Speaker #3: A trend we see continuing from a strategic perspective. We continued to build businesses that are benefiting from secular tailwinds. An example is the Peer Services acquisition in November, which expanded our technical services capabilities in the digital infrastructure market. Our Data Center Solutions business is another example.

Speaker #3: We've created an integrated offering for the most important hyperscalers . This business consists of services related to a data centers , technical infrastructure called the white space , and the building operating systems called the gray space .

Bob Sulentic: This business consists of services related to a data center's technical infrastructure, called the white space, and the building operating systems, called the gray space, along with traditional facilities management services. Revenue from this business is expected to reach $2 billion in 2026 and is growing at 20% per year. More broadly, data center and digital infrastructure work across our four business segments accounted for approximately 14% of our core EBITDA in 2025. CBRE is positioned for strong, sustained growth. We are taking advantage of this circumstance to streamline our operations while investing to ensure this growth continues further into the future. We expect another good year in 2026, with core EPS in the range of $7.30 to $7.60, reflecting 17% growth at the midpoint of the range.

Speaker #3: Along with traditional facilities management services Revenue from this business is expected to reach $2 billion in 2026 , and is growing at 20% per year More broadly , data center and digital infrastructure work across our four business segments accounted for approximately 14% of our core EBITDA in 2025 .

Speaker #3: CBRE is positioned for strong , sustained growth . We are taking advantage of this circumstance to streamline our operations while investing to ensure this growth continues further into the future .

Speaker #3: We expect another good year in 2026 with core EPs in the range of $7.30 to $7.60 . Reflecting 17% growth at the midpoint of the range .

Speaker #3: This will be driven by healthy growth in both our resilient and transactional businesses Before I turn the call over to Emma , I want to address AI .

Bob Sulentic: This will be driven by healthy growth in both our resilient and transactional businesses. Before I turn the call over to Emma, I want to address AI. We spend a lot of time thinking about this topic, and we know it's top of mind for investors. I'll begin with how we are using AI in our business today, and will then walk through market-facing risks and opportunities that we see related to AI. We are using AI today in two areas. The first is efficiency. We're deploying AI where its economic value clearly exceeds the economic value of traditional efficiency levers, like offshoring. We're very disciplined about understanding the trade-offs before pursuing efficiency-related AI investments. The second area is developing a knowledge advantage to differentiate our product offerings. CBRE has more real estate data than any company in the world.

Speaker #3: We spend a lot of time thinking about this topic , and we know it's top of mind for investors I'll begin with how we are using AI in our business today , and we'll then walk through market facing risks and opportunities that we see related to AI .

Speaker #3: We are using AI today in two areas . The first is efficiency . We're deploying AI where its economic value clearly exceeds the economic value of traditional efficiency .

Speaker #3: Efficiency levers like offshoring We're very disciplined about understanding the trade offs before pursuing efficiency related AI investments The second area is developing a knowledge advantage to differentiate our product offerings CBRE has more real estate data than any company in the world Historically , have not been able to turn this enormous base of knowledge into a comparably large competitive advantage with the use of AI .

Bob Sulentic: Historically, we have not been able to turn this enormous base of knowledge into a comparably large competitive advantage. With the use of AI, we are moving toward gaining advantages that are more in proportion to the data advantage that comes with our market position. We are encouraged in a balanced way by both of these AI-related opportunities. With regard to the market-facing risks and opportunities AI introduces to our business, we think about the risks in three broad areas. First, our transactional businesses. Second, the businesses in which we create and improve physical assets, and third, the businesses in which we operate assets. The transactional and investment work we do is most protected from AI disruption. For instance, we've known for some time that our opportunity in the brokerage business is enabled by, but not anchored to, market data. This same dynamic is in play in our REI businesses.

Speaker #3: We are moving toward gaining advantages that are more proportionate to the data advantage that comes with our market position . We are encouraged in a balanced way by both of these AI related opportunities With regard to the market facing risks and opportunities , AI introduces to our business , we think about the risks in three broad areas First , our transactional businesses Second , the businesses in which we create and improve physical assets And third , the businesses in which we operate assets .

Speaker #3: The transactional and investment work we do is most protected from AI disruption . For instance , we've known for some time that our opportunity in the brokerage business is enabled by but not anchored to market data This same dynamic is in play in our Ray businesses .

Speaker #3: Clients engage CBRE to plan and execute complex transactions Because of our creativity , strategic , strategic thinking , negotiating skills , deep base of market knowledge and broad relationships , none of this seems likely to be replaced by AI in the foreseeable future .

Bob Sulentic: Clients engage CBRE to plan and execute complex transactions because of our creativity, strategic thinking, negotiating skills, deep base of market knowledge, and broad relationships. None of this seems likely to be replaced by AI in the foreseeable future. The physical creation and improvement of assets, which relates to our development and project management businesses, entails a level of complexity across such things as site assemblage and entitlement, strategic planning, cost analysis, knowledge of vendor capabilities and pricing, construction supervision, negotiating skills, and more. Because of that complexity and the physical nature of this business, we believe what we do is materially protected from disintermediation. Finally, we have the operation of buildings, facilities, and property management, which inherently involves both large amounts of data and information and has a labor-intensive element to it. AI can both enable and disintermediate the data and knowledge side of this.

Speaker #3: The physical creation and improvement of assets , which relates to our development and project management businesses , entails a level of complexity across such things as site , assemblage and entitlement .

Speaker #3: Strategic planning , cost analysis , knowledge of vendor capabilities and pricing , construction supervision , negotiating skills , and more Because of that complexity and the physical nature of this business , we believe what we do is materially protected from disintermediation Finally , we have the operation of buildings , facilities and property management , which inherently involves both large amounts of data and information and has a labor intensive element to it AI can both enable and disintermediate the data and knowledge side of this .

Speaker #3: We believe the scale and complexity of our client relationships is helpful in mitigating this risk . The labor intensive side will not be easy for AI to disintermediate .

Bob Sulentic: We believe the scale and complexity of our client relationships is helpful in mitigating this risk. The labor-intensive side will not be easy for AI to disintermediate. On the market-facing side, we believe there is and will be massive opportunity with owners and operators of data centers and digital infrastructure. We serve those owners and operators in a myriad of ways. We have a strong start in building these capabilities, as evidenced by the results we delivered in 2025. On balance, when you add all of this up, there will be risks, risk mitigants, and opportunities in our business associated with AI. We are optimistic that the net impact will benefit CBRE in the long run. Early empirical evidence is supportive of this view. With that, Emma will discuss our outlook and results for the quarter and the year in detail. Emma?

Speaker #3: On the market-facing side, we believe there is, and will be, massive opportunity with owners and operators of data centers and digital infrastructure.

Speaker #3: We serve those owners and operators in a myriad of ways We have a strong start in building these capabilities as evidenced by the results we delivered in 2025 .

Speaker #3: On balance , when you add all of this up , there will be risks . Risk , mitigants and opportunities in our business associated with AI .

Speaker #3: We are optimistic that the net impact will benefit CBRE in the long run Early empirical evidence is supportive of this view With that , Emma will discuss our outlook and results for the quarter and the year in detail .

Speaker #3: Emma .

Speaker #2: Thank you .

Emma Giamartino: Thank you, Bob, and good morning, everyone. CBRE's strong Q4 saw revenue increase 12%, with both resilient and transactional businesses delivering double-digit growth. Core EBITDA rose 19% for the quarter, while core EPS increased 18%. In Advisory Services, we saw continued double-digit growth in both leasing and sales. Leasing revenue grew 14% globally. EMEA led the way, with Continental Europe up 29% and the UK up 16%. The US showed continued strength, growing leasing revenue 12% overall, supported by data centers, which more than doubled, and industrial, which was up 20%. Demand for big box logistics facilities, a market segment where CBRE has a deep presence, accelerated meaningfully, while 3PLs continued to exhibit a strong appetite for space. In Q4, we saw large industrial occupiers act in advance of upcoming lease expirations, often upgrading their space.

Speaker #4: Bob , and good morning , everyone CBRE strong fourth quarter saw revenue increased 12% with both resilient and transactional businesses delivering double digit growth .

Speaker #4: Core EBITDA rose 19% for the quarter, while core EPS increased 18% in Advisory Services. We saw continued double-digit growth in both leasing and sales.

Speaker #4: Leasing revenue grew 14% globally . EMEA led the way with continental Europe up 29% and the UK up 16% . The US showed continued strength , growing , leasing revenue 12% overall , supported by data centers , which more than doubled and industrial , which was up 20% .

Speaker #4: Demand for big box logistics facilities , a market segment where CBRE has a deep presence , accelerated meaningfully , while three Pls continued to exhibit a strong appetite for space .

Speaker #4: In Q4 . We saw large industrial occupiers act in advance of upcoming lease expirations , often upgrading their space . US office leasing revenue remained strong in line with our expectations reaching record levels for both the quarter and full year year over year office leasing growth decelerated to low single digits versus a then record Q4 in 2020 .

Emma Giamartino: US office leasing revenue remained strong, in line with our expectations, reaching record levels for both the quarter and full year. Year-over-year office leasing growth decelerated to low single digits versus a then record Q4 in 2024. We saw some large deals slip into 2026, which we expect to benefit our Q1 results. In capital markets, both sales and commercial mortgage originations grew at high teens rates. US sales revenue increased 27%, driven by office and multifamily. However, revenue from both asset classes still remain well below prior peak levels. Outside the US, sales were strong in India and the UK. Mortgage origination fees grew over 20%, supported by a 23% rise in loan volume, led by increased activity with debt funds and CMBS. Advisory SOP grew 14%, outpacing revenue growth.

Speaker #4: For we saw some large deals slip into 2026 , which we expect to benefit our first quarter results in capital markets , both sales and commercial mortgage originations grew at high teens rates .

Speaker #4: US sales revenue increased 27% , driven by office and multifamily . However , revenue from both asset classes still remain well below prior peak levels .

Speaker #4: Outside the US , sales were strong in India and the UK mortgage origination fees grew over 20% , supported by a 23% rise in loan volume led by increased activity with debt funds and CMBS advisory .

Speaker #4: SOP grew 14% , outpacing revenue growth . Excluding the impact of lower escrow income Operating leverage was even more significant . Turning to the building operations and experience segment .

Emma Giamartino: Excluding the impact of lower escrow income, operating leverage was even more significant. Turning to the Building Operations and Experience segment, revenue growth was driven by local facilities management, data center solutions, and contributions from the Pierce Services acquisition. As Bob highlighted, we are seeing the benefits of our investment in data center solutions, where revenue grew by more than 20%. Local facilities management continued to deliver strong mid-teens growth, driven primarily by the ongoing expansion in the Americas, as well as notable strength in Western Europe. Enterprise Facilities Management growth was led by the life sciences, healthcare, and financial services sectors. BOE segment operating profit grew 20%, outpacing revenue. Turning to project management, we delivered solid revenue growth underpinned by new real estate projects for hyperscalers in the US and new infrastructure mandates in the UK public sector.

Speaker #4: Revenue growth was driven by local facilities management, data center solutions, and contributions from the Pierce Services acquisition. As Bob highlighted, we are seeing the benefits of our investment in data center solutions, where revenue grew by more than 20%.

Speaker #4: Local facilities management continued to deliver strong mid-teens growth , driven primarily by the ongoing expansion in the Americas , as well as notable strength in Western Europe Enterprise facilities management growth was led by the Life sciences , healthcare and financial services sectors .

Speaker #4: BOE segment operating profit grew 20% , outpacing revenue Turning to project management , we delivered solid revenue growth underpinned by new real estate projects for hyperscalers in the US and new infrastructure mandates in the UK .

Speaker #4: Public sector . The integration of Turner and Townsend and Seabreeze legacy business continues to proceed well , and our project management segment is now largely operating as a combined business around the world .

Emma Giamartino: The integration of Turner & Townsend and CBRE's legacy business continues to proceed well, and our Project Management segment is now largely operating as a combined business around the world. As we anticipated, margins declined compared with the prior year due to a few unusual one-time expenses. The segment delivered healthy operating leverage for the full year. Turning to our Real Estate Investments segment, SOP showed strong growth, driven by the sale of data center sites in our development business. We still have embedded gains of about $900 million in our development portfolio. Investment management operating profit was largely in line with expectations. Growth in recurring asset management fees was offset by lower incentive fees, and co-investment returns than in the prior year.

Speaker #4: As we anticipated , margins declined compared with the prior year due to a few unusual one time expenses . The segment delivered healthy operating leverage for the full year .

Speaker #4: Turning to our real estate investment segment , SOP showed strong growth driven by the sale of data center sites in our development business .

Speaker #4: We still have embedded gains of about $900 million in our development portfolio. Investment management operating profit was largely in line with expectations.

Speaker #4: Growth in recurring asset management fees was offset by lower incentive fees and co-investment returns than in the prior year . We raised over $11 billion in capital in 2025 , and AUM ended the year at $155 billion , up more than $9 billion for the year Before moving to cash flow and capital allocation , I want to point out a couple of items that reduced GAAP earnings for the quarter The first is the non-cash impact of the buyout of our UK pension plan , which will result in future net cash savings .

Emma Giamartino: We raised over $11 billion in capital in 2025, and AUM ended the year at $155 billion, up more than $9 billion for the year. Before moving to cash flow and capital allocation, I want to point out a couple of items that reduced GAAP earnings for the quarter. The first is the non-cash impact of the buyout of our UK pension plan, which will result in future net cash savings. The second is an increased reserve for fire safety remediation in the UK development business. Together, these totaled $279 million. Without them, Q4 GAAP net income would have increased 43%.

Speaker #4: The second is an increased reserve for fire safety remediation in the UK . Development business Together , these totaled $279 million . Without them , Q4 GAAP net income would have increased 43% .

Speaker #4: Looking at our cash flow , we generated nearly $1.7 billion of free cash flow in 2025 , reflecting 86% conversion on core net income , slightly above our 75 to 85% target range Since the end of the third quarter , we have allocated more than $1.5 billion of capital .

Emma Giamartino: Looking at our cash flow, we generated nearly $1.7 billion of free cash flow in 2025, reflecting 86% conversion on core net income, slightly above our 75% to 85% target range. Since the end of Q3, we have allocated more than $1.5 billion of capital. This includes about $1.2 billion for the Pierce Services acquisition and nearly $400 million for share repurchases. Share buybacks have totaled more than $1 billion since the beginning of 2025. Net leverage ended the year at 1.2 turns. As Bob indicated, we expect to generate Core EPS in the range of $7.30 to $7.60 for 2026.

Speaker #4: This includes about $1.2 billion for the peer services acquisition and nearly $400 million for share repurchases . Share buybacks have totaled more than $1 billion since the beginning of 2025 .

Speaker #4: Net leverage ended the year at 1.2 turns , as Bob indicated , we expect to generate core EPs in the range of $7.30 to $7.60 for 2026 .

Speaker #4: This represents 17% growth at the midpoint , supported by continued double digit revenue growth in our resilient businesses and greater than through cycle growth in our transactional businesses .

Emma Giamartino: This represents 17% growth at the midpoint, supported by continued double-digit revenue growth in our resilient businesses and greater than through cycle growth in our transactional businesses. In our advisory segment, we expect low teens SOP growth to be supported by solid increases in leasing and sales activity. As we move further into the recovery cycle, transaction revenue growth will begin to slow from the prior year's elevated levels. In our BOE segment, we anticipate mid-teens SOP growth, driven by strength in our data center solutions business, our local facilities management business, and full year contributions from pure services. We are focused on sustaining the significant margin gains made in 2025, while we are investing in future growth. In project management, we expect low teens SOP growth. The complex integration of Turner & Townsend and legacy CBRE project management should be largely complete this year.

Speaker #4: In our advisory segment , we expect low teens SOP growth to be supported by solid increases in sales activity . As we move further into the recovery cycle Transaction revenue growth will begin to slow from the prior year's elevated levels in our BOE segment , we anticipate mid-teens SOP growth driven by strength in our data Center Solutions business .

Speaker #4: Our local facilities management business , and full year contributions from peer services . We are focused on sustaining the significant margin gains made in 2025 .

Speaker #4: While we are investing in future growth in project management , we expect low teens SOP growth . The complex integration of Turner and Townsend and legacy CBRE project management should be largely complete this year in real estate investments .

Emma Giamartino: In real estate investments, we expect both investment management and development operating profits to roughly match our strong 2025 results. We continue to see demand from hyperscalers for sites that can be developed for data centers. However, as we've discussed in the past, it can be difficult to predict when we will complete these land sales due to the long lead times required to secure power. As Bob mentioned, we're positioned for sustained growth and are taking advantage of this position to invest in our functional platform and products. This includes launching a finance transformation, which will include an ERP implementation, process standardization, and organizational restructuring. We are also making further organic investments across many parts of our business to support the strong mid-teens EPS growth we expect to deliver this year and beyond.

Speaker #4: We expect both investment management and development operating profit to roughly match our strong 2025 results . We continue to see demand from hyperscalers for sites that can be developed for data centers However , as we've discussed in the past , it can be difficult to predict when we will complete these land sales due to the long lead times required to secure power .

Speaker #4: As Bob mentioned , we're positioned for sustained growth and are taking advantage of this position to invest in our functional platform and products .

Speaker #4: This includes launching a finance transformation , which will include an ERP implementation process , standardization and organizational restructuring . We are also making further organic investments across many parts of our business to support the strong mid-teens EPs growth , we expect to deliver this year and beyond .

Speaker #4: In addition to data center solutions, we are expanding our local business in the Americas, which has grown revenue from $330 million in 2021 to $800 million in 2025.

Emma Giamartino: In addition to data center solutions, we're expanding our local business in the Americas, which has grown revenue from $330 million in 2021 to $800 million in 2025. Our Industrious business is growing profitably and will expand to more than 300 locations by year-end, up from about 200 when we acquired the business at the beginning of 2025. We're also building out our Americas infrastructure capabilities in the project management business. Traditional infrastructure is growing rapidly, but comprises far less of the segment's total revenue in the Americas than the 25% it contributes across the rest of the world. Finally, our strong growth in Q4 has continued through the first 6 weeks of the year across our services segments.

Speaker #4: Our industrial business is growing profitably and will expand to more than 300 locations by year end , up from about 200 . When we acquired the business at the beginning of 2025 .

Speaker #4: We're also building out our Americas infrastructure capabilities in the project management business . Traditional infrastructure is growing rapidly , but comprises far less of the segment's total revenue in the Americas than the 25% it contributes across the rest of the world Finally , our strong growth in Q4 has continued through the first six weeks of the year across our services segments .

Speaker #4: Advisory BOE and Project Management are expected to deliver double digit growth in the first quarter . Advisory is showing particularly notable strength for Q1 Historically , its slowest period as a result , we expect Q1 to comprise approximately 15% of our full year core EPs .

Emma Giamartino: Advisory, BOE, and project management are expected to deliver double-digit SOP growth in Q1. Advisory is showing particularly notable strength for Q1, historically its slowest period. As a result, we expect Q1 to comprise approximately 15% of our full-year core EPS, a larger percentage contribution than in last year's Q1. With that, operator, we'll open the call for questions.

Speaker #4: A larger percentage contribution than in last year's Q1 . With that operator , we'll open the call for questions .

Speaker #1: Thank you. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star one on your telephone keypad.

Chandni Luthra: Thank you. We'll now be conducting a question-and-answer session. If you'd like to be placed in the question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to move your question from the queue. As a reminder, we ask you, please ask one question, one follow-up, then return to the queue. Our first question today is coming from Steven Sheldon from William Blair. Your line is now live.

Operator: Thank you. We'll now be conducting a question-and-answer session. If you'd like to be placed in the question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to move your question from the queue. As a reminder, we ask you, please ask one question, one follow-up, then return to the queue. Our first question today is coming from Steven Sheldon from William Blair. Your line is now live.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to move your question from the queue.

Speaker #1: As a reminder , we ask that you please ask one question , one follow up , then return to the queue . Our first question today is coming from Stephen Sheldon , from William Blair .

Speaker #1: Your line is now live .

Speaker #5: Hey , good morning . Thanks for taking my questions and really appreciate the commentary around AI opportunities and risks . Bob , I would highly agree with your take Maybe just starting in capital markets .

Stephen Sheldon: Hey, good morning. Thanks for taking my questions, and really appreciate the commentary around AI opportunities and risks, Bob. I would—I highly agree with your take. Maybe just starting in capital markets, I mean, can you just give some more detail on what you're seeing in the pipeline and what you've baked into the guidance for 2027? Sounds like you're off to a strong start to the year. And, I guess, how dependent do you think a continued recovery and activity will be on the interest rate trajectory? And specifically, do we need any additional rate cuts for activity to continue picking up, in your view, or are there plenty of other factors that just support activity? Just generally, how are you thinking about it?

Speaker #5: I mean , can you just give some more detail on what you're seeing in the pipeline and what you've baked into the guidance for 2027 ?

Speaker #5: Sounds like you're off to a strong start for the year . And I guess how dependent do you think a continued recovery and activity will be on on the interest rate trajectory and specifically , do we need any additional rate cuts for activity to continue picking up , in your view , or are there plenty of other factors that should support activity ?

Speaker #5: Just generally , how are you thinking about it ?

Speaker #3: Yes , Stephen , we're not counting on that business being driven by interest rate cuts in 2026 . At this point , what we do see is that the the .

Bob Sulentic: Yeah, Steven, we're not counting on that business being driven by interest rate cuts in 2026 at this point. What we do see is that the balance between asking prices and offering prices has closed. There is capital available, even though not more inexpensively materially than it was recently. And there's a lot of buyers out there that want to buy assets and sellers that want to sell assets. And as a result, we expect another good year for sales and financing activity in our business this year. But it won't return. This isn't a business that's rapidly returning to peak levels like some of our other businesses. We've said in prior quarters that we expect this to be a slow, steady recovery. We still feel that way.

Speaker #3: Demand between or the balance between asking prices and offering prices is closed . There is capital available , even though not more inexpensively , materially , than it was recently .

Speaker #3: And there's a lot of buyers out there that want to buy assets and sellers that want to sell assets . And as a result , we expect another good year for sales and financing activity in our business this year .

Speaker #3: But it won't return . This isn't a business that's rapidly returning to peak levels like some of our other businesses We we've said in prior quarters that we expect this to be a slow , steady recovery .

Speaker #3: We still feel that way . In her prepared remarks , noted that the first quarter has started out strong and we're encouraged by that .

Bob Sulentic: Emma, in her prepared remarks, noted that Q1 has started out strong, and we're encouraged by that. But we don't expect to see a big rapid rise in that part of our business this year, just some nice double-digit growth.

Speaker #3: But we don't expect to see a big, rapid rise in that part of our business this year. Just some nice double-digit growth.

Speaker #5: Got it . That's helpful . And then maybe for Emma . And apologies if I missed this , but can you just give some more detail on the one time expenses that weighed on project management margins in the quarter and and will there be any flow through impact from those ?

Stephen Sheldon: Got it. That's helpful. And then maybe for Emma, and apologies if I missed this, but can you just give some more detail on the one-time expenses that weighed on project management margins in the quarter? And will there be any flow-through impact from those, I guess? You know, are they truly one time for Q4, or is there going to be any flow-through impact into early 2026?

Speaker #5: I guess ? Are they truly one time for the fourth quarter , or is there going through impact into early 2026 ?

Speaker #2: Sure .

Emma Giamartino: Sure. I'll start with saying we now believe that those will be entirely reversed in Q1, so you'll see nice margin expansion in Project Management. In Q4, as we were going through the balance sheet, we did take a pretty conservative view on some of the receivables, on some of our larger projects, and we now think that will be reversed.

Speaker #4: I'll start with saying we now we believe that those will be entirely reversed in the first quarter . So you'll see . Nice margin expansion in project management in Q4 as we were going through the balance sheet , we did take a pretty conservative view on some of the receivables on some of our larger projects , and we now think that will be reversed

Speaker #1: Thank you . Our next question today is coming from Julie Berlin from Goldman Sachs . The line is now live

Chandni Luthra: Thank you. Our next question today is coming from Julian Bluman from Goldman Sachs. Your line is now live.

Speaker #6: Thank you for taking my question , Bob . I wanted to dig into your comments around the brokerage businesses sort of being hardest to disintermediate , you know , by AI , I think broadly , the thought out in the market was that this was maybe where the risk was greatest , given the ability of AI to sort of empower sales , lead generations , perhaps automate other parts of a sales process .

Julien Blouin: ... Thank you for taking my question. Bob, I wanted to dig into your comments around the brokerage businesses sort of being hardest to disintermediate, you know, by AI. I think broadly, the thought out in the market was that this was maybe where the risk was greatest, given the ability of AI to sort of empower sales, lead generations, perhaps automate other parts of a sales process. Do you think there's a risk that AI maybe eats into some of these more market-making aspects of your brokerage business?

Speaker #6: Do you think there's a risk that AI may eat into some of these more market-making aspects of your brokerage business?

Speaker #3: Well , Julian , you know , we've watched this business for years with people saying things like , gosh , with the scale you have with the client relationships , you have with the data , you have , shouldn't you be able to shift the economics between the brokers and the company ?

Bob Sulentic: Well, Julian, you know, we've watched this business for years with people saying things like, Gosh, with the scale you have, with the client relationships you have, with the data you have, shouldn't you be able to shift the economics between the brokers and the company? You know, that's been part of the dialogue over the years. If you go back and listen to my comments over the last several years, I've always said, "That's not what we're trying to do." What we're trying to do is enable our brokers, because what we know our clients want is certain things the brokers bring to the table that we enable, but the brokers bring to the table. The ability to provide strategic input to big, complex transactions. We're not selling $2 million condos. These are big, complex transactions that we're doing.

Speaker #3: And that's that's been part of the dialogue over the years . And if if you go back and listen to my comments over the last several years , I've always said , that's not what we're trying to do , what we're trying to do is enable our brokers because what we know our clients want is certain things the brokers bring to the table that we enable .

Speaker #3: But the brokers bring to the table the ability to provide strategic input to big , complex transactions . We're not we're not selling $2 million condos .

Speaker #3: These are big , complex transactions that we're doing . The ability to negotiate the in doing these big complex transactions relationships in the market , we don't get we don't get our brokerage leads online somewhere .

Bob Sulentic: The ability to negotiate, experience in doing these big, complex transactions, relationships in the market. We don't get our brokerage leads online somewhere. We get our brokerage leads because of deep knowledge about the occupiers and investors in the marketplace that we serve. So, we've become quite confident that that business really is driven by this strategic, creative thinking that our brokers do, and we think that's gonna continue to be the case, and we haven't seen any evidence to the contrary. What we're really working hard to do and thinking we're finally making some gains on using AI is to provide data to our brokers in a more efficient way, and a more cost-effective way for us. It is expensive to collect and provide this data to our brokers from the different sources.

Speaker #3: We get our brokerage leads because deep knowledge about the occupiers and investors in the marketplace that we serve . So we become quite confident that that business really is driven by this strategic creative thinking that our brokers do .

Speaker #3: And we think that's going to continue to be the case . And we haven't seen any evidence to the contrary . What we're really working hard to do and thinking we're finally making some gains on using AI is to provide data to our brokers in a more efficient way and a more cost effective way .

Speaker #3: For us , it is expensive to collect and provide this data to our brokers from the different sources . We think we've turned the corner on that with the use of AI , we're pretty encouraged in some tools we've built .

Bob Sulentic: We think we've turned the corner on that with the use of AI. We're pretty encouraged in some tools we've built. But the thing that the clients buy from us is creative, strategic thinking, negotiating skills, et cetera. It's the same set of skills that go into our investment businesses, which are gonna, and that's development and investment management, which are gonna make those difficult to disintermediate.

Speaker #3: But but the thing that the clients buy from us is creative , strategic thinking , negotiating skills , etc. it's the same set of skills that go into our investment businesses which are going to .

Speaker #3: And that's development and investment management , which are going to make those difficult to disintermediate .

Speaker #6: Thank you . No , that's that's really helpful . Emma , I wanted to maybe check on the advisory services sort of incremental margins .

Julien Blouin: Thank you. No, that's, that's really helpful. Emma, I wanted to maybe check on the advisory services, sort of incremental margins. They appeared lower this quarter. I know you mentioned the lower escrow income. I guess, how much of that, or what would the incremental margins have looked like absent the lower escrow income? Versus is there any sort of impact here from compensation or sort of fee pressures? And then what kind of incremental margins are you assuming in 2026 in advisory?

Speaker #6: They appeared lower this quarter . I know you mentioned the lower escrow income . I guess how much of of that or what would the incremental margins have looked like absent the the lower escrow income versus is there any sort of impact here from compensation or sort of fee pressures ?

Speaker #6: And then what kind of incremental margins are you assuming in 2026 ? In advisory ?

Speaker #4: Julian , to answer your the second half of your question around escrow interest , without the escrow interest , which declined this quarter as interest rates declined , our incremental margins were above 30% , which we view as very strong .

Emma Giamartino: So, Julian, to answer your--the second half of your question around escrow interest, without the escrow interest, which declined, this quarter as interest rates declined, our incremental margins were above 30%, which we view as very strong. I think what we have to keep in mind is we have industry-leading margins in this business, as we do across all of our segments, and we consistently grow above the market. So we're consistently gaining market share, and to do that, we have to continue to invest in the business. Just like Bob just talked about, investing in our data for our brokers and our platforms, we're consistently doing that. We're also investing in talent. To be able to outperform the market, you have to have the best talent in the industry.

Speaker #4: And I think what we have to keep in mind is we have industry leading margins in this business , as we do across all of our segments .

Speaker #4: And we consistently grow above the market, so we're consistently gaining market share. And to do that, we have to continue to invest in the business.

Speaker #4: Just like Bob just talked about investing in our data for our brokers and our platforms . We're consistently doing that . We're also investing in talent to be able to outperform the market .

Speaker #4: You have to have the best talent in the industry . So we're making all those investments and looking to 2026 , we we expect to continue to do the same

Emma Giamartino: So, we're making all of those investments, and looking to 2026, we expect to continue to do the same.

Speaker #1: Thank you . Next question today is coming from Anthony Pallone from JP Morgan Chase . Your line is now live .

Operator: Thank you. Next question today is coming from Anthony Pallone from JPMorgan Chase. Your line is now live.

Speaker #7: Yeah . Thank you . Bob . Thanks for the comments on AI related to CBRE . Can you talk maybe a bit more about what you think the impact might be on your end markets , particularly around office , and whether you see any long term diminution in that ?

Anthony Paolone: Yeah, thank you. Bob, thanks for the comments on AI related to CBRE. Can you talk maybe a bit more about what you think the impact might be on your end markets, particularly around office, and whether you see any long-term diminution in that, just in terms of overall space needs, and perhaps also in areas like appraisal, which can maybe get streamlined and perhaps reduce fees or something there?

Speaker #7: Just in terms of overall space needs, and perhaps also in areas like appraisal, which can maybe get streamlined and perhaps reduce fees or something, there—

Bob Sulentic: Tony, two, two very different questions. Let me start with office. If there are less office workers in the long run as a result of AI, there will be less demand for office space. That, that would be a long-term trend to unfold. What we're seeing right now is tech companies, financial companies, advisory companies, every kind of company you can imagine, is using their office space to attract talent and make talent more efficient, and effective, and excited to come in and go to work. And that's created a lot of opportunity for us. Over the last five quarters, we've gone from well, on Main & Main, there's more demand for office space to Main & Main in, you know, the gateway markets. Well, then it's Main & Main plus, and the gateway markets plus.

Speaker #3: Well , Tony , two , two very different questions . Let me start with office If there are less office workers in the long run , as a result of AI , there will be less demand for office space .

Speaker #3: That would be a long term trend . Unfold . What we're seeing right now is tech companies , financial companies , advisory companies , every kind of company you can imagine is using their office space to attract talent and make talent more efficient and effective and excited to come in and go to work .

Speaker #3: And that's created a lot of opportunity for us over the last five quarters , we've gone from well on Maine and Maine . There's more demand for office space to a , excuse me , Maine and Maine in , you know , the gateway markets .

Speaker #3: Well , then it's Maine in Maine . Plus , and the gateway Markets plus . Now what we're seeing is across primary and secondary and tertiary markets , a lot of demand for office space because workers have come back and companies are using office space to support those workers in all the ways I said at the outset of this answer , in the long run , will there be less office users because because AI does disintermediating some of the work people do , that's possible .

Bob Sulentic: Now what we're seeing is across primary, secondary, and tertiary markets a lot of demand for office space because workers have come back, and companies are using office space to support those workers in all the ways I said at the outset of this answer. In the long run, will there be less office users because AI disintermediates some of the work people do? That's possible, but what we're likely to see is a lot more AI-related workers backfill other types of workers that may go away because of AI. So it would be very difficult to sit here today and say there's gonna be less office space as a result of AI in the foreseeable future, over the next few years.

Speaker #3: But what we're likely to see is a lot more AI related workers backfill other types of workers that may go away because of AI .

Speaker #3: So it would be very difficult to sit here today and say there's going to be less office space as a result of AI in in the foreseeable future .

Speaker #3: Over the next few years . And certainly right now , we're in we're in one of the sweet spots we've been in in my entire career for office space leasing , which is a wonderful thing for us because it's at a point in time when we're taking share and leasing .

Bob Sulentic: And certainly right now, we're in one of the sweet spots we've been in, in my entire career for office space leasing. Which is a wonderful thing for us because it's at a point in time when we're taking share in leasing. We've had some really good momentum there, particularly in the Americas. The second part of your question, restate the second part of your question, if you would.

Speaker #3: We've we've had some really good momentum there , particularly in the . The second part of your question Restate the second part of your question , if you would .

Speaker #7: It was more on on appraisals where appraisals .

Anthony Paolone: It was more on appraisals where-

Bob Sulentic: Appraisal.

Anthony Paolone: You know.

Speaker #3: Yeah . Well we for years , for years we've been automating . If you go to if you go to Asia and Pacific Australia , New Zealand for years we've had an appraisal business there that was heavily , heavily automated , radically more efficient in terms of the hours of the man hours that go in appraisal than here .

Bob Sulentic: Yeah.

Anthony Paolone: Yeah.

Bob Sulentic: Well, we, for years, for years, we've been automating. If you go to Asia Pacific, Australia, New Zealand, for years, we've had an appraisal business there that was heavily, heavily automated, radically more efficient in terms of the hours of the man-hours that go in per appraisal than here. And what we, what we did is we built technology systems over there that caused the revenue per appraisal to go down for us, but the number of appraisals we do to go up radically, and that's been one of the more profitable parts of our valuations business around the world. So that cuts in both directions.

Speaker #3: And what we what we did is we built technology systems over there that caused the revenue per appraisal to go down for us .

Speaker #3: But the number of appraisals we do to go up radically , and that's been one of the more profitable parts of our valuations business around the world .

Speaker #3: So that cuts in both directions . That probably is a part of the business . That's subjected to disintermediation . And the question for us will be , given our scale and our ability to address what we believe to be a net winner in that , in that subject to that set of dynamics .

Bob Sulentic: That probably is a part of the business that's subjected to disintermediation, and the question for us will be, given our scale and our ability to address, will we be able to be a net winner in that, in that subject to that set of dynamics? And we're feeling good about that. I think, Emma, our assessment is that our vals business is gonna grow 10% next year.

Speaker #3: And we're feeling good about that . I think . Mr. . Assessment is that our vowels business is going to grow 10% next year .

Emma Giamartino: Yep.

Speaker #3: So we're feeling good about that right now . Tony .

Bob Sulentic: So we're feeling good about that right now, Tony.

Speaker #7: Okay . And then just a detail question , Emma , for you , I think there's a comment in the deck about Omcer .

Anthony Paolone: Okay. And then just a detail question, Emma, for you. I think there's a comment in the deck about OMSR, net OMSR gains and a change there. Is that in the guidance, and you just haven't shown us, like, how you're gonna disclose it yet, or just kinda what's happening there?

Speaker #7: Net Omcer gains and a change there . Can you is that in the guidance and you just haven't shown us how you're going to disclose it yet or just kind of what's happening there ?

Speaker #4: It's not in the guidance yet . What we will do is we will provide a historical restatement of our financials , including the omcer change and the data center project management change .

Emma Giamartino: It's not in the guidance yet. What we will do is we will provide a historical restatement of our financials, including the OMSR change and the data center project management change, going back, a number of years. We'll do that well before you get the Q1 results. But it doesn't change the growth rates on the guide.

Speaker #4: Going back a number of years . We'll do that well before you get the Q1 results But it doesn't change the growth rates on the guide .

Speaker #1: Thank you. Next question, today, is coming from Steve Sakwa from Evercore ISI. Your line is now live.

Anthony Paolone: Thank you. Next question today is coming from Steve Sakwa from Evercore ISI. Your line is now live.

Speaker #8: Yeah . Thanks . Good morning . I think you had a comment about the data centers . I think being up more than 20% .

[Analyst] (Aiera): Yeah, thanks. Good morning. Emma, I think you had a comment about the data centers, I think, being up more than 20%. Obviously, there's a lot of discussion just around AI data center growth in general and kinda whether we're in a bubble or not. But, like, what visibility, I guess, broadly, do you have on the data center business inside of CBRE broadly? How far out kinda can you see that business? And are there any sort of longer-term concerns or issues that, you know, you see with that business? Thanks.

Steve Sakwa: Yeah, thanks. Good morning. Emma, I think you had a comment about the data centers, I think, being up more than 20%. Obviously, there's a lot of discussion just around AI data center growth in general and kinda whether we're in a bubble or not. But, like, what visibility, I guess, broadly, do you have on the data center business inside of CBRE broadly? How far out kinda can you see that business? And are there any sort of longer-term concerns or issues that, you know, you see with that business? Thanks.

Speaker #8: And obviously there's a lot of discussion just around AI data center growth in general . And kind of whether we're in a bubble or not .

Speaker #8: But like what visibility , I guess , broadly , do you have on the data center business inside of CBRE ? Broadly , how far out kind of can you see that business ?

Speaker #8: And are there any sort of longer-term concerns or issues that you see with that business? Thanks.

Speaker #3: Yeah . Steve , I'm going to I'm going to answer that question , if you don't mind . So so you can imagine , given our business and given how much data centers have grown for us , how much time we spend discussing that question , how enduring is the growth that we're seeing ?

Bob Sulentic: Yeah, Steve, I'm gonna answer that question, if you don't mind. So, so you can imagine, given our business and given how much data centers have grown for us, how much time we spend discussing that question. How enduring is the growth that we're seeing? What do we need to do to position ourselves to take advantage of all the demand? And, and one of the very first things that we observe when we ask that question is, we couldn't have imagined five years ago if we were talking about the data center business being where we are today. I think we need to keep that in mind. We don't know where we're gonna be five years from now. It may be, we may be in something of a bubble, or we may find that the explosion gets even bigger.

Speaker #3: What do we need to do to position ourselves to take advantage of all the demand and and one of the very first things that we observe when we ask that question is we couldn't have imagined five years ago if we were talking about the data center business being where we are today .

Speaker #3: I think we need to keep that in mind . We don't know where we're going to be five years from now . It may be we may be in something of a bubble , or we may find that the explosion gets even bigger .

Speaker #3: What we know for sure is that, given what's already in the pipeline today, we are having trouble keeping up, and others that do what we do are having trouble keeping up. Based just on the duration of the work that's out there today, that's going to go on for a few years.

Bob Sulentic: What we know for sure is that given what's already in the pipeline today, we are having trouble keeping up. And others that do what we do are having trouble keeping up. Based just on the duration of the work that's out there today, that's gonna go on for a few years. I had Vincent Clancy, who's the CEO of our Turner & Townsend businesses, in from London, and he and I had dinner last night. The number one subject that he and I discussed was: How are we gonna get the talent we need to keep up with the demand we have in our data center and critical infrastructure businesses? That's a little bit at odds with the notion that that talent's being disintermediated. What's happening is that talent's being used to support the growth of AI.

Speaker #3: I had Vince Clancy , who's the CEO of our Turner and Townsend business , in from London , and he and I had dinner last night and the number one subject that he and I discussed was , how are we going to get the talent we need to keep up with the demand ?

Speaker #3: We have in our data center . And critical infrastructure businesses . That's a little bit at odds with the notion that that talent is being disintermediated .

Speaker #3: What's what's happening is that talent's being used to support the growth of AI . So we think there's going to be enduring growth there .

Bob Sulentic: So we think there's gonna be enduring growth there. We have very quickly built this integrated data center solutions business that includes white space projects, gray space projects, which is kind of the building infrastructure, MEP work, the white space is the technical work, and then legacy facilities management. As I said in my comments, that's a $2 billion business, likely, and $2 billion, likely revenue business in 2026. We have big, big efforts underway to grow that business, both organically and inorganically, and finding resources. Not the financial resources we need to grow that business, but the people resources we need is hard. So we're not sitting here today worried about a bubble or running out of opportunity.

Speaker #3: We have very quickly built this integrated data center solutions business that includes white space projects , gray space projects , which is kind of the building infrastructure .

Speaker #3: MEP work . The white spaces , the technical work , and then legacy facilities management . As I said in my comments , that's a $2 billion business , likely in $2 billion , likely revenue business in 2026 .

Speaker #3: And we have big , big efforts underway to grow that business , both organic and inorganically . And finding resources . Not not the financial resources we need to grow that business , but the people resources we need is hard .

Speaker #3: So we're we're not sitting here today worried about a bubble or running out of opportunity . By the way , we are not .

Bob Sulentic: By the way, we are not, we are not material players in the ownership of data centers, so if there's some bubble around that, that's not a big area of exposure to us. You know, we do have this land, data center land business, within Trammell Crow Company, but we have very, very little, balance sheet investment, supporting that. And it's a nice add to our profitability, and we think it's gonna continue to be. We have, I think, 30 or so sites that we have under control in various ways that we're working on.

Speaker #3: We are not material players in the ownership of data centers . So if there's some bubble around that , that's not a big area of exposure to us .

Speaker #3: You know , we do have this land data center , land business within Trammell Crow Company . But we have very , very little balance sheet investment supporting that .

Speaker #3: And it's a nice add to our profitability . And we think it's going to continue to be we have , I think , 30 or so sites that we have under control in various ways that we're working on , but we just we don't see a scenario sitting here today just based just on what's in the pipeline and the duration associated with that .

Bob Sulentic: But we just we don't see a scenario sitting here today, just based on what's in the pipeline and the duration associated with that, and our direct interface with the hyperscalers and what we know about the capital they have available to keep growing and what they're asking us to do. We see this running for a few years, and then, of course, once those few years go in terms of creating data centers, there's gonna be a huge amount of work to do to maintain those data centers, refit those data centers, manage those data centers. So, we see this as a substantial part of our future and one that we are fortunate enough to have put ourselves in a pretty good position to take advantage of.

Speaker #3: And our direct interface with the hyperscalers, and what we know about the capital they have available to keep growing and what they're asking us to do, we see this running for a few years.

Speaker #3: And then , of course , once those few years go in terms of creating data centers , there's going to be a huge amount of work to do to to maintain those data centers , refit those data centers , manage those data centers .

Speaker #3: So we see this as a substantial part of our future , and one that we are fortunate enough to have put ourselves in a pretty good position to take advantage of .

Speaker #8: Great . Thanks , Bob . Maybe just on capital allocation , you know , you've been both acquisitive buying businesses , but also buying back stock .

Operator: Great. Thanks, Bob. Maybe just on capital allocation. You know, you've been both acquisitive, buying businesses, but also buying back stock. I know you don't put any of that into guidance, as you set the range for 2026, but just, I guess, where is your head today, either Bob or Emma, on kind of the free cash flow you have, moving into 2026? Are you tilting more in the buybacks, given the recent sell-off, or is there a pipeline of deals, that seems to be more attractive than buybacks?

Steve Sakwa: Great. Thanks, Bob. Maybe just on capital allocation. You know, you've been both acquisitive, buying businesses, but also buying back stock. I know you don't put any of that into guidance, as you set the range for 2026, but just, I guess, where is your head today, either Bob or Emma, on kind of the free cash flow you have, moving into 2026? Are you tilting more in the buybacks, given the recent sell-off, or is there a pipeline of deals, that seems to be more attractive than buybacks?

Speaker #8: I know you don't put any of that into guidance as you set the range for 26 , but just I guess where is your head today ?

Speaker #8: Either Bob or Emma on kind of the free cash flow you have moving into 26 ? Are you tilting more in buybacks given the recent sell off , or is there a pipeline of deals that that seems to be more attractive than buybacks ?

Speaker #4: So it's very consistent with what we've talked about historically and done historically . We have a strong pipeline . We're actively looking at target companies within data centers , within facilities management , within investment management , within infrastructure project management .

Emma Giamartino: So it's very consistent with what we've talked about historically and done historically. We have a strong pipeline. We're actively looking at target companies within data centers, within facilities management, within investment management, within infrastructure project management. And we have a strong pipeline, but as we've always said, it takes a lot for those to convert, and it's very difficult to anticipate which of those deals will convert into a transaction. And so we're gonna balance that with share repurchases. And our goal, for on a consistent basis, is to at least deploy the level of free cash flow that we expect to generate in a year.

Speaker #4: And we have a strong pipeline . But as we've always said , it takes a lot for those to convert . And it's very it's very difficult to anticipate which of those deals will will convert into a transaction .

Speaker #4: And so we're going to balance that with share repurchases . And our goal for on a consistent basis is to at least to deploy the level of free cash flow that we expect to generate in a year .

Emma Giamartino: So given the levels of free cash flow we're generating, it's unlikely that we'll do M&A, do all of that through M&A, so we'll continue to buy back shares.

Speaker #4: So given the levels of free cash flow we're generating , it's unlikely that we'll do M&A , do all of that through M&A .

Emma Giamartino: So given the levels of free cash flow we're generating, it's unlikely that we'll do M&A, do all of that through M&A, so we'll continue to buy back shares.

Speaker #4: So we'll we'll continue to buy back shares

Speaker #1: Thank you . Next question today is coming from Ronald Camden from Morgan Stanley . Your line is now live .

Operator: Thank you. Next question today is coming from Marlon Tam from Morgan Stanley. Your line is now live.

Operator: Thank you. Next question today is coming from Ronald Tam from Morgan Stanley. Your line is now live.

Speaker #9: Hey thanks so much . Two quick ones . First is a little bit difficult when you I think you said that you know the company has sort of the most CRE data of sort of any other company out there and build through the cycles , I guess the question that we're getting is , you know , how if you have an AI tool out there , you know , can you just remind us what are some of the modes to being able to replicate that sort of data advantage , and how long you think it could take ?

Operator: Hey, thanks so much. Two quick ones. First is a little bit difficult. When you—I think you said that, you know, the company has sort of the most CRE data of sort of any other company out there and built through the cycles. I guess the question that we're getting is, you know, how—if you have an AI tool out there, you know, can you just remind us what are some of the moats to being able to replicate that sort of data advantage, and how long you think it could take? Thanks.

Ronald Kamdem: Hey, thanks so much. Two quick ones. First is a little bit difficult. When you—I think you said that, you know, the company has sort of the most CRE data of sort of any other company out there and built through the cycles. I guess the question that we're getting is, you know, how—if you have an AI tool out there, you know, can you just remind us what are some of the moats to being able to replicate that sort of data advantage, and how long you think it could take? Thanks.

Speaker #9: Thanks

Bob Sulentic: We think by the end of 2026, there'll be concrete evidence that we've made some real gains in terms of extracting the data we have, assimilating it, and delivering it to our professionals in a way that we haven't done before. And that is being enabled by AI, and that's one of the areas we're most encouraged by. It's gonna save us money in terms of accumulating the data, buying the data, and it's gonna make our brokers more efficient in terms of using the data. We're also, as already mentioned, using that same set of tools to meaningfully cut the cost of our research effort. So we expect concrete evidence this year. We're very excited about it.

Speaker #3: We think by the end of 2026 , we'll there'll be concrete evidence that we've made some real gains in terms of extracting the data .

Speaker #3: We have , assimilating it . And delivering it to our professionals in a way that we haven't done before . And that is being enabled by AI And that's one of the areas where most encouraged by it's it's going to save us money in terms of accumulating the data , buying the data , and it's going to make our brokers more efficient in terms of using the data .

Speaker #3: We're also we're also , as already mentioned , we're we're using that same set of tools to meaningfully cut the cost of our research effort .

Speaker #3: So we expect concrete evidence this year. We're very excited about it.

Speaker #9: Great . And then my follow up is just on on free cash flow . Maybe one can you talk about the expectations for 26 .

Operator: Great. And then my, my follow-up is just on, on free cash flow. Maybe one, can you talk about the expectations for 2026? And I think the 2027 numbers came in at $1.7 billion versus $1.8 billion before. Is that, is that sort of correct, and, and what sort of happened there?

Ronald Kamdem: Great. And then my, my follow-up is just on, on free cash flow. Maybe one, can you talk about the expectations for 2026? And I think the 2027 numbers came in at $1.7 billion versus $1.8 billion before. Is that, is that sort of correct, and, and what sort of happened there?

Speaker #9: And I think the 27 numbers came in at 1.7 versus 1.8 before , is that is that sort of correct ? And what sort of happened there .

Speaker #4: Yeah . And and 2025 I think is the 1.7 . So cash flow for 2025 was really strong . It was above the the high end of our slightly above the high end of our range of 75 to 85% conversion on core net income .

Emma Giamartino: Yeah. And 2025, I think, was the $1.7 billion. So cash flow for 2025 was really strong. It was slightly above the high end of our range of 75% to 85% conversion on core net income. And the reason it was higher than our range is because of those we had a really strong year within development, and those gains convert to cash flow above 100%. So that's what drives us above the range. In terms of the delta between the $1.8 billion that we talked about and the $1.7 billion, that's simply some timing related to onboarding our large enterprise clients. So that's hitting working capital, and that will be reversed in 2026.

Speaker #4: And the reason it was higher than our range is because of those . We had a really strong year within development , and those gains convert to cash flow above 100% .

Speaker #4: So that's that's what drives us above the range in terms of what what the the delta between the 1.8 that we talked about and the 1.7 that simply some timing related to onboarding our large enterprise clients .

Speaker #4: So that's that's hitting working capital . And that will be reversed into in 2026 . Going into 2026 , we believe we're going to be solidly within that 75 to 85% range , that working capital headwind that we had at the end of Q4 , again , should reverse in 2026 .

Emma Giamartino: Going into 2026, we believe we're gonna be solidly within that 75% to 85% range. That working capital headwind that we had at the end of Q4, again, should reverse in 2026. But we also do have another headwind in 2026, related to the cash compensation that we're paying in 2026, related to the really strong performance we had in 2025, especially within our development business.

Speaker #4: But we also do have another headwind in 2026 related to the cash compensation that we're paying in 2026 , related to the really strong performance we had in 2025 , especially within our development business

Speaker #1: Thank you . Next question today is coming from Jade Rahmani from CCB . Your line is now live .

Operator: Thank you. Next question today is coming from Jade Rahmani from KBW. Your line is now live.

Speaker #10: Thank you very much . Could you comment as to where you see margins in the BOE and project management business ? Do you expect there to be room for further improvement ?

Operator: Thank you very much. Could you comment as to where you see margins in the BOE and project management business?

Jade Rahmani: Thank you very much. Could you comment as to where you see margins in the BOE and project management business? Do you expect there to be room for further improvement? Do you see margin expansion in 2026?

Operator: ... Do you expect there to be room for further improvement? Do you see margin expansion in 2026?

Speaker #10: You see margin expansion in 2026 .

Emma Giamartino: Thanks, Jade. I'll start with BOE. First, I'll say, we're very pleased with where we are, with where our margins ended up in 2025. The expansion that we delivered, resulting from the big cost efficiency exercises we went through at the end of 2024, led to margin expansion beyond what we had expected at the beginning of 2025. And again, like I said about our advisory margins, our BOE margins are industry leading. So we put a lot of work into getting to those margins and focusing on operational efficiency to get there. We're also really pleased with the growth we delivered. It's exceptional growth in that business. It's above what we've delivered historically on an organic basis and definitely on an inorganic basis.

Speaker #4: Thanks , Jade . I'll start with BOE . First I'll say we're very pleased with where we are with our margins . Ended up in 2025 .

Speaker #4: The expansion that we delivered resulting from the big cost efficiency exercises we went through at the end of 2024 , led to margin expansion beyond what we had expected at the beginning of 2025 .

Speaker #4: And again , like I said about our advisory margins , our BOE margins are are industry leading . So we put a lot of work into getting to those margins and focusing on operational efficiency to get there .

Speaker #4: We're also really pleased with the growth we delivered . It's exceptional growth in that business . It's above what we've delivered historically on an organic basis , and definitely on an organic basis .

Speaker #4: So going into 2026 , we are very focused on proactively investing into that within our BOE business to make sure that we can sustain those levels of outsized growth .

Emma Giamartino: Going into 2026, we are very focused on proactively investing into that within our BOE business to make sure that we can sustain those levels of outsized growth. There is some operating leverage in the plan in 2026, but that is being offset by the investments that we're making. We're expecting BOE margins to be flat in 2026. Going forward, because of these investments and because of the growth that we're putting into some of these newer businesses, like our data center solutions, like Industrious, like Local in the Americas, we should expect to see continued margin expansion, and it'll always be incremental, but going forward beyond 2026. And then turning to project management, we are expecting some margin expansion in the year.

Speaker #4: So there is some operating leverage in the plan in 2026 , but that is being offset by the investments that we're making . So we're expecting BOE margins to be flat in 2026 , going forward because of these investments and because of the growth that we're putting into these , some of these newer businesses like our data center solutions like industrious , like local and the Americas , we should expect to see continued margin expansion .

Speaker #4: It'll always be incremental , but going forward , beyond 2026 and then turning to project management , we are expecting some margin expansion in the year

Speaker #10: Thanks very much . On the agency servicing business . There's been a lot of players that have received loan put backs from Fannie Mae and Freddie Mac .

Operator: Thanks very much. On the agency servicing business, there's been a lot of players that have received loan putbacks from Fannie Mae and Freddie Mac. That's when those companies force the originator servicer due to issues of fraud and the like, to buy back those loans. Has CBRE experienced any of that? It doesn't seem that way from the disclosure, but I wanted to ask.

Jade Rahmani: Thanks very much. On the agency servicing business, there's been a lot of players that have received loan putbacks from Fannie Mae and Freddie Mac. That's when those companies force the originator servicer due to issues of fraud and the like, to buy back those loans. Has CBRE experienced any of that? It doesn't seem that way from the disclosure, but I wanted to ask.

Speaker #10: That's when those companies forced the originator servicer due to issues of fraud and the like , to buy back those loans , has Seebri experienced any of that ?

Speaker #10: It doesn't seem that way from the disclosure , but I wanted to ask .

Speaker #4: We have not seen any fraud in our in our portfolio , and we are evaluating it consistently on a quarterly basis . Like all of our competitors do .

Emma Giamartino: We have not seen any fraud in our, in our portfolio, and we are evaluating it consistently on a quarterly basis like all of our competitors do, and are very attentive to, to that. We have a really, a very rigorous underwriting process. And our loan loss reserves do increase steadily as our loan book increases, and I think now it's just about $70 million, but we haven't seen the spikes that, we've- that you've seen elsewhere in the market. And we don't expect to.

Speaker #4: And are very attentive to that . We have a really a very rigorous underwriting process , and our loan loss reserves do increase steadily as our loan book increases .

Speaker #4: And I think now it's at about 70 million , but we haven't seen the spikes that we've that you've seen elsewhere in the market .

Speaker #4: And we don't expect to .

Speaker #1: Thank you. Next question is coming from Alex Kramm from UBS. Your line is now live.

Chandni Luthra: Thank you. Next question is coming from Alex Cramp from UBS. Your line is now live.

Operator: Thank you. Next question is coming from Alex Cramp from UBS. Your line is now live.

Speaker #11: Yeah . Hey , good morning everyone . Just coming back to BOE for a second . You mentioned local the local business continues to be .

Alex Kramm: Yeah. Hey, good morning, everyone. Just coming back to BOE for a second. You mentioned local, the local business continues to be, it sounds like the one of the locomotives in that business. So maybe you can just expand on what you're seeing right now in the pipeline. Any changes in the competitive dynamics in that market? And, since somebody just asked about margins, can you just talk about how the margins in the local business are trending relative to BOE overall? Thanks.

Speaker #11: It sounds like that's one of the locomotives in that business. So maybe you can just expand on what you're seeing right now in the pipeline.

Speaker #11: Any changes in the competitive dynamics in that market ? And since somebody just asked about margins , can you just talk about how the margins in the local business are trending relative to BOE overall ?

Speaker #11: Thanks .

Speaker #3: I'll , I'll talk about the expansion and the strategy for expansion . And then Emma can hit the margin . Question . So I want to start by saying this has been one of the gems for CBRE for years , and I'm not sure that people always recognize when we say enterprise facilities management and local facilities management , what the difference is .

Bob Sulentic: I'll talk about the expansion and the strategy for expansion, and then Emma can hit the margin question. So I want to start by saying this has been one of the gems for CBRE for years, and I'm not sure that people always recognize when we say enterprise facilities management and local facilities management, what the difference is. Enterprise facilities management is when we handle facilities, typically for large corporates across large swaths of geography, sometimes the entire world, sometimes the US or Europe, and multiple asset classes, that they have in their portfolio. So big, big portfolios of property, sometimes hundreds, even over 1,000 people assigned to those enterprise clients.

Speaker #3: Enterprise facilities management is when we handle facilities typically for large corporates across large swaths of geography , sometimes the entire world , sometimes the US or Europe , and multiple asset classes that they that they have in their portfolio .

Speaker #3: So big , big portfolios of property sometimes hundreds , even over a thousand people assigned to those enterprise clients , local FM is when we do typically single complex assets , for instance , maybe a big museum or a particular hospital , or we do a group of assets of a similar type within a confined geography .

Bob Sulentic: Local FM is when we do typically single complex assets, for instance, maybe a big museum, or a particular hospital, or we do a group of assets of a similar type within a confined geography, one metropolitan area, two very different profiles in terms of the portfolios you serve for those clients. Local includes within it also a lot of small project work, so roof replacements, parking lot replacements, et cetera, that's done on a principal basis. And that's typically add-on work. That's typically not in the base contract. It's incremental work you do at nice margins in that business. That business was very centered in the UK and Ireland, and then we grew it into Continental Europe, and now we've started to build that business in the US. And I think Emma gave the numbers.

Speaker #3: One metropolitan area , two very different profiles in terms of the portfolios you serve . For those clients , local includes within it also a lot of small project work .

Speaker #3: So roof replacements , parking lot replacements , etc. the done on a principle basis . And that's typically add on work . That's typically not in the base contract .

Speaker #3: It's incremental work . You do at nice margins in that business that that business was very centered in the UK and Ireland . And then we grew it into continental Europe , and now we've started to build that business US .

Speaker #3: And I think Emma gave the numbers . It's grown from like 300 million to 800 million in the last three and a half years .

Bob Sulentic: It's grown from, like, $300 million to $800 million in the last 3.5 years. That's the basic FM footprint that we've laid down, doing those projects. Now we're starting to build into that business the incremental project work that's higher margin. That model is working exactly as it's supposed to work. We're thrilled with what's going on there. It's one of the things that differentiates our business from others. But it does take organic investment. We're growing that business mainly here in the US organically. That's why Emma commented on some of the... Yes, there, there's some inherent margin advantage as you take on those projects, for instance, but you also have to do an organic build out of that business. And that's where that's working...

Speaker #3: And that's the basic FM footprint that we've laid down . Doing those projects . Now we're starting to build into that business . The incremental project work that's higher margin .

Speaker #3: That model is working exactly as it's supposed to work . We're thrilled with what's going on there . It's one of the things that differentiates our business from others .

Speaker #3: And but it does take organic investment . We're growing that business mainly here in the US organically . Thats why Emma commented on some of the yes , we there's some inherent margin advantage as you take on those projects .

Speaker #3: For instance , but you also have to do an organic build out of that business and that's where that's working . And and it's driving a considerable amount of growth for the company .

Bob Sulentic: It's driving a considerable amount of growth, for the company. Emma, you might want to comment on the margins.

Speaker #3: And Emma , you might want to comment on the margins .

Speaker #4: Yeah . So overall , the local margins globally are slightly above what you see for the BOE segment . And then , like Bob said in the Americas , that margin is is lower as they're building out , they're building out those teams expanding across the US .

Emma Giamartino: Yeah. So overall, the local margins globally are slightly above what you see for the BOE segment. And then, like Bob said, in the Americas, that margin is lower as they're building out those teams expanding across the US. And so that's the upside to both local and to BOE as that market matures.

Speaker #4: And so that's upside to both local and to BOE . As as that market matures .

Speaker #11: Very helpful . Thank you . And then just a quick follow up on the data opportunity . It sounds like you just want to do you're going to do a lot more work there to enable your your brokers etc.

Alex Kramm: Very helpful. Thank you. And then just a quick follow-up on the data opportunity. It sounds like you just wanna do you were gonna do a lot more work there to enable your, your brokers, et cetera. But just maybe just 2 more questions here. On the saving side, Bob, you gave some opportunities to have savings. Can you expand on that a little bit? Maybe how much are you spending on external vendors? Do you think you can actually cut those out mostly over time as AI gets better? And then also you mentioned research. So it's just is it just a reshaping of the research organization that you have internally?

Speaker #11: . But just maybe just to two more questions here on the on the savings side , Bob , you gave you gave some opportunities to to have savings .

Speaker #11: Can you expand on that a little bit maybe . How much are you spending on external vendors ? Do you think you can actually cut those out ?

Speaker #11: Mostly over time as AI gets better . And then also you mentioned research . So it's just is it just a reshaping of the research organization that you have internally .

Speaker #11: And then just very quickly on the on the external side , are you are you also seeing data opportunities , monetization opportunities externally to to some of your real estate end clients ?

Alex Kramm: Then just very quickly, on the external side, are you also seeing data opportunity monetization opportunities externally to some of your real estate end clients, or is this really just to enable your business better?

Speaker #11: Or is this really just to enable your business better ?

Speaker #3: Yeah . So there are a number of things there . I'm going to start with an area where we can be empirical about the savings .

Bob Sulentic: Yeah. So there are a number of things there. I'm gonna start with an area where we can be empirical about the savings. We think we're gonna be able to save over this year, maybe extending into next year, about 25% of the cost of our research work, using AI and the data that we assemble and manipulate through AI to support the research work. We get data from a lot of different sources in our brokerage business, and we spend money in a variety of ways there.

Speaker #3: We think we're going to be able to save over this year . Maybe extending into next year . About 25% of the cost of our research work using AI and the data that we assemble and manipulate through AI to support the research work we get , we get data from a lot of different sources in our brokerage business , and we spend money in a variety of ways .

Speaker #3: There . We're not specifically talking about where we're going to save , but we're through a combination of what it costs us to collect data ourselves and what it costs us to buy data .

Bob Sulentic: We're not specifically talking about where we're gonna save, but we're, through a combination of what it costs us to collect data ourselves and what it costs us to buy data, we will save money, and then we will be able to deliver that data, this is what we're most excited about, in a more useful, efficient way to our brokers, in a more self-serve way to our brokers. So it's a combination of all those things, and that's, I think, as far as we wanna go with that right now.

Speaker #3: We will save money , and then we will be able to deliver that data . This is what we're most excited about in a more in a more useful , efficient way to our brokers in a more self-serve way to our brokers .

Speaker #3: So it's a combination of all those things . And that's , I think as far as we as we want to go with that right now

Speaker #1: Thank you . The next question today is coming from Seth Burger from city . Your line is now live

Chandni Luthra: Thank you. Our next question today is coming from Seth Bergen from Citi. Your line is now live.

Operator: Thank you. Our next question today is coming from Seth Bergen from Citi. Your line is now live.

Speaker #12: Hey , thanks for taking my question . I guess just to start off , you know , you've touched a lot on AI and you know , you know , just going back to some of your comments on , on data and , you know , efficient , you know , efficient ways for your brokers to kind of serve your clients .

Seth Bergey: Hey, thanks for taking my question. I guess just to start off, you know, you've touched a lot on AI, and you know, just going back to some of your comments on data and you know, efficient ways for your brokers to kind of serve your clients. You know, how do you think about kind of headcount needs, just as you balance you know, kind of the accelerating advisory services business, and then maybe some efficiency gains that you're kind of seeing with AI over the longer term?

Speaker #12: How do you think about kind of headcount needs just as you balance , you know , kind of the accelerating advisory services business and then maybe some efficiency gains that you're kind of seeing with , with AI over the longer term .

Speaker #3: Yeah . So I'll talk about two kinds of headcount . We're not reducing broker headcount . We're adding brokers . By the way .

Bob Sulentic: Yeah. So I'll talk about two kinds of headcount. We are not reducing broker headcount. We're adding brokers. By the way, another thing we have going on here in Dallas this week, we have our Americas brokerage leadership team assembled here in Dallas. I spent time with them today, or excuse me, yesterday. We've rebuilt... It's a spectacular team, and they are doing a really good job of adding talented brokers and taking market share in leasing in particular. And they're doing a good job with the team that we've built with that's been enabled by our digital and technology team, of delivering data to our brokers in more, in a more effective and efficient way, and that's what we were commenting on.

Speaker #3: Another thing we have going on here in Dallas this week , we have our Americas brokerage leadership team assembled here in Dallas . I spent time with him today or excuse me , yesterday .

Speaker #3: We've rebuilt . It's a spectacular team and they are doing a really good job of adding talented brokers and taking market share in leasing in particular .

Speaker #3: And they're doing a good job with the team that we've built with . That's been enabled by our digital and technology team of delivering data to our brokers in more in a more effective and efficient way .

Speaker #3: And that's what we were commenting on . That helps us recruit , that helps us retain . But but the big product there is the is the talent of that .

Bob Sulentic: That helps us recruit, that helps us retain, but the big product there is the talent of that group of brokers. And so that's all going exactly as we would like it to go. But the savings is in things like research, the cost of data, and then the efficiency of delivering data to the brokers.

Speaker #3: That group of brokers . And so that's all going exactly as we would like it to go . But the savings is in things like research , the cost of data and then the efficiency of delivering data to the brokers

Speaker #12: Thanks . That's helpful . And then maybe just getting that kind of some of the things that you're kind of underwriting with , with guidance , you know , what kind of gets you to kind of the top end and the low end of , of the guidance range that you put out for the year .

Seth Bergey: Thanks. That's helpful. And then maybe just getting at kind of some of the things that you're kind of underwriting with guidance. You know, what kind of gets you to kind of the top end and the low end of the guidance range that you've put out for the year?

Speaker #4: Yeah . Seth , so similar to last year , the range is almost entirely driven by the timing of our data center land site monetization , like I said in my prepared remarks , we've talked about before , there is uncertainty around how long it takes to get power to these sites .

Emma Giamartino: Yeah. Seth, so similar to last year, the range is almost entirely driven by the timing of our data center land site monetization. Like I said, in my prepared remarks, and we've talked about before, there is uncertainty around how long it takes to get power to these sites, and that really is the driver of the timing. And so to get to the high end of the range, it's, it's really the almost all of what we have in our data center pipeline converts this year, and then the low end is very little comes through.

Speaker #4: And that really is the driver of the timing . And so to get to the high end of the range , it's really that almost all of what we have in our data center pipeline converts this year .

Speaker #4: And then the low end is very little comes through

Speaker #1: Thank you . We reached the end of our question and answer session . I'd like to turn the floor back over for any further closing comments .

Chandni Luthra: Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over for any further closing comments.

Operator: Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over for any further closing comments.

Speaker #3: Thanks, everyone, for joining us. We will talk to you again when we report our first quarter results.

Bob Sulentic: Thanks, everyone, for joining us, and we will talk to you again when we report our Q1 results.

Speaker #1: Thank you. That does conclude today's teleconference and webcast. You may now disconnect your line at this time, and have a wonderful day.

Chandni Luthra: Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Operator: Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Q4 2025 CBRE Group Inc Earnings Call

Request a DemoDemo

CBRE

CBRE Group

Earnings