CBRE Projects Double-Digit Growth, Boosted By 'Profound Shift' In Office Leasing
CBRE ended 2024 with what CEO Bob Sulentic described as its best quarter ever for core earnings and free cash flow, and the brokerage expects to continue to ride a market recovery this year.
The world's largest commercial real estate services firm turned a $487M profit in the fourth quarter, more than half of its $968M of net income for the full year. The quarter's net income was 2.1% higher than a year earlier, while CBRE's profit for all of 2024 was 1.8% down from 2023.
Dallas-based CBRE finished the year with $1.5B in free cash flow, up from $202M in 2023. It posted $10B in net revenue for the fourth quarter, bringing its 2024 total to $35.8B, up 12% year-over-year.
The fourth-quarter surge was driven by a major rebound in U.S. office leasing revenue, which was up 28% year-over-year.
“There was a pretty profound shift in what was going on in office leasing toward the back half of last year,” Sulentic said on a call with analysts Thursday morning. “I don't think we're going to go all the way back to where we were in 2019. But it also appears, based on empirical evidence, that we're going to go further back than we thought we were before.”
Executives expressed optimism about 2025, projecting that the firm's earnings per share will grow by more than 10% as deal volume increases and its recent acquisitions of flexible office provider Industrious and project management firm Turner & Townsend start paying dividends.
“We expect to easily set a new peak in 2025,” CBRE Chief Financial Officer Emma Giamartino said.
Leasing activity across all asset types in New York, San Francisco, Los Angeles, Chicago, Washington, D.C., and Boston grew approximately 30% on aggregate. Dallas, Atlanta and Seattle outperformed those gateway markets.
Combined, the firm’s advisory services brought in more than $3B in net revenue in the fourth quarter, up nearly $500M from a year earlier.
“Office occupiers are increasingly comfortable making long-term decisions given improved return-to-office momentum and a healthy economic outlook,” Giamartino said.
The firm’s global workplace solutions segment, which includes its consulting services, added $100M to its operating profits year-over-year, pulling in $393M in the fourth quarter.
CBRE expects the service line to grow as it integrates coworking firm Industrious, which it acquired in January, into the business. Sulentic said he expects Industrious to generate double-digit growth for the firm.
“We also think we'll end up with a capability that's different from what has been seen in the market before,” he said. “I would say it's one of the areas of the future for CBRE that we're most ambitious about.”
Operating profits for investment management slid from $42M to $27M year-over-year. CBRE raised $10B in investment capital in 2024, with half of that coming in the fourth quarter, and it's expecting to raise a near-record amount of capital this year, Giamartino said.
Executives expect data center demand to continue to grow significantly. CBRE has diversified its services in the space, including with the acquisition of Turner & Townsend, which was fully integrated into the brokerage in January. It expects to generate gains by selling land to data center users and developers.
“We see continued elevated data center activity and have positioned the portfolio to benefit from the secular tailwind, with data center site monetization expected to contribute more than half of this year's development profit,” Giamartino said.
CBRE’s $2.32 earnings per share in the fourth quarter were up 68% year-over-year as it benefits from tailwinds in the sector. The brokerage’s resilient lines of business grew by 14% in 2024, and the firm bought back more than $800M of its own shares since the end of the third quarter.
“Our confidence in CBRE’s future has never been higher, as evidenced by our considerable share repurchases since the end of the third quarter,” Sulentic said. “We believe the market is undervaluing our business relative to both its growth profile and dramatically enhanced resiliency.”
CBRE’s earnings were roughly in line with analysts’ expectations, although it slightly beat the expected $2.21 consensus EPS estimate. Its stock slipped 3% in early trading Thursday but recovered to be close to flat by 10:30 a.m. ET. Its shares have gained 64% in value over the past year.
Resilient business lines include property management, loan servicing, valuation services and recurring investment management, which collectively accounted for 60% of CBRE’s profits in 2024.
CBRE’s 2025 guidance announced Thursday projects profit growth of more than 10% in its advisory services and workplace solutions. Its investment business is expected to be flat year-over-year, with new developments and refinancing offsetting continued sluggishness in property sales.
“While acquisition financing is increasing, refinancing continues to lead the recovery, making up almost 60% of total volume for the quarter,” Giamartino said.
