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Morningstar | CBRE Updated Report

CBRE has overseen a boom in the commercial real estate services industry since the nadir of the real-estate-driven financial crisis of 2007. As the largest player in the space by market cap, CBRE has benefited disproportionately from various tailwinds that have underpinned its impressive run of growth. Key to this success has been the company’s industry-leading brand reputation and a platform that melds complementary business lines in areas such as property sales, outsourcing, and leasing to serve its corporate clients.After a segment reclassification that involved changes to the company’s corporate structure, CBRE now has three main segments. Advisory services contains many of the company’s more traditional business lines, including capital markets, advisory leasing, and valuation. This segment, which accounts for 66% of companywide revenue, is subject to a higher level of cyclicality, given its more transactional nature. By contrast, global workplace solutions, or GWS, which contains corporate outsourcing business lines, such as project management and facility management, is significantly less cyclical, given the contractual nature of its revenue. This segment, 29% of companywide revenue, has been the fastest-growing area for the firm, which we expect to continue. Finally, the real estate investments segment contains CBRE’s real estate development business, its investment management business, and the newly created Hana shared workplace solution. This segment accounts for about 5% of companywide revenue. Given its scale, CBRE is one of just a few options that serve as a one-stop shop to multinational corporations that outsource their real estate operations. Buoyed by trends such as urbanization, the institutionalization of real estate, and the growing tendency of corporate outsourcing, we expect CBRE to post healthy growth rates as it continues to take share from its smaller and weaker rivals.