CBRE Group CEO Sees AI as Tailwind, Bullish on NYC Growth

Well, first of all, Norah, thanks for having me. We did report today. We were very pleased with our results, very pleased with how we're positioned for the remainder of the year. There is downward pressure on the stock. Sometimes you just can't quite figure out what's going to impact your stock at any given time. Its stock price is a long term game, not a short term game. We feel good about what's happened over the last couple of years. Our stock price today is a little disappointing, but that's the way things go.

Yeah. So brokerage or advisory services, as we call it, is one of our four segments in our business. So brokerage advisory services being one, building management being one, project management being a big one, and then real estate investment, which is where we do development and investment management work. Historically, up until the last two or three years, we've been heavily, heavily skewed toward real estate. We've been known as a real estate firm, even though far beyond just brokerage. What's happened over the past few years, and really when we made the Turner and Townsend project management investment, it was accelerated significantly. We've increasingly become an infrastructure services firm in mostly critical infrastructure. So a lot of data centers, but telecom assets, energy assets, transportation assets. And by the end of last year, about 15% of our earnings came from work we were doing in the infrastructure area and in particular critical infrastructure. So you go to the first quarter of this year, we had $3 billion of that kind of revenue last year. In the first quarter of this year, we had almost $2 billion. That part of our business is now growing over 50%. We are legitimately today a real estate services and investment firm and an infrastructure services firm. And I think that's a really important, profound change in our company.

What was data centers plus other types of critical infrastructure, mostly data centers though. And yeah, there's a everybody knows there's a big boom going on in data centers driven by artificial intelligence, but not just artificial intelligence. You have all kinds of things going on in technology there demanding the use of data centers. We've moved through a series of acquisitions. Our companies since I've been in this role has done over 100 acquisitions. We've done a number of acquisitions that have positioned us quite well in that market. We have an ability to attract talent, which is really hard, that serves that market. And as a result, we're attracting clients, we're attracting talent, and we're attracting M&A targets in the data center services area that have allowed us to move really rapidly in growing that part of our business. And we expect it to sustain for some time.

Well, you did see that downdraft in the first quarter and we're continuing to see some of it. And people are trying to figure out what's going to happen with artificial intelligence and who's going to be a winner and who's going to be a loser. We look at the impact on our business. We look at it in four categories. Okay. So the first is we always look at it strategically as the environment we're operating in morphs and changes and evolves. What are we going to do with our business to address that? And we've had a strategy in place for some time that says we're going to move in the direction of businesses with secular tailwinds. We're having tremendous success moving in the direction of the secular tailwinds associated with data centers and critical infrastructure, almost like anything ever in the history of our company. If you went back in the nineties and early 2000s, we saw some of that moving into the real estate outsourcing business. But this has been more powerful and more rapid than that. The second thing we look at is the products we have that we offer our clients today independent of the new businesses. And right across the board in brokerage and building management and project management, we've introduced tools that are supported by artificial intelligence and supported by the massive amount of data we have that we think are going to make those products and our ability to serve our customers better. We're very, very bullish about that. The third area we look at is efficiencies that might be introduced. That's where we're going to cut some cost through efficiencies, but also replace some jobs. And we're very attentive to where that's going to happen. And so we got opportunities across those three areas. And then where you might be disintermediated, and there probably are places where there could be some disintermediation. You see that a little bit on building management. There'll be more and more technology associated with operating buildings. But given the size and complexity of the portfolios we serve, we think we're relatively well insulated. More importantly, we think that's small compared to the market-facing opportunities we're seeing on the growth side. So we think we're going to be pretty significant net winners due to artificial intelligence. And I think if you look at our recent results, at least the empirical evidence to date would suggest that's the case.