The 1906 San Francisco earthquake, in which more than 225,000 people lost their homes, was the starting point for what is now CBRE. The world’s largest commercial real estate and services company ranks 122nd in the Fortune 500 and is rated by Standard & Poor’s among the top 500 companies. In Europe it became strong since in 1998 it took a giant leap by merging with the British Richard Ellis.
Now, in the year of its 116th anniversary, the services and investment group, with 105,000 employees worldwide and net income (2021) of 22,000 million euros, has announced what seemed impossible two years ago: it will increase its sales by double-digit percentages each year through 2025. After taking a majority stake in Turner & Townsend Holdings, a construction project management firm (now that price slippage can derail any building), the group rides the transition integrating complementary businesses for its real estate portfolio, such as that of Altus Power, a supplier of solar energy for commercial use and industrial properties with which it has begun to work in the North American market.
But CBRE’s headquarters in Delaware, that American financial enclave that offers juicy corporate advantages and is populated by more companies than people, is far from Europe, where Adolfo Ramírez-Escudero, its president on the Peninsula, speaks of a bright future for the real estate sector. Here the turnover reaches 321 million, with 1,904 employees on the workforce and profit margins of between 20% and 25%. The executive promises to comply with the guidelines set by the parent company thanks to what he describes as “the renaissance of the real estate market focused on the person.” In an expression that he, he admits, may seem cheesy, expectations of him travel. “The sector has put people aside to produce, but now those people expect something more than having a box with four walls. They want the property to help them work, or to give them more rest.”
With the pandemic, as many needs as individuals have been born in a context of scarcity. “We are one of the sectors that benefit the most from the environment and we should be the first interested in preserving it. You have to recover before thinking about building, introduce the culture of recycling. And when it comes to building —because we are going to have to continue doing so—, establish a greater dialogue with the environment so that it is affected as little as possible”. Too bad that 20, 30 or 50 years ago no one thought the same. And how much will it cost? “How much would it cost you to lose the planet you live on?” she replies. It may be late, but the threat of climate change is so powerful that the rhetoric of large companies has been transformed and they talk more about the planet than about money and bricks.
He knows in depth all the sides of the coin.
In the more prosaic field, Ramírez-Escudero believes that the macroeconomy accompanies the recovery of the national market. Last year they participated in operations worth almost 3,000 million, 13% more than in 2020. CBRE, which has 11 million square meters under management on the Peninsula, is a strong player in the office market, and has seen very boosted its logistics business by the e-commerce revolution. In this segment there is still, according to the firm, 1.2 million square meters of available space to be occupied. They are also the largest independent manager in Spain in shopping centers: they operate 40 on the Peninsula, a segment that, they say, will be encouraged with the end of indoor masks. Another growing line of business in which they are already in the international arena is in the management of data centers, the new temples of digitization that house the physical structures that cloud computing needs.
But lifelong operations are still very important. The largest of the recent ones, for example, was the sale of the buildings of a network of funeral homes (from the Memora chain) for around 130 million. In the residential market they want to become stronger. The demand for rental housing is now the star driven by changes in lifestyle and the difficulty that young people have to buy. There, the executive does not see that the establishment of the 2% cap on the revaluation of rents has had a great impact on his clients, the majority of whom are large property owners. “More than a sharp rise in rents, what they want are high occupations without surprises.” Construction operations for rent (build to rent) have reached 700 million euros in the first quarter in Spain. Nor do they take their eyes off the hotel segment: 130 new ones are expected to open in the country before 2024 with “a record investment,” according to the president.
The IMF believes that the Spanish economy will advance by 4.8% this year and 3.3% next year, correcting the strong inflation along the way. “These are reasonably high expectations for our environment”, believes the executive, who mentions that the business will be encouraged thanks to the dynamism of a group of cities: he mentions Madrid and Barcelona, but also Malaga or Valencia. He sees them as magnets for employment because of the usual topics (climate, food, quality of life in general) and because of their specific qualities: “For example, Barcelona is becoming a magnet for science start-ups”.
However, the pandemic and the war in Europe remind us that everything can change very quickly. Will a rise in interest rates stop this scenario with the increase in the cost of financing? The director of CBRE does not believe it. “If inflation returns to normal, which is the base hypothesis, we will live with high nominal interest rates, but real interest rates (understood as the difference between nominal rates and inflation) will be negative or neutral.” And the brick, he trusts, will continue to be a magnet for relocating fixed and variable income money.