CBRE Group (CBRE) is the world’s largest real estate services and investment firm by revenue. The company has leading market positions within leasing, property sales, occupier outsourcing, and valuation services. CBRE Group provides its services to real estate occupiers and investors across the globe. The company works in three segments, Advisory Services, Global Workplace Solutions, and Real Estate Investments.
Since 2010 the economy has boomed, and the real estate market has thrived. But with the COVID-19 pandemic 2020 has slowed CBRE Group’s transactions down. I believe that the current valuation is fair, and there is a possibility to have a bounce back from a V-shaped economic recovery. Nonetheless, I am not an investor right now, as I would like more of a margin of safety.
Past Financial Results
Source: SEC 10-K’s
CBRE Group has had a revenue CAGR of 17.09% over the past five years. Now I should clear up where CBRE Group recognizes revenue. The company recognizes revenue in two parts, the pass-through revenue, and fee revenue. Pass-through revenue is derived from activities CBRE Group passes directly through to the client without adding value. On the other hand, fee revenue is revenue that CBRE Group has added value to the client, such as the advisory services provided. In 2019, pass-through revenue accounted for 50.36% of total revenue, and fee revenue was 49.64%. Fee revenue is what an investor will want to pay attention too as it shows what CBRE Group is doing for the customers. Overall, pass-through revenue had a CAGR of 30.95%, and fee revenue had a CAGR of 8.94%. Commercial real estate markets in the United States have seen increasing demand for space, filling vacancies, and higher rent since 2010, which is the reason for the growth in revenues. With an improving economy over the past