CBRE's Q3 2025 Earnings Call: Contradictions Emerge on Office Leasing Recovery, M&A Priorities, and CRE Sales Outlook

Date of Call: October 23, 2025

Financials Results

• Revenue: Advisory revenue +16% YOY; Building Operations & Experience revenue +11% YOY; Project Management revenue +19% YOY (pass-through costs +23%); property sales +28% YOY; data center revenue nearly $700M, +40% YOY; Japan & India combined revenue ~ $400M, +30% YOY.
• EPS: Q3 core EPS up 34% YOY; raised full-year core EPS guidance to $6.25–$6.35 from $6.10–$6.20 (midpoint implies ~24% growth vs prior year; top end >10% above prior peak EPS).

Guidance:

• Raised full-year core EPS guidance to $6.25–$6.35 (from $6.10–$6.20).
• Expect approximately $1.8B of free cash flow for the year.
• Net leverage 1.2x at quarter-end; expect to delever through year-end.
• Guidance assumes contributions from planned data-center site dispositions; monetizations could push EPS to the high end of the range.
• Capital allocation: prioritize M&A and REI co-investment; remaining free cash flow for buybacks.

Business Commentary:

* Strong Financial Performance and Outlook: - CBRE Group reported a 34% growth in core EPS and 19% in core EBITDA for Q3 2025, exceeding expectations. - The growth was driven by double-digit revenue gains in both resilient and transactional businesses, highlighting the balanced strength of the company's business model.

• Data Center Revenue and Growth:
• Data center revenue reached nearly $700 million in Q3 2025, a 40% increase from the previous year's third quarter.

• This growth was fueled by strong demand from hyperscalers and contributed to profitability in all four segments.

• Geographic Growth in Asia:

• Revenue from Japan and India combined rose more than 30% to nearly $400 million in Q3 2025.

• The growth was driven by secular and sustained demand in these regions, positioning CBRE for future expansion.

• Outlook and Guidance:

• CBRE raised its full-year core EPS outlook to $6.25 to $6.35, reflecting strong performance and strong fourth-quarter pipeline confidence.
• This increase reflects the company's solid financial performance and confidence in its strategic direction.

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly stated results 'exceeded expectations', highlighted 34% core EPS growth and 19% core EBITDA growth, raised full-year core EPS guidance to $6.25–$6.35, and cited strong pipelines and data-center momentum supporting further upside.

Contradiction Point 1

Office Leasing Recovery and Comps

It involves differing perspectives on the strength and sustainability of office leasing recovery, which is crucial for understanding market conditions and investor expectations.

Did any business activity get pulled forward from Q4, and in which business lines should we expect comp normalization to begin? - Anthony Paolone (JPMorgan Chase & Co, Research Division)

2025Q3: We haven't seen a significant pull forward across segments. Strong momentum continues, but we're facing tougher comps. Leasing faces tough Q3 comps, sales activity is strong but expected to decelerate, and Project Management faces a tough Q4 compare. - Emma Giamartino(CFO)

What factors will sustain the office leasing recovery as comps become harder in the back half of the year, and was demand pulled forward? - Anthony Paolone (JPMorgan)

2025Q2: The comps do get tougher... But we expect office building leasing to continue to be strong. - Robert E. Sulentic(CEO)

Contradiction Point 2

M&A and Share Repurchase Priorities

It highlights a shift in company priorities regarding capital allocation, specifically between M&A activity and share repurchases, which impacts investors' understanding of the company's strategic direction.

Can you comment on the M&A pipeline and its impact on stock buybacks? - Anthony Paolone (JPMorgan Chase & Co, Research Division)

2025Q3: Capital allocation priorities remain M&A and co-investment, then share repurchases. We believe our share price is undervalued. We're focused on resilient areas with secular tailwinds, actively advancing M&A approach, and confident in finding right targets over time. - Emma Giamartino(CFO)

Bob, can you provide additional context on the potential synergies in BOE, including their order of magnitude and impact by 2026? - Anthony Paolone (JPMorgan)

2025Q2: Our first priority is share repurchase. If we don't do anything, we've got plenty of capital, which we're going to continue to deploy in those areas, picking up the pace actually. The second priority, if we can't do share repurchases, if there's a constraint, would be M&A. And that is a very attractive area for us. - Robert E. Sulentic(CEO)

Contradiction Point 3

Office Leasing Market Recovery

The company's perspective on the office leasing market recovery varies between the two quarters, which could impact investors' expectations for this segment.

How strong is office leasing, and what is driving the recovery? - Jade Rahmani (Keefe, Bruyette, & Woods, Inc., Research Division)

2025Q3: Recovery is broad-based, including gateway markets, with surprises in secondary markets. We're seeing a return to the mean rather than return to the office, with office space becoming more strategic. - Robert Sulentic(CEO)

Can you share updates on the pipeline, recent changes, and whether there's a wait-and-see approach or deal cancellations? - Anthony Paolone (JPMorgan)

2025Q1: In our Global Investment Banking segment, while our capital markets transaction volumes decreased in the first quarter, our mortgage origination and equity and debt placement volumes increased. As I mentioned at the outset, our office leasing net effective rent growth is slower, particularly in our gateway markets. - Emma Giamartino(CFO)

Contradiction Point 4

Project Management Revenue Growth Expectations

It involves differing expectations for the growth trajectory of the Project Management segment, which impacts revenue projections and strategic planning.

Regarding the Advisory segment, what is the talent situation? - Ronald Kamdem (Morgan Stanley, Research Division)

2025Q3: We're appropriately staffed, with capacity in leasing, sales, and mortgage origination. Our leasing business has significantly improved, supported by technology and research. We're in a strong talent position, with significant hires in sales and mortgage origination. - Robert E. Sulentic(CEO)

What are your expectations for Project Management revenue growth in H2, particularly regarding whether double-digit growth will persist on both reported and adjusted bases after this quarter's high single-digit vs. low teens growth? - Stephen Sheldon (William Blair)

2025Q2: Yes, Stephen, on a net revenue basis for the full year, we're looking at low double-digit revenue growth... There is some noise between Q2 and Q3. So in Q2 2024, there was net revenue that was mischaracterized in PJM that should have been in FM... That net revenue growth at Q2 this year in Project Management is looking low... That's going to reverse in Q3, and the net revenue growth in Project Management is going to look slightly above trend, but it all will normalize for the full year. - Emma E. Giamartino(CFO)

Contradiction Point 5

Sales Activity in Commercial Real Estate (CRE)

The company's outlook on sales activity in the CRE market differs between the two quarters, which could affect financial forecasting and market expectations.

How far along is the CRE transaction market recovery, and what growth potential remains? - Julien Blouin (Goldman Sachs Group, Inc., Research Division)

2025Q3: We expect a longer, slower recovery in sales. We're early into it, with pent-up demand from buyers and owners ready to sell. Interest rate ticked down in September, boosting sales. Strong pipelines suggest a nice, steady recovery over the next couple of years. - Robert Sulentic(CEO)

Can you share updates on the pipeline, recent changes, and whether there's been a shift toward a wait-and-see approach or deal cancellations? - Anthony Paolone (JPMorgan)

2025Q1: In our Global Investment Banking segment, while our capital markets transaction volumes decreased in the first quarter, our mortgage origination and equity and debt placement volumes increased. As I mentioned at the outset, our office leasing net effective rent growth is slower, particularly in our gateway markets. - Emma Giamartino(CFO)

Q&A:

• Question from Anthony Paolone (JPMorgan): Do you feel any Q3 strength was pulled forward from Q4, and when will comps start to get tougher or normalize?
  Response: No meaningful pull-forward observed; momentum is strong but comps get tougher in Q4 (tough leasing comp and sales growth likely to decelerate vs 2024; Project Management faces a difficult prior-year SOP compare).

• Question from Anthony Paolone (JPMorgan): Can you comment on the M&A pipeline and whether it affected buybacks in the quarter?
  Response: Capital allocation prioritizes M&A and REI co-investment first, with remaining free cash flow used for buybacks; management views shares as undervalued but is patient and won't preannounce deal specifics.

• Question from Julien Blouin (Goldman Sachs): Where are we in the CRE transaction market recovery and how much further can it run?
  Response: Early in a longer, slower recovery; pipelines are strong, buyer/seller gaps have narrowed, and management expects steady, multi-year recovery unless macro conditions change.

• Question from Julien Blouin (Goldman Sachs): How is Q4 deal activity/pipelines trending and why were Advisory incremental margins lower this quarter?
  Response: Pipelines remain strong into Q4; guidance incorporates Q3 outperformance and high confidence in development monetizations—Advisory incrementals were ~25% due to higher incentive compensation from deferments.

• Question from Ronald Kamdem (Morgan Stanley): Are you appropriately staffed in Advisory and will you add hiring as the recovery progresses?
  Response: Appropriately staffed with capacity across leasing, sales and mortgage origination; actively recruiting targeted talent where needed and leveraging tech/managed brokerage to expand coverage and market share.

• Question from Ronald Kamdem (Morgan Stanley): Any update on Turner & Townsend vs legacy Project Management and margin opportunity?
  Response: Integration largely complete under the Turner & Townsend operating model; further integration of finance/HR/tech expected to deliver cost synergies next year and higher-margin wins from combined capabilities.

• Question from Stephen Sheldon (William Blair): Over the next 2–3 years where are the biggest avenues to grow supporting data centers and will monetizations become a larger part of EBITDA?
  Response: Data centers are ~10% of earnings this year and likely larger next year; durable opportunities across brokerage, project management/cost consultancy, BOE operations and development land monetizations will drive continued growth.

• Question from Stephen Sheldon (William Blair): How are you creating better touch points with occupiers to drive wallet share gains and the timeline for seeing results?
  Response: Bundled offerings across BOE, Project Management, Advisory and Development (supported by acquisitions like Turner & Townsend and Industrious) enable cross-sell; management expects wallet-share gains to materialize as integrated solutions are adopted.

• Question from Alex Kramm (UBS): How have BOE pipelines trended and have things normalized after earlier disruptions?
  Response: Pipelines have normalized and improved; enterprise pipelines are very strong and elevated sales volume should begin to show in BOE revenue in the second half of next year.

• Question from Alex Kramm (UBS): On the data center divestment that might slip to 2026, how should we think about EPS impact?
  Response: Full-year EPS range ($6.25–$6.35) is driven by development monetizations; outcomes at the bottom vs top of the range depend on timing and execution of those dispositions.

• Question from Steve Sakwa (Evercore ISI): Was not buying back stock in Q3 an active decision related to potential deals?
  Response: No active decision not to repurchase; management continues to view the stock as undervalued and will buy back shares when cash is available, but cannot discuss M&A specifics pre-close.

• Question from Steve Sakwa (Evercore ISI): How do you view the ultimate TAM for facilities management and your market share?
  Response: TAM has expanded materially via acquisitions and new service lines (data centers, government work, Direct Line); management believes CBRE remains far from TAM saturation with significant growth runway.

• Question from Seth Bergey (Citi): Do your data center development sites have access to power or is that a constraint?
  Response: Power is a primary and growing constraint; CBRE focuses on acquiring/control of land, entitlements and site improvements to position assets for utilities and hyperscalers, but securing power is competitive.

• Question from Seth Bergey (Citi): Is office leasing strength broad-based or concentrated in gateway markets?
  Response: Recovery is broad-based; Q3 showed a resurgence in gateway markets (e.g., NY, SF) but pipelines indicate broad-based office leasing growth and a return toward pre-COVID norms driven by strategic occupier demand.

• Question from Jade Rahmani (KBW): Is U.S. office recovery driven by Class A/A+ or spreading to Class B and secondary markets?
  Response: Initially demand filled top-tier buildings, then spurred upgrades and conversions in lower-quality buildings; new development is returning (examples: Uptown Dallas, NYC) and recovery is spreading across classes and markets.

• Question from Jade Rahmani (KBW): What drove industrial growth this quarter after prior oversupply and negative absorption?
  Response: Growth driven by large leases in prime buildings plus many renewals in smaller/second-generation spaces; vacancy expected to start declining by mid-next year.

• Question from Jade Rahmani (KBW): Are EBITDA margins steady for the full year or is further margin expansion likely beyond 2025?
  Response: Advisory margins near recent peaks and expected to be sustained; BOE and Project Management should see further margin expansion next year as synergies and operational efficiencies materialize.