By Barbra Murray, Contributing Editor
With the stroke of a pen–and $1.48 billion in cash–CBRE Group Inc. has become a dominant force in the commercial real estate occupier outsourcing arena worldwide. The commercial real estate services firm just closed the previously announced acquisition of Johnson Controls Inc.’s Global Workplace Solutions business, a leading provider of enterprise facilities management solutions, and has taken its place as a giant in outsourcing services for commercial real estate occupiers in innumerable industries around the world.
It’s a watershed event. “This is an industry that’s going to change now as a result of having these two companies–very strong in their own rights–come together with these capabilities that we can bring our clients,” Bill Concannon, formerly CEO of CBRE’s occupier outsourcing business line and now CEO of CBRE’s Global Workplace Solutions, told Commercial Property Executive
CBRE will integrate GWS–and the GWS name–into its occupier outsourcing business line, adding GWS’s expertise in technical engineering, supply chain management and critical facilities to CBRE’s existing roster of occupier services. And with GWS’s status as the largest provider of facilities management services outside the U.S. and CBRE’s strong presence in the Americas, there will be little, if any, geographic ground that will go uncovered.
The two businesses’ geographic strengths are as complementary as their blue-chip client base. More than 80 percent of Legacy GWS’s clients are not on CBRE’s contractual client roster. And there’s a certain harmony in their respective industry presence as well. Legacy GWS brings to the table a strong foothold in the industrial/oil & gas, life sciences, technology and manufacturing sectors, which will balance out CBRE’s vital position in the areas of financial services, technology, telecommunications and healthcare.
Timing is everything and as John Murphy, formerly president of Global Workplace Solutions under JCI and now COO of Global Workplace Solutions, told CPE, “The time is perfect for this type of a combination in this industry.” He points out that the international real estate outsourcing business is growing at a compound annual rate of 6 percent, and even in the U.S., which was a market that was an early adopter of the idea of integrated real estate services outsourcing, demand is still on the upswing.
“Clients who were early adopters are now in their fourth or fifth generation of outsourcing, and yet we continue to see the pace of first generation outsourcing in the U.S. at a pretty steady, very attractive clip,” Murphy noted. “One reason is there’s real value in doing this. It allows our clients to focus on their core business while we bring unique expertise to helping them manage their real estate portfolios in a cost-competitive and high-quality way.”
For CBRE, which continues to be the real estate services industry’s leader in leasing and capital markets transactions, the acquisition of GWS dovetails perfectly with its current corporate strategy. As CBRE has publicly stated, its goal as it endeavors to better serve its clients is to become more balanced and less transactional in terms of real estate returns that come through the traditional channels. “What we told Wall Street in all of our public documents is we’ll be much more stable and balanced through cycles because real estate is a cyclical industry,” Concannon added
With the GWS transaction, CBRE, already the world’s largest commercial real estate services and investment firm in terms of revenue, will become even larger. GWS recorded revenue of more than $3 billion in 2014. And CBRE’s outsourcing business line now boasts a management portfolio of approximately 5 million square feet of commercial real estate and corporate facilities. Additionally, in terms of size, CBRE will get a boost there as well, as GWS comes aboard with 14,000 employees.
“A combined organization like ours–where we have what we believe are best-of-breed service lines in our portfolio–puts us in a position to help really transform the industry with a combined set of integrated services to offer our clients now,” Murphy concluded. “Up until this point in time, no one else in the industry has credibly and authentically been able to actually deliver that. It’s a turning point in the industry.”