Q4 2020 Cushman & Wakefield PLC Earnings Call
Welcome to the Cushman and Wakefield fourth quarter, 'twenty and 'twenty earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
I'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star followed by the number two and it is now my pleasure to introduce Len Texter head of Investor Relations and global controller for Cushman and Wakefield. Mr. Texter, you may begin the conference.
Thank you and welcome again to Cushman and Wakefield fourth quarter, 2000, and 'twenty earnings Conference call earlier today, we issued a press release announcing our financial results for the period.
The release, along with today's presentation can be found on our Investor Relations website at IR, Doc Cushman and Wakefield Dot com.
Please turn to the page labeled forward looking statements. Today's presentation contains forward looking statements based on our current forecasts and estimates of future events. These statements should be considered estimates only and actual results may differ materially.
During today's call, we will refer to non-GAAP financial measures as outlined by SEC guidelines reconciliations of GAAP to non-GAAP financial measures and definitions of non-GAAP financial measures are found within the financial tables of our earnings release and appendix of today's presentation.
Also please note that throughout the presentation comparison and growth rates of parts of comparable periods 2019 and are in local currency.
And those of you following along with our presentation. We began on page five and with that I'd like to turn the call over to our executive Chairman and CEO Brett White.
Thank you Lynn and thank you to everyone joining us today.
Before I start with a brief review of our fourth quarter performance, including some color by region and service line I wanted to let you know, we and again invited Kevin Stuart our chief economist to join US today to provide some commentary on the recovery and more specifically office.
Following kevins comments Duncan will provide additional detail on our financial results for the quarter and the full year.
First I want to thank our team of Cushman and Wakefield professionals around the world.
And it goes without saying that 'twenty and 'twenty was incredibly challenging and our employees perseverance create.
Creativity.
And service to our clients continue to go above and beyond.
And those who have continued to support the frontline operations through the pandemic day notice delivering new and unprecedented solutions to our clients I.
And I continue to be extremely proud of how our people have risen to the occasion.
Second as previously announced our Chief Financial Officer, Duncan Palmer will be retiring as of February 28 day.
Duncan and the first class CFO.
He's been a terrific partner to me and has added significant value to cushman and Wakefield and.
And I can't think of them enough of it its work and.
And friendship over the past six years.
From the merger to numerous acquisitions.
So a very successful IPO.
A global pandemic and everything in between.
He has excelled and we wish talking all of the best and his next chapter.
Youll Johnston, our incoming Chief financial Officer has an impressive pedigree as well and we are lucky to have him and look forward to them, becoming CFO on February 28.
And you'll brings 30 years of financing and executive leadership experience, having previously served as the CFO of Presidio and Cox automotive.
And he was looking forward to many of our investors and analysts and the coming months.
And we look forward to him joining us on our first quarter earnings call.
And with that let me turn to our results.
There's gonna Wakefield reported fourth quarter consolidated fee revenue of $1 $6 billion and adjusted EBITDA of $198 million overall.
Overall, we were encouraged by the performance across our portfolio, including brokerage where revenue exceeded expectations, particularly in Americas capital markets.
Additionally, we delivered significant cost savings and the quarter from the decisive cost management actions taken earlier in the year as well as our continued tight management of discretionary costs.
For the full year, we reported fee revenue of $5 $5 billion and adjusted EBITDA of $504 million.
The impact of leasing and capital markets revenue declines.
Of 34 per cent and 26%, respectively were partially offset by the continuing and stability.
Of our P M at the service lines.
And over $300 million of cost savings realized in year in 2020.
For the year of decremental margins were 24%, which was consistent with our guidance.
Duncan will provide additional detail on our results for the quarter and full year.
I will summarize our fourth quarter results and the balance of encouraging signals on business activity, especially in brokerage.
And validation of our commitment to operational excellence.
We've executed very well and.
Very fluid and uncertain environment.
With that let me provide an overview of the market and what we saw across our service lines and the fourth quarter.
As expected our P. M F M service lines, where of continuing source of stability this year.
These contractual fee based revenue streams and represent just over half of our total portfolio of this year.
Throughout the pandemic our teams and these businesses have been directly supporting our clients and keeping the central buildings open.
And we configuring offices and retail outlets for social distancing.
Providing enhanced cleaning and specific facility services to ensure buildings are safe for tenants.
In addition, our global Occupier services business continue to win new assignments and renew existing client engagements for outsourcing services as large of occupiers continue to focus on operational efficiency through the down cycle.
The recent wins and renewals with Citibank.
Digital Realty and.
And Sun life financial just to name a few.
On balance we.
We expect to continue to benefit from these trends and cushman and Wakefield as one of the three large firms that provide comprehensive and scaled outsourcing solutions on a global basis.
As mentioned brokerage activity was ahead of what we expected for the quarter.
And as leasing and capital markets were down, 37% and 14% respectively.
More specifically we.
We saw capital markets and Americas declined just 3%.
Versus the fourth quarter of 2019.
Capital markets revenue was driven by a couple of factors first the remains a significant amount of capital that's been raised for commercial real estate and investment sitting on the sidelines.
Transaction velocity that had been lower at peak pricing has accelerated the sales prices and resulting by our return requirements have narrowed over the year.
The very low interest rate environment.
Additionally, we believe that sellers were more active and anticipation of potential changes to tax rates.
With the new U S administration.
And we've seen we continue to see positive momentum for industrial warehouse and data center space, which was already performing well and.
As we have discussed near term of office fundamentals remained less clear as businesses continue to assess the space requirements.
And vaccinations become more abundant and the recovery advances.
And as you'll hear from Kevin and a minute, we believe and as the data shows the.
The structural impacts of work from home trends will likely be offset by economic growth and.
And office using job growth, which will lead to a full recovery of the office over time.
I regularly hear from other Ceos on the significance of the opposite of their organizations.
Kevin will highlight some recent data that echoes the sentiments and more specifically points out of the importance of the office for collaboration and team building and culture.
Turning to the balance sheet, our capitalization remained strong with cash and more than $1 $1 billion and liquidity totaling $2 $1 billion.
Going forward the strong financial position gives us tremendous flexibility.
And positions us to take advantage of growth opportunities, including infill M&A or larger opportunities should they arise.
Going forward.
The outlook for 'twenty, and 'twenty, one and contemplates continuing uncertainty in the near term environment and in particular, a challenging first half.
We anticipate continued stability and growth and P&L P. M F M and some level of recovery and year over year brokerage revenue, particularly in the second half of the year.
We remain very focused on operational excellence and plan to deliver additional permanent cost reductions in 'twenty and 'twenty one building on our strong execution in 2020.
These permanent cost reductions will largely replace many of the temporary cost reductions, we realized in 'twenty and 'twenty and should in the long term and.
Enable return to 2019 margins, even before the recovery and brokerage revenue is complete.
As we sit on the third quarter call, we do expect and increase in operating costs and the first half of 'twenty and 'twenty one.
And by a return to a more normal year of bonus compensation for non fear of staff.
Despite the ongoing near term challenges faced in the industry.
We believe the consolidation of share to firms like Cushman, and Wakefield and have the capability.
<unk> sources and scale the solve the challenges our clients face each day.
Likely continue to increase.
In summary.
I continue to be very proud of our team and our execution.
Throughout this past challenging year.
Cushman and Wakefield holistic expertise.
Global market intelligence and thought leadership and.
Never been more important to our clients.
With that I'd like to turn the call to Kevin to provide a few comments on the recovery and more specifically office Kevin.
Thank you, Brett and Hello, everyone and if you could please turn to slide six.
From a market wide perspective, if I had the sum up the impact of the pandemic is having on property and one word that word would be uneven the.
Depending on the property sector of the geography, the viruses trajectory. The policy response, we continue to observe a mix of strong performance in certain sectors, and weak performance and others and bearing degrees and between.
Clearly the situation remains fluid and the trajectory of the virus the rollout of the vaccines confidence all of these are still moving targets. So admittedly the outlook remains clouded and we're making predictions during the period of exceptional uncertainty, but we also learned a lot last year, which will help inform the future as we look ahead more.
The economists are cautiously optimistic that the worst of the pandemic impact on the economy is largely behind us and by extension of the worst of the impact on the property market is also largely behind us.
The path of the virus is central to the recoveries. So let me start there.
As you know it was a difficult start to 'twenty and 'twenty one the spread of the virus was intensifying into the new year and new variance introduced new downside risk to the economic outlook more recently, however, some encouraging trends are forming we note the as of mid February over 18% of the U S adult population Henry.
And at least one dose of the vaccine. We also note that the seven day moving average of the vaccines being administered was trending up and that the number of vaccinations and easily outpacing the number of new confirmed daily infection.
Baseline forecast assumed the vaccine will be widely distributed by mid 'twenty 'twenty, one and most advanced countries and in some emerging markets and the.
You asked and is currently assumed full herd immunity will be reached in or around September of this year and possibly as soon as the summer.
Economic outlooks have been revised upwards and the general consensus now assumes the U S real GDP will grow and the 4% to 5% range in 'twenty and 'twenty, one with more recent forecast on the higher end of that range globally real GDP is now projected to grow by five 5%. This year according to the IMF.
The upward revisions largely reflect expectations of the successful rollout of the vaccines in combination with additional policy support because of the upward revision U S. Real GDP is now expected to return the pre crisis levels by the second half of this year, which is six to nine months faster than what was originally assumed.
And most baseline forecast and.
Employment forecast of also been revised upwards.
Next please turn to slide seven.
So the stronger economic backdrop also puts the property market on a faster road to recovery, though again I would emphasize the path forward will be uneven as.
As we observed last year, the pandemic accelerated of few trends that were already and the making and because of that certain property sectors have recovered more swiftly and the industrial sector. For example benefited greatly from the accelerated shift to online shopping and the U S industrial space absorption registered at 268.
Millions square feet, and 2020, which was higher than the levels observed in 2019 and industrial occupancy is currently hovering at near record highs day.
Data centers, Lifesciences self storage or other sectors that are benefiting from secular shifts and accelerating trends and we do expect these strong trends to continue in 'twenty and 'twenty one.
The apartment sector was another bright spot, particularly and the capital markets last year. The apartment sector was the leading property sector for investment and the U S. And 2020 now also gaining share in Europe, and Asia Pacific as the percentage of total sales volume.
In terms of the office sector as it concluded and our impact study last year office occupancy, meaning of the total amount of occupied office stock and rental rates will fully return to pre pandemic levels, but the exact timing depends on many factors many of which at this stage are unknowable.
Like other sectors that rely on bringing people together much of the recovery ties directly to the path of the virus itself and the rollout of vaccines, but here's what we know we know that the pandemic had a significant impact on office leasing fundamentals last year and.
And the U S. We observed 104 million square feet of negative absorption of 2020 with vacancy rising from 12, 9% pre pandemic the $15 five per cent by year end and we.
Know that the work from home of dynamic still needs to filter through.
We also know that according to multiple studies and surveys conducted both by the commercial real estate industry and outside of the industry.
Most companies do plan on returning to the office when it and safe to do so.
From various focus groups and studied very few businesses are indicating that they plan to move to a 100% remote working model and in fact, according to a recent survey conducted by price Waterhouse Coopers, 87% of executives believed the office is critical for collaborating with team members and building relationships.
While the remaining 13% are considering a more of virtual remote working model.
Although there is no consensus on the optimal balance of remote versus in the office and it will undoubtedly vary greatly based on many factors such as the business itself the industry the job function personnel and other factors. Most surveys show that the majority of the employees and employers expect to spend two to.
The four days and the office post Covid, it's debt stack in combination with the fact, the economy will continue to produce knowledge based workers positions that typically drive the main for office space indicates that the office sector will continue to play an important role and the organization strategy and structure. We also note and.
Certain parts of the World, where the virus has been more contained the office sector has already started to rebound and.
And the Asia Pacific Region for example office space absorption region wide turned positive and the second half of 'twenty and 'twenty and off of sales volume increased by 9% and the fourth quarter compared to a year ago. Although every region of the world is different if the trajectory and Asia Pacific as a useful guide when the virus becomes less.
Threatening the office sector will begin to recover and.
The office leasing and the U S. We also note that last year, we observed and abnormally high percentage of short term renewals not only did renewals of account for and unusually high percentage of leasing activity, but nearly one third of those renewals were for one year or less which is nearly double the norm. These short term renewals could trans.
And do an increase and leasing volume of activity in late 'twenty and 'twenty, one 'twenty and 'twenty two and there is a broader return to the office.
Lastly on slide eight and importantly, we know that the capital markets and our 2021 with momentum.
According to data from real capital analytics global sales volume plunged and the second quarter of last year, which was the nadir of the recession, but since the end of volumes have generally been trending upwards and December U S sales volume for all product types registered at nearly 71 billion, which is on par with <unk>.
Some of the strongest months of activity on record the drivers of demand do appear to be gaining momentum due to the following factors the low interest rate environment, the attractive yield GAAP, which is the cap rate spread over a long term sovereign bonds pent up demand for real estate assets and pent up demand from cross border capital and.
Again, there is still a great deal of uncertainty and there are many alternative scenarios to the ones that I've described with the virus and the economy follow the most probable script and there are also strong reasons to be cautiously optimistic and with that I'd like to turn the call over to Duncan Duncan.
Thanks, Kevin and good afternoon, everyone.
Before covering our fourth quarter results I wanted to build on a couple of items Brett mentioned earlier.
As we've said on past calls.
We've been active and managing our cost and 2020.
As a result, we achieved over $300 million and savings consistent with what we said during the year. These actions include the permanent cost initiatives announced in March which contributed 125 million of savings and the year.
All of these actions have been completed.
In addition, we achieved over $175 million and temporary savings during the year. These.
These savings included reductions in travel and entertainment and events would you spend on third party suppliers stockpile of Lowe's and part time work schedules and impacted businesses.
Government subsidies and support comprised $37 million of these savings.
Also included the total annual bonus compensation for non fee and as in 2020 was significantly below target.
Above and beyond the cost reductions and variable costs in 2020 declined as a result of lower revenue across different service lines and geographies. These.
These reductions included broker commissions.
Yeah, and the profit share direct clients of labor and materials and third party subcontractor costs.
In addition, our financial position is strong.
We ended the fourth quarter with $2 $1 billion of liquidity consisting of cash on hand of $1 $1 billion under our revolving credit facility availability of $1 billion.
We had no outstanding borrowings on our revolver at any point in 2020.
We have managed out of liquidity to bolster our financial position and flexibility as we have mentioned we are actively looking for opportunities to acquire through infill M&A.
And well positioned should opportunities arise.
With that backdrop on page 10, we summarize our key financial data of for the fourth quarter and full year.
For the fourth quarter fee revenue of $1 6 billion was down 15% and adjusted EBITDA of $198 million was down 34% as compared to 2019 the.
Ongoing stability of our P. M F M service lines, partially offset the impact of declines and our brokerage and valuation and other service lines on that.
Fee revenue trends for the fourth quarter were ahead of expectations, particularly in brokerage.
For the full year, 'twenty and 'twenty fee revenue was $5 $5 billion down, 14% and adjusted EBITDA of $504 million was down 31% versus 2019.
Decremental margins were 24% for the full year, which was in line with our projections.
Moving on to pages, 11, and 12, where we show fee revenue by segment and by service line.
For the fourth quarter leasing and capital markets revenue declines of 37% and 14%, respectively with better and our expectations, particularly in capital markets.
Brent mentioned the has been significant capital invested and commercial property and an environment, where we have see narrowing of the spread between price expectations and return requirements.
Additionally, we also believe that some U S deals, which were delayed throughout 2020 were pushed through to closing the year and in anticipation of potential tax rate changes while encouraging.
The cautious with regard to our expectations and the service line as we look at the first quarter of 2021.
Helping to partially offset these brokerage trends with the stability, we experienced and our PM FM service lines, which was up 1% in the fourth quarter and from the full year.
Excluding the impact of the deconsolidation of the revenue associated with the China JV executed with Banca early this year.
PM FM service line was up 6% per the quarter and full year.
This mid single digit growth has been typical of what we have seen in prior years.
Within P. M. S. N facility services represents just under half of the fee revenue.
And facility services, we typically self the formal subcontract of variety of services through.
Through our operations and both the Americas and APAC.
This business generates solid cash flow on the stable revenue stream and on.
And on annualized basis, typically has low single digit growth.
In 2020 facilities services in the Americas was up 7% compared to 2019, reflecting strong demand for our services during the Covid period.
With that we will start on a more detailed review of our segments starting with the Americas on page 13.
Fee revenue in our Americas segment was down 12% for the quarter.
Leasing and capital markets were down, 40% and 3% respectively.
These trends were partially offset by P. M S N, which was up 7% per the quarter.
The non Americas PM FM service line.
The <unk> services operations represent a little over half of our fee revenue and were up 7% for the quarter as well.
We saw a very strong finish to the year of and capital markets and we will be monitoring this encouraging trend closely and 2021.
Leasing trends and the fourth quarter were broadly in line with our expectations in the Americas.
Americas, adjusted EBITDA of $127 million.
<unk> was down year over year, primarily due to the impact of low brokerage revenue. This impact was partially mitigated by the.
Permanent and temporary cost actions in this region.
Moving onto EMEA on page 14.
In EMEA fee revenue declined 16% for the quarter for.
For the quarter leasing capital markets and valuation and other were down 28% 35 per cent and 18% respectively.
These declines were partially offset by growth and R. P. M. F M service line, which was up 14% per the quarter.
Fourth quarter, adjusted EBITDA of $43 million was.
And was down $22 million of 38% versus the prior year, primarily due to the impact of lower brokerage revenue.
This impact was partially offset by cost saving initiatives and growth in our PM FM satisfying.
Now for our Asia Pacific segment on page 50.
Fee revenue was down 24% for the fourth quarter, the deconsolidation of the PM FM revenue associated with the joint venture and China with Banca services accounted for nearly half of this decline.
P. M F. M service line represents roughly two thirds of the fee revenue for the second.
Leasing and capital markets were down by 27% and 44% respectively.
Capital markets was down primarily due to a continued slowdown in activity in Hong Kong, which is largely unrelated to COVID-19.
Fourth quarter, adjusted EBITDA of $27 million was down $19 million of 44% driven by low brokerage revenue, partially offset by the cost savings initiatives.
Turning now to page 16.
The near term business outlook environment remains highly uncertain and we continue to have limited line of sight to revenue trends and our brokerage service lines. While we believe that will be a full recovery and brokerage revenue overtime the shea.
And speed of this recovery continues to be difficult to predict we are hoping to see continued improvement in brokerage and 2021 as the economy continues to heal.
And we do expect the first quarter of the year to show material decline year over year and.
In 2020, the impact of the Covid pandemic on our business began in March.
Responding to this uncertain outlook, we've identified specific actions within our operating budget that will drive more permanent cost reductions impacting 2021 and beyond.
Actions include converting some of the temporary savings from 2020 into permanent savings as.
As well as implementing a portfolio of projects across our segments and back office functions to improve the efficiency and enhance our operating model.
The impact of these cost savings actions will ramp up during the year and continue to have impact into 2022 and.
And not providing guidance for the year at this time, however, I would like to provide some remarks to help investors model our business, where we do have reasonable line of sight.
2020 permanent cost savings contributed about $125 million in year, and temporary cost savings, including a low of bonus expense contributed over $175 million again in year, giving a total of over $300 million in savings.
In 2021, we expect the additional permanent cost savings, which I referenced to contribute significantly and to offset much of the unwind and temporary cost savings that will inevitably occur throughout 2021 net.
Net net at the end of 2021, as we end of 'twenty 'twenty, two and compared to 2019, we will have executed a significant reduction and permanent cost over the two years, even as most if not all of the 2020 temporary cost actions one of the unwound by them.
We.
<unk> growth of low to mid single digits, and Pms and 2021 and.
And brokerage, we expect to see a decline in revenue and the first quarter and some recovery and the remainder of the year, especially if we continue to see economic recovery and the second half of the year.
Do not expect brokerage to recover 2019 levels in any quarter of 2021, but to be clear, we do expect brokerage revenue for 'twenty and 'twenty one to be up most of the 2020 for the full year.
As a result of the cost drag and the shape of the brokerage revenue. During 2021, we expect that our EBITDA will be more heavily weighted to the second half of the year than we would see an atypical year such of 2019.
We anticipate having a better view on the brokerage recovery and the second half of 2021, and we'll provide an update on our expectations as the visibility improves.
As Brett said you can be confident that's what's out of the Covid pandemic outcome and economic impact we will continue to focus on the welfare of our employees supporting our clients and financial strength of our company and the profitability in 2021 and for the long term.
So in closing this is my last earnings call the Cushman and Wakefield when I joined the company and 2014. My objective was the support and lead our business through a period of rapid growth and transformation.
And I'm very proud of what we have accomplished particularly taking the company public and 2018.
Today, Cushman and Wakefield holds a robust financial position from a major firms and our industry and he is poised for continued sustainable growth and success and I'm very grateful for the partnership the non I enjoyed with Brett My Cushman and Wakefield colleagues and my finance team and with many of you listening to this call.
Gradually Neil on his appointment as CFO and I wish him all of the best and I look forward to watching the firm continued to growth and wish everyone continued success.
With that I'll turn the call back to the operator of the Q&A portion of today's call.
Thank you we will now be conducting a question and answer session. If you would like to ask the question. Please press star one on your telephone keypad and confirmation tone will indicate that your line is and the question queue. You May press star two and he would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Yeah.
Thank you. Our first question is from Anthony and Paul loan with Jpmorgan. Please proceed with your question.
Okay, Thanks, and thanks, dark and for all of your help over the last few years best of luck.
My first question is with regards to thinking about margins given your commentary if we think about the the <unk>.
And $50 million, which seems to be the year over year drag.
Drag that you won't be able to offset debt, which seemed to imply that margins start and I don't know 80 9100 basis points down and then how should we think about the incremental margin that would help move that back up as we think about growth and PM FM and brokerage in 'twenty and 'twenty one.
Duncan and why you take that.
Yeah can you hear me.
Yeah, Yeah, okay. Okay. So yeah, it's a good question.
You got the drivers there and as the mix of those three so youre right were saying theres going to be of drag from bonus.
It won't be out of offset with permanent cost about 50 million and the first half mainly.
And then we're saying, yes, and the things that will obviously give us higher margins will be the organic growth Pms and is typically a little bit less margin rich and brokerage and.
And so will we expect the sort of low to mid <unk> growth and Pms and that will that will obviously help on the margin side, but then the big question will be how much of brokerage growth, we actually get which will be really driven by the second half of the year.
Tough to say exactly yet exactly how much that will be but it'll be obviously, the highest incremental margins of those.
Of those two areas so.
You've got a pretty good idea I think of what the incremental decremental margins were the last year purely on brokerage. So I think it's easy it's really just a question of them.
And mapping out the blend of those three given the assumptions you want to make about brokerage recovery and the back half of the year and we're not guiding to that and I don't think may of Crystal ball. So.
But those will be the drivers you've got those right.
Okay do you think the the incremental growth should be better than the 24% decremental you had and alright, yes, sorry, yes. So just thanks and thanks for clarifying that yes, it will be because of the decremental was off the cost savings range. If you thought about and really what happened last year just to kind of help you of the mapping out here right. We did 20 folks and decrement.
Of those mid Twenty's, that's kind of what we said we would do but that was after all of the cost savings per day right. So the the decremental the photo of the cost savings don't seem to quite a bit higher than that and so we'd be we'd be hoping and brokerage to get incrementals that were quite a bit higher than that this year. It all depends on how much brokerage revenue we actually get.
Okay.
Got it and then just my second question, maybe for Brad can you just give us an update on as to how you're thinking about investing and the acquisition opportunities.
And you mentioned the liquidity position and the ability to do.
Infill deals, but just wondering if you could size up the landscape and how you're thinking broadly there.
Sure happy to so you're right, we're sitting at the moment and a very very liquid position.
A lot of capacity on the balance sheet, I think given where we sit today and our.
Our outlook on the back half of this year, and then 'twenty, two and 'twenty, three which is getting a bit bullish on.
Our appetite for infill M&A or appetite for strategic recruiting.
And is quite high.
And we never.
Truly turned off or.
And our search for good opportunities during 2020, but we certainly kept some on the back burner.
And I think we're now at a place where while we certainly don't have 100% certainty about our outlook for the year, we should feel a lot better about the near term and midterm future than we did.
On 11 months ago. So a lots of we are hoping we will see lots of opportunity.
And the infill M&A market lots of opportunity and the strategic recruiting market.
We have some particular areas, we're focused on both geographically and by service line.
And we're leaning into those.
Well the bigger right now.
This is done can you kind of mega.
If I could just come back in on the margin point, we made before which is the point I forgot to maybe I think it's probably a pretty important Tony you probably appreciate this but as I said on the <unk>.
<unk> and Brent make exactly the same statement and his remarks you know the.
Net net of all the costs. We are doing is that by the time the temporary cost of instead of unwound and we would have saved on lot of permanent cost here and what that really means is that our ability to get back to 2019 margins, which were just a bit north of 11% our ability to get back to those.
We'll be we'll be able to get back to there was a low level of brokerage activity than they had in 2019. So it basically means that we'll be able to sort of improve our overall margin structure with all of the permanent cost we're taking out. So obviously the timing is uncertain the bass.
Is it the nature of that strong permanent cost out is that we will be able to get back to 19 margins and a low level of brokerage activity than we saw in 2019 stainless brokerages and recovery.
Okay, all right and I understand that thanks.
Thanks.
Thank you. Our next question comes from Stephen Sheldon with William Blair. Please proceed with your question.
Alright. Thanks.
And I appreciate the high level expectations for 'twenty and 'twenty, one wanted to ask about the expectations for P. M. S N.
To grow low to mid single digit seems to assume that the business growth, it's pretty consistent in 2021 as you saw in the past few quarters is there anything notable that youre, assuming that would keep that from accelerating more including your ability to implement new mandates and have there been any notable changes that you've seen and the competitive environment.
And you pursued new contracts there.
Sure. This is Brett well first.
As it pertains to acceleration or deceleration of the growth of <unk> I would say that the structural trends and that business.
And are playing out as we would expect they would which is to say that this is a mid single digit.
And and Goodyear's, perhaps a high single digit growth top line growth business. When you combine our P. M F and businesses, which includes the very large self performance business the trends and the industry right now are favorable for us and favorable for to a large.
Large peers.
And nothing there has really has really changed on the competitive landscape.
No. This is the this is a.
Really a three firm business.
And I think clients are.
We're quite comfortable and settled with that that they have choices and good choices and the industry for PM FM services and self performance services.
There's a I wouldn't say, it's an even distribution of the work and we're you know we're fighting to get our fair share having come from and why.
Much smaller place four of five years ago, but we like.
The trends, we're seeing we I can tell you that we are seeing in 'twenty and 'twenty, one and some mandates on the size and the quality that we have not.
And invited to pitch before again indicative of an ever improving platform and a better competitive position for C and W. But the.
And the PM FM business and solid performance business for us remains.
Very very important to the long term value thesis for the firm it is a growth business.
It was last year will be this year and I would say that the competitive dynamics continue to favor.
And Cushman and Wakefield and it's too is to larger peers.
Got it that's good to hear thanks for that.
And I wanted to ask about what Youre seeing on the office property sales side, how are the activity levels, there looked and for deals that are happening what hit the buyers did and willing to assume in terms of office leasing leasing to get deals closed and I guess, maybe more specifically the office property buyers appear to be willing.
And to assume that Opex office dynamics in.
In terms of space utilize that utilize the lease pricing et cetera.
More or less fully recover.
And I think it's a mixed bag.
On.
'twenty 'twenty, we certainly saw fewer of the marquee you know very large class a office trades as compared to the prior few years and that's not surprising given the turmoil and the marketplace and I think that there's a there's a real bifurcation of the market among.
I'm on geography.
And I'm on a quality and size of asset. So there are markets, where I believe and we are seeing buyers relatively comfortable around the underlying fundamental dynamics and the market and.
On the occupancy rates and and let's call it midterm rental.
Rental rates for the buildings, but when you if you look at the data or the forecasts that are out there and you just.
Consider these for a moment so at.
At the moment and we're forecasting that vacancies peak.
And 2022.
And that we start to see rent growth and.
And begin to move positive.
In late 'twenty two.
And absorption moving strongly positive and 22, so the buyers looking at of building with not a lot of rollover and the next couple of years high credit tenant and high quality building, they're probably a bit more sanguine about their midterm long term underwriting and say a building with a lot of vacancy and it right now.
But I would say this is it's a really interesting question.
It's one that is not completely answered yet I do believe that the first nine months of this year, we're going to give us a lot better signaling around how the investment community is going to look at high quality class a office assets midterm long term, but at the moment and I would say that the general investor market.
Is is pretty much aligned with what Kevin said, which is rough times for sure right now and like there aren't any recession, but the long term prospects for high quality class, a office space and the and even class B and good locations.
And is fundamentally sound and generally and the long term. So we don't you saw last year, we saw a number of trades and the office sector.
People are investing real capital and the office sector, we expect to see the same happening this year.
But it's behaving not that.
And that much differently than any other fairly severe short term recession I think the people.
The questions that are really on the answer right now.
Of our around the <unk>.
<unk> store office occupier footprint today versus what someone might renew or lease two or three years from now on.
I think that it's you know I think it would be fair to say that most large office occupiers as they think about their footprint today would say that if they were renewing today are signing new lease day, they try and get a bit less square footage.
But as Kevin said that.
And that dynamic and the work from home dynamic over the next three years.
And maybe a bit longer maybe a bit shorter is mitigated by the growth and office employment and so as we look at the office sector and we look at the office sector, as an investment and and Investable class asset class.
On the midterm and long term prospects for it we believe are positive, although it's going to be rocky for the next couple of years.
Got it really helpful.
Yes.
Last one from me on the on the first quarter brokerage guidance for it to be down and I think I think Doug and he said materially can you frame at a high level of any differences you expect the fee between the leasing brokerage side and capital markets.
And I would just say debt go ahead go ahead, John can you go and go ahead and you got it.
And I was just on saying that the the math is just simply that again.
Because of the only kicked in and sort of halfway through March last year, and so we would expect year over year.
And of season decline driven by that right. So I don't want out of a specific point of views of the mix of that between leasing and capital markets. I think what we did see and maybe Brett won't Atlas of many of the the Q4, saying.
And that we saw and capital markets, which was unusually strong book of what we'd expected yeah, we don't expect that to be and shouldn't necessarily of general trend on the way through 'twenty and 'twenty. One I do think of the reasons. The Brent alluded to that we think of that as something that happened in Q4.
So, but I think it's something of a specific sort of view that the.
And we're talking about and Q1 moving down the shift between leasing and capital markets. What do you think Brian.
Yeah, I think it's you know again, it's a bit of a mixed story so right now.
And this environment very low interest rates.
A wash with liquidity hard assets like commercial real estate are attractive.
And that of course is balanced by the <unk>.
Concerns around the office market and what it means of arm and goes back to work and how much space is going to be ultimately.
Released into the market or not and by the way of lot of space has already been leased and the market of 100 million square feet of negative net absorption in 2020 is already and the system.
We expect a bit more in 'twenty 'twenty, one, but less and we saw in 2020 capital markets clearly.
Through this last recession and now the early days of recovery capital markets of the leading that recovery, which is not what happened and the GSE, but it's a different environment.
Let's see we had a crisis of liquidity today, we are awash in liquidity dealing with other with other issues so capital markets.
And you know is and probably I think it's fair to say and better shape today than we would have expected the leasing markets.
And as Kevin said, you had an awful lot of commercial real estate occupiers kicked the can for a year or 18 months down the road last year, if they had the lease coming up for renewal and they needed to.
And I need to do something with their lease you can't do that forever and as Kevin said that August for perhaps a bit stronger recovery and leasing as we get to the back end of this year and early next year on.
But again that that also partially mitigated by folks looking at their square footage and I'm wondering if they can live with a bit less.
Rather than a bit more and they would typically do so all of that to say we're in early early days of recovery here a lot of things have to fall in the right place on for this to be of strong back end of the year at the moment, we see some positive signals capital markets certainly in the fourth quarter was a very pleasant.
Rise capital markets in general are active.
And that's a good thing and I do believe as Duncan referenced in his comments and Kevin did and here is that as we get to herd immunity as we get to a post COVID-19 environment, there's going to be of pent up demand of leasing activity that has been curtailed during the shutdown that is going to need to get dealt with and are probably a positive way.
Great. Thank you.
Thank you. Our next question comes from Vikram Malhotra with Morgan Stanley. Please proceed with your question.
And thanks for taking the.
You've seen several of the sort of recessions and the brokerage industry.
Wearing different hats, and I know every recession is different.
I'm wondering sort of given what we know today.
And how is the visibility I'm not talking about the pace of recovery because of its difficult to predict but just the visibility from leading indicators today versus sort of say of prior recessions. This is the visibility better and similar worse is there anything that you feel is different.
And it's a good question.
Well first of all of in terms of visibility every every year, we move forward visibility for all of the firms the sensory gets better because we're using technology better, we're just getting better and examine measuring and forecasting from pipeline activity and client data I would say that.
Or as we look forward from today.
And our visibility into how 'twenty 'twenty, one might behave and how 'twenty two and 'twenty three might behave I would say that certainly the data we have today the forecasts and research we have today feel the laws to be certainly a bit more concrete.
And maybe better and higher quality than they were and the last recession for a lot of reasons and the when you think about the midterm here and the long term here as we have been repeating and in the Q&A. There are a number of of data points that are positive.
And and we're watching those carefully but it has to do with the pace of immunization and it has to do with the number of leases last year that were renewed for a year.
Instead of seven or eight or 10 years and has to deal with what we think GDP will look like this year and how that will translate into.
Potentially job growth and an occupancy of commercial real estate those are all very positive.
The negatives of what we've talked about the negatives are.
What is the long term.
Complexion nature.
And the function of office space and as we've said, we think that that's long term and good shape short term under some pressure, but I would say that the.
We're being very careful.
And providing forecasting and data to you right now, we're not providing guidance and that's for a reason and that is there are so many variables out there right now that could move.
But I would say and you've heard it and our tone.
And we feel a lot better about what the back end of 'twenty. One 'twenty two and 23 are going to look like and we did six seven months ago, but that's about as far as I'll take it because in this environment.
And that could change and it can change quickly, but at the moment our visibility.
Is the decent pie.
Pipeline data is good and were watching it carefully.
And I'd say that the the comments of Kevin made comments that Duncan made.
About the year on the shape of the year, we feel pretty good about at the moment.
Doug and anything you want out of that debt.
Yes.
I was wondering with you Brad I mean, the thing is we obviously did debt. The recessionary event. This time around because of the E U.
Essentially of natural disaster, and you've got the sort of.
Second quarter 'twenty was very much of a trough and so right now adjusted of dealing with the aftermath of that event and sort of the recovery format.
Yeah as opposed to wage and defined Boston, we kind of know what Boston, Los and now we're just talking about speed of the recovery and nature of the recovery patches of the recovering by sector tough to predict but we no longer trying to find bottom right. So it's more of a sort of judging the recovery and the other thing is obviously very different this time round of capital markets. It looks like a much.
From the leader than it was.
And it was lagging and GNC.
Yes.
And thats the interesting, but thinking about the spectrum as you asked the question I'm thinking about about this so you're shaping the model and you think about how do you how do you model.
'twenty, one 'twenty two 'twenty three compared to coming out of the GSC and and then Theres a couple of variables that are different one is and this situation capital markets are much healthier right now than they were.
And one year from the trough of the GSC and they're just much healthier. The second is the question around office space in general and so that is a potential negative variable the rest of the <unk> is pretty traditional recessionary modeling right. The.
Pace of recovery of the type of recovery of the way it should work.
Probably isn't going to be wildly different than the last couple of recessions that the U S economy and other economies have been through the variables that are different here is the health of your capital markets environment and a lot of liquidity and then the question Mark around utilization and demand for office. Those are the two I think just generally speaking.
For the unique variables here.
That's fair, that's really interesting and good color.
Just building on that office comment maybe for your breath of Kevin.
You know and I know theyre shorter term renewals last year, but and you. If you looked at this year and beyond especially from any of the larger Liza as dentists start negotiation of a year or two years prior to exploration.
And your comment on you know.
Many tenants may if they look the renew I think if I'm paraphrasing, they look to renew and the next two years they would potentially see on.
And I think that they can get slightly less space.
Is that based on you know just high level conversations of what you are hearing are there any differences between larger small tenants or by sector. Just wanted to get more of a bit more color on that comment you made.
Yes and.
And Fortunately and I don't know of Kevin first of all of its Kevin and so on the line yeah, Yeah, I'm happy to take a swing at.
Yeah, Kevin why don't you want and what do you get this fall first and I'll just add any color when youre done.
Sure and.
So I think the way to think about it is and I'll use some numbers so and are in a typical year of it and this and this idea of there's pent up demand that's likely to the executed on and the future of whether that second half of this year or into 'twenty and 'twenty two the here's I think the way to think about it and the typical year Theres about 400 million.
Feet of office leasing that occurs and the U S and that's based on 87 markets that we track and so that's all leases right, that's new leases, which means the business is coming to the market to lease space that includes renewals. So of businesses just renewing their lease so let's call in about 400 million square feet.
Last year, there was only about 250 million square feet of leasing that was completed market wide rights of significant drops. So so the inference. There is companies didn't know what to do great and so businesses that were in the market looking for space many of them stopped and some businesses that had leases expire some of them said.
That said, let's let that expire let's go home per year, we'll figure. This out once we have more certainty and many just said, let's renew of shortlist do of short term renewal and we'll figure it out next year and are tracking of renewables shows that it's that the number of renewals was double the norm and so that's that was the environment now fast forward to this year and what do we have.
Well theres likely this pent up demand dynamic where the businesses that stopped looking for space. They start up again and they look for space and the client space. They leased businesses, who renewed last year for three months to 12 months, which was very high will now say, while the pandemic is showing signs of it's behind US, let's go forward and so on a longer term lease and business.
And as he said, let's just go home for a year some will say well that was okay for some of the team, but it wasn't okay for everyone and we need to get back and had some space to be productive again, they'll sign a lease and so I think that's sort of the maybe the way to think about it and the way the and modeling going forward is will that pent up demand activity when will that get.
Captured maybe 'twenty 'twenty, one probably a good portion of it will and then again I think maybe even stronger in 2022 and.
And so that's sort of my read on the Brett.
Yeah, and the only I'd add to this it's well said, Kevin and by the way.
And I would add to this day.
Like like the early days of the pandemic when people were talking about.
And there are a lot of rash rhetoric and the market about whenever use office again, and we're going to cut our footprint by 50% and really so far at least none of that happened.
And I can find as many Ceos right now.
I'll give you a specific example, one of our larger.
One of our competitors.
I was on the conversation with them not long ago and they told me. They had just renewed their HQ location of this would've been late summer of last year and he told me that they renewed at almost exactly the same square footage that they had.
And he said, we could've changed buildings, we could have cut back we could have added we ended up getting about what we had before.
And for a lot of reasons. They they had redone the space they were using the space differently, but they weren't getting less space.
And I can find a lot of Ceos that would tell you that they're going to try really hard to take less space and the near term.
And as I mentioned, and others and I'll say theyre going to take the same or might take more because of a growing business. So I think unfortunately this is a very fluid situation.
I think Kevin here.
His his considered view with the data that he is saying is probably the best place to land on this though and again for us there's a lot of rhetoric and the market pointing a lot of different directions, but rhetoric does not necessarily mean that is the way actions will ultimately be taken.
Fair enough just last one on the P. M S M business.
Just both spend and make it can and and just given kind of the the increasing focus on ESG and climate change can you talk at all.
Are those specific drivers of meaningful changes to the to the revenue line, one and in terms of just cleaning and security both spend and make across the board.
And then just anything climate change related debt does that and she can add to the business four P. M. S N.
Well I would say that the.
All of the work around ESG and particular carbon.
And it's certainly a revenue line.
For the services industry.
And you know whether that will be a material revenue line for cushman and Wakefield of our peer group or for others.
And is an open question certainly all of us are.
And quite focused at the moment on the potential business opportunities around building retrofit.
Building and analysis and data gathering and so forth so certainly.
It's a bit like of y2k of that building owners and likely building tenants are going to be pain.
A lot of money and the future around this issue and people service providers will be.
We will be receiving some of that revenue from consulting work of retrofit work that theyre doing remains to be seen whether it's the needle mover in the for.
<unk> for us or other firms like us and the PM FM space, but there's a lot of energy and work right now in our space and in an adjacent vertical such as big engineering firms and design firms all in this area.
So it is I would think of the most fairly and best describe it as and emerging and likely material opportunity for the industry.
Great. Thanks, so much.
Thank you. Our next question comes from Mike Funk with Bank of America. Please proceed with your question.
Yeah. Thanks. Thank you very much for the question and and Duncan and best of Best of luck to you and thank you again for the.
For the help of.
A few if I if you if I could some of your prepared remarks, you talked about.
Some of the funnel and property sales being pulled forward into <unk> just stood up.
The thoughts about potential changes in tax rates.
With the new administration.
Can you quantify how much of the funnel do you expect it to close and 21 got pulled into the fourth quarter of 'twenty.
I know I'm happy to.
Yeah, we really don't know, but all of it Kevin why don't you take a shot at this at least and Ali.
And it is true that it is.
I think impossible to sort of parse that out but my so there was that spike in Q4 really in December and sales volume. It's my my impression is that.
That was the combination of factors I think mostly you have pent up deal demand with a larger number of deals having been put off and preceding quarters largely due to the the pandemic and lack of activity and then that was helped along was we saw more liquidity and the debt markets and then the vaccine optimism really started in the fall.
Quarter and.
And so I also think there was some incentives from the sphere of the tax policy changes 10, and 31 is getting eliminated something like that but again I think the the strong sort of December was the combination of factors and then on on the go forward I think.
And sort of you have to see how tax policy changes and go from there will it change.
And you know tax policy changes tend to be phased in.
And so if there is a change it's likely to be a phase and over years and sort of when you study the capital markets and just property throughout history as long as there is time for the market to adjusted adjusted to changes and policy and there's all of the other factors that are every bit as important state of the economy interest rates and geopolitical dynamics and so forth I think.
Just as important and sort of gauging that the future trajectory there.
Yes, thank you for that and maybe one for from bright and Kevin If I could so I. Appreciate the slide that you tried to show expected recovery and different property types and it seems like that the.
The office piece correlate with consensus surround around reopening and probably kind of September.
And back half of the year Repopulation of offices so.
And your expectation that that office leasing picks up after the repopulation and so when you're talking with clients or are they saying they wont actually get pulled back into the office.
Analyze and you know.
Evaluate how the using the space and then after they do that recalibrate the space they need or is it different and they do they tried to do that before the repopulation of offices. So they already have plans.
And in place in terms of of space needs.
Yeah, It's a great question and the answer is yes, yes, and yes. So it just.
And every.
And every company of different I think look if I'm going to generalize.
I think that many many companies are on a wait and see.
And when no one is showing up and the offices and everyone's working from home, there's a lot of thinking going on but until we get you know when we we think that marker is probably around labor day.
But we get past that marker and we start to see a more aggressive repopulation of offices.
And my guess is that is win lots of companies will really begin to consider what their midterm and long term plans are for their footprint and.
And certainly there are companies a lot of them that have been doing that for the past year and you talked to the folks again blur or other firms like that theyre doing a lot of work with.
We are with customers on rethinking the footprint.
But again and I'm horribly generalizing, but at the generalize I think that these types of decisions are likely to be made post occupancy rather than the next few months.
And that's anecdotal now Kevin Scott got better data on this and I do Kevin anything you want to either dispute on matter or add to it.
No I agree I think it's very difficult to predict the return.
Full force returned to office with any precision of lot of moving pieces and you look at it as of today, it's roughly 25% of employees are going into the office and that that's based on the castle access data and there doesn't appear to be a rush certainly not in the next.
The two to three months of rush to get people back as the vaccine gets the administered to more people, we will gradually see more people return to the office and more and more occupiers encouraging employees to her.
So that was encouraging employees to return to the office and from there and I do think that's where you see of more of a significant pick up and activity in general, but I agree with your assessment their bread and my my best guess and what we're really hearing from.
A good majority of our clients is that sort of the return to full force and now there is a little bit of graduate return, but the full force return likely to be probably more on the September of this year time frame.
Yeah.
Alright.
And on the on your question about so how do companies make decisions about the long term for office space.
Think about the statistics the Kevin gave the the vast majority of office workers are going to be and the office. The majority of the top of it may not be five days of week might be three days a week of four days of week.
It's not that easy.
For a company to rework their footprint down because people aren't going to be opposite day or two so many of everyone's going to try.
But this is I think going to be somewhat of an incremental process and we're not going to really know how this plays out and the marketplace I don't think for for some quarters ahead of us.
And what one of your peers had 85% right.
And with 100 before of the 85 and the future.
We're willing or able to.
The that's kicked Kevin Kevin's projections were almost kind of what you can save yourself and almost exactly of that sure.
So what's interesting about that is I think there's just a ton of of conjecture on that topic and we've modeled it and made our assumptions and survey is generally show that businesses will not require somewhere between 20, and 10 and 30% less space somewhere in that range, but I think really interesting is so far just from <unk>.
Far what's really happened is the total amount of occupied space and the United States has declined by less than 3% and that's not nuts and that's not an insignificant as Brett said, there was a 100 million square feet of negative absorption of space that was leased pre pandemic now empty so its not insignificant, but two 7%.
Very far from 15% and feels very very far from 30%.
And so I think I do think we're going to learn a lot more of this year, yeah. If I could one more quick one for Duncan and it's being aware of time.
Dunkin' and PM FM.
And any potential impacts from from wage inflation on.
And on margin there either through minimum wage hike or otherwise.
What are your thoughts on that.
And generally speaking not right because.
And most of our contracts here and we're able to too.
And we cover that so I don't think it'll be a particularly material impact on the side of the way.
Okay, great. Thank you all for the time.
Okay.
Thank you. Our next question comes from Rick Skidmore with Goldman Sachs. Please proceed with your question.
Good afternoon, just a follow up question as you look at Asia Pacific and my assumption is that Asia Pacific's of few quarters ahead of the U S and terms of returning to the office and vaccination and the virus.
The thing the learned from what they've done.
And specifically around the office leasing that might translate into the U S market and then maybe a follow up on that would be as you look at your Asian business would've expected, maybe Asia Pacific to be a little bit better year over years can you just maybe elaborate on what youre seeing and Asia Pacific market.
Sure sure.
Well, let me just start with generally speaking so generally speaking and Youre right.
Asia Pacific for different reasons and geography.
We look at as a leader coming out of.
The pandemic and and and the recession as it pertains to our asset class of commercial real estate I think the.
These early days.
As was mentioned I believe Kevin and your comments, we're seeing return to lease and activity are returned to support and the leasing markets in Asia Pacific as of as a.
Leader, because they are coming out in many jurisdictions.
Before we are here.
As it pertains to our own business and Asia Pacific.
A very large business, it's a very diversified business, there are positives and negatives and Asia right now.
Hong Kong is still very very locked down.
And they disembogue of 'twenty, one day quarantine for anyone that wants to come in to a Hong Kong based what they're saying is we don't want anyone here and that has that has flowed through that markets property markets and that locked down and a very severe way I'm on the other hand, our banki J D and mainland China.
And for P M and Tom did quite well and 'twenty and we think we'll do the same in 'twenty, one and so I would say that just generally speaking the Asia Pacific.
As a leading indicator for western Europe, and the U S would be of positive.
We would take positive.
And takeaways from that.
But that's again very early days and and a bit of a mixed bag of there Kevin and I know that you don't.
Specifically, we spent a lot of time on Asia Pacific and any comments you want to add to that.
No I think that that pretty much covers it and theirs.
It is a positive story there is increasing number of examples of our businesses in that region of the world are not the or actually absorbing space theyre actually expanding and taking more space and mainland China as it's an absolute example, there and in fact that debt.
The region of the World absorbed 23 million square feet of office space and the second half of last year. It was actually double what the absorbed and the second half of 2019, Beijing, Shanghai, Shenzhen and Shanghai, all positive and it's not just in mainland China Youre seeing it and some of the Indian markets and Seoul, Korea, and so I think it's important to point.
Out of the work from home dynamic is less accepted across that region of the world for a number of regions cultural reasons and other factors. So I don't think we can say that that what's what we're observing there that pattern.
That same pattern won't be followed.
And other parts of the world, but equally I don't think you can dismiss the fact that one the one region of the world where the virus is more contained is seeing more of the snapback in demand for office space.
Yeah, and I would just out of that I just received the.
Tax from our company President who is in London, and staying up very late this evening.
But John force or pointed out debt what he's seen at least in the early days is that.
And it's not necessarily a direct correlation between.
10% or 8% or 15% less people on the office.
And 8%, 10% or less of our 15% less need for space and is trying to.
But the layman's terms.
And I used. This example, with our competitor just at their headquarters.
You May you may leave 8% of 10% of your office staff at home permanently you may very well use that space differently going forward and not and not be able to have less space.
It's people are definitely going to rework the way they lay out space going forward and there's a lot of energy around that right now it doesn't necessarily mean, though and if you cut how many people are and the office on any given day by 15 or 20% and you can just cut your square footage by 15 or 20 per cent and John has just mentioned and to meet my texture that that's that that is what he's seen.
At least from these early days and in the marketplace I think it's a very good point.
Great. Thank you for the color.
Thank you our last question comes from Patrick O'shaughnessy with Raymond James. Please proceed with your question.
Hey, good evening and the interest of time and I'll just keep it to one question so of multifamily and industrial logistics are obviously pretty hot areas right now how comfortable are you with your company's capabilities and those property types and what are your aspirations to essentially build further and those areas.
Yeah, Great question.
We love those two verticals, but multifamily industrial logistics or.
They're right and Cushman and Wakefield Sweet spot, we have a very very.
Very deep capability, particularly in the U S and parts of Asia Pacific and industrial logistics, we would like to up weighted industrial logistics in Western Europe, and we that is one of the initiatives that we're quite focused on this year multifamily we identified multifamily some time ago as Ah.
Very attractive vertical for us five years ago.
And we made an acquisition quite a significant acquisition for the firm and the U S. On multifamily capital markets. You may recall that gosh going on almost two years ago now we purchase pinnacle, which is a leading multifamily property management business here and the U S actually domiciled here, where I am and Dallas.
We've been bullish on both of those verticals, the industrial logistics business and the U S has always been.
One of the core.
Strength of Cushman and Wakefield so for US the good news is we don't have to.
Recognize now that these are great places to do business and startup businesses. There. We can now leverage into what on what is already a compelling.
Platform in both of those verticals recognizing that we of geographies as I mentioned, such as Western Europe, where we think theres some tremendous white space to grow on.
Our industrial logistics business, and we intend to do that quickly.
Thank you.
You bet.
Thank you there are no further questions at this time I would like to turn the floor back to management for any closing comments.
Sure well, we appreciate all the questions. This evening and you can tell when you're in a very fluid economic situation that.
Everyone is very curious about about everyone's views about what the future looks like and we hope that tonight's call gave you some clarity on our views of the future. We look forward to talking to you all and another quarter and be well and be safe and thank you.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation of a wonderful evening.