Q2 2023 CBRE Group Inc Earnings Call
Greetings and welcome to the C. B R E Q2.
Two 220 23 earnings Cole.
At this time, all participants might listen only mode.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please put <unk> on your telephone keypad.
As a reminder, this conference is being recorded.
Oh, no I'd like to turn the conference over to your host Breitbach. Please go ahead Sir.
Good morning, everyone and welcome to CBRE second quarter of 2023 earnings Conference call earlier today, we posted a presentation back on our website that you can use to follow along with our prepared remarks, and an excel file that contains additional supplemental materials.
Before we take off today's call I'll remind you that today's presentation contains forward looking statements, including without limitation statements concerning our economic outlook, our business plans and our financial outlook.
Forward looking statements are predictions projections or other statements about future events. These statements involve risks and uncertainties that may cause actual resolved and trends differ materially from those projected.
For a full discussion of the risks and other factors that may impact. These forward looking statements. Please refer to this morning's earnings release and our SEC filings.
We have provided reconciliation of the non-GAAP financial matters discuss on our call to the most directly comparable got measures together with explanations of these measures.
Reason patient back appendix I'm.
I'm joined on today's call by Bob Flatpick, our president and CEO and M. A G R Martino, our chief Financial Officer.
Please turn to slide five as I turn the call over to ball.
Thank you Brad and good morning, everyone.
Like last quarter Cbre's results slightly exceeded our expectations.
Driven largely by better than expected growth in global workplace solutions and aggregate growth and a resilient lines of business, which Emma will describe in detail offset by weaker than expected property sales and advisory services.
It is notable when considering our performance that the prior year comparison was especially difficult.
We had our best quarter ever.
Earnings per share and last your second quarter driven.
Driven by exceptionally robust development earnings.
To put this in perspective are development earnings and last your second quarter.
<unk> did the level of development operating profit in any prior full year, except 2021.
With this in mind my remarks. This morning, the largely focus on how both CBRE and the macro environment performed relative to our expectations coming into the quarter.
Followed by some high level comments on our outlook.
The economy performed better than we had anticipated going ended the quarter in terms of boat G. D. P.
An employment growth.
However, the opposite was true with respect to interest rates were increases in the last 90 days, coupled with expectations that rates will in the year higher than anticipated last quarter <unk>.
Pressured the elements of our business that are sensitive to commercial real estate capital flows <unk>.
Particularly our sales in financing businesses, we expect this pressure to continue for the remainder of the year.
At the same time, we are beginning to see signs in our own business that will eventually lead to improved performance likely starting next year for example.
We capitalized 10, new development projects during the second quarter versus only five projects and the prior two quarters combined.
Or investment management team responsible for capital raising has noted a definitive change in investor sentiment in the last 90 days.
Many of these investors remain cautious but are now exploring how they can take advantage of the reset and pricing.
They develop their 2024 commitment plants.
Looking ahead, we still anticipate a mild recession.
However, we now expect the recession to occur at least one quarter later than we had previously thought.
Followed by a recovery beginning next year.
We realize that our investors are closely watching the U S office market and bank exposure to commercial real estate loans.
Views regarding both are consistent with those we expressed at.
At the end of the first quarter.
We now expect full year 2000, twenty-three court E. P. S to declined by 20% to 25% against last year's record level.
With the majority of the decrease due to the delayed capital markets recovery.
We continue to expect are resilient lines of business.
Good to go for the full year at a rate that is consistent with our expectations three months ago.
Further we believe there is a reasonable path to achieving a record level of court E. P. S. In 2024.
Reaching that goal now has become more difficult with the expected delay and the return of capital markets activity.
Amazon will now take you through a more detailed look at our performance for the quarter and.
And provide additional insights on our outlook Emma.
Bob.
On a consolidated visa card with a very resilient mine's a business continued during the quarter together. These businesses, which consists of our entire global workplace solutions business loan servicing property management valuation.
But management component of investment management Dot net revenue arrived 10 per cent in constant currency.
Please turn to five sex as I discuss our advisory services results.
Weakness in capital markets had a pronounced effect on the advisory business.
Advisory net revenue fell 21% against the challenging prior year comparison, when net revenue grew by more than 20 per cent versus Q2 2021.
R capital market does that says property sales and loan origination together. So our revenues fell 44 per cent versus a 13% increase in the prior year second quarter and.
In the Americas property sales revenue fell 49 per cent more than expected, reflecting limited credit availability and the gap between buyer and seller expectation.
We are beginning to see an uptick in investor appetite for industrial asset where buyers are well, except modest negative leverage due to the significant embedded rent games over the past several years and U S. Multifamily February currently has $18 billion of deals in the market more than double R volume sold in the first half of the year.
Sales Avenue fell 43 per cent anemia, and 11 per cent in APAC both in local currency.
We are increasingly well positioned in APAC, notably revenue in Japan has increased by 16% in local currency ear to date and this has become our most profitable advisory market outside the U S.
In contrast to the capital markets leasing performed in line with our expectation with revenue down 16% versus 40 per cent growth in the prior year second quarter policing decline was driven by the America.
Losing revenue grew in overseas markets as combined APAC anemia increased to six per cent in local currency.
Among property types in the U S office was the weakest with revenue down 30 per cent, while industrial was down only 10% against the challenging prior year comparison.
Loan servicing revenues declined to six per cent due to a significant prepayment fees in the prior year, excluding prepayment loan servicing revenue increased by six per cent free.
Prepayment trees fell significantly beginning in the third quarter of last year. So the prepayment headwind should diminish going forward.
<unk> revenue declines of six per cent in the corner and local currency largely driven by or U S business.
And the you asked me perform a significant volume of work for financial institutions. This business has slowed down at the air as investors pulled back from investment into commercial real estate.
Property management net revenue rose five per cent in local currency increasing across most geography's with notable strength in continental Europe , and South East Asia.
Turning to our Gws business on slide seven net revenue increased 13% and S. O P grew by seven per cent and a quarter slightly exceeding our expectations.
Growth was driven by the continued strength of our local business in the UK and expansion into the U S.
In an enterprise deaf I'm clients, where we increase both the scope and geographic reach of our services.
Demand for project management services also remains strong led by her Turner and Townsend business.
S O P. Martin's decline from the prior year second quarter did a higher opex investments to support our local businesses continue geographic expansion is always costs associated with integrating recent acquisition, even though we expect these investments to continue through the balance of the year full your S. O P should be slightly better than we expected with the March.
In line with last year's level.
Our local business represents a tremendous growth opportunity, particularly in the U S, which is expected to account for just 15% of this business lines net revenue this year.
This business began with the Norlin acquisition in late 2013 at his friends significantly from its original UK focus and that revenue is expected to grow by over 20 per cent. This year.
Our pipeline remained elevated more than 20 per cent above the queue to 20 twenty-two level. The pipeline growth is driven by large first generation outsourcers that our focus on lowering the real estate costs.
Turning to our Rei's segment on flight eight as expected S. O P was down significantly versus the prior year. When we generated a record S. O P from this segment.
Looking at the investment management business nearly all of the operating profit decline was driven by lower incentive fees and modest co investment losses versus co investment gains and last year, a second quarter.
Assets under management fell by 1% driven by lower market valuation the foundation of our I am business, which earns basically the encore encore plus assets remains healthy and we expect co investment gains an incentive fee is to return when broader commercial real estate market conditions improve.
Turning to development, we realized a modest operating loss as we have discussed before is important to look at this business over the longterm versus any particular quarter.
Are highly flexible financing structure allows us to hold onto completed assets. If we believe they can y'all better returns in the future and we continually evaluate our portfolio with that in mind.
On a trailing 12 month basis, we generated $92 million in development operating profit compared to $544 million and the prior 12 months a period of record performance.
Do you do anticipated asset Monetizations in Q4 of this year, we expect higher operating profits for the full year, then we realized over the trailing 12 month period.
As Bob mentioned investors have begun to selectively to play the capital into development favoring well located industrial and residential projects I pipeline increased slightly during the quarter positioning as well for a market recovery.
Please turn to slide nine for a discussion of capital management and our balance sheet.
During the quarter, we raised $1 billion of capital there a senior unsecured bond offering.
And shortly after quarter and we raised an additional $350 million from refinancing and upsizing, our euro term loan.
We now have you been more capacity to invest while maintaining an investment grade balance sheet.
We have a robust emanate pipeline and are evaluating multiple opportunities in the range of $1 billion. We expect these investments if completed will drive meaningful shareholder value, we did not repurchase any shares in queue too, but have repurchased $100 million of shares month today.
Looking at free cash flow, we had originally expected to generate just over $1 billion. In 2023, we now expect this figure to be closer to $600 million to $800 million for two main reason.
First as noted our expectation for earnings has declined which has a direct impact to cash flow.
Second the cost of Trammell Crow company development investments that are consolidated on our balance sheet as well as broker recruitment costs run through free cash flow, we are seeing attractive opportunities to make targeted investments and both land acquisition for future development and broker recruiting and we know anticipate investing more in these two areas versus our.
And last quarter.
I'll end with her updated outlook for 2023 on slide 10.
Bob noted, we now expect core EPS to declined 20% to 25% from last year's record level greater than the low to mid double digit decline we previously discussed.
Our original outlook anticipated a low teens decline in advisory S. O P. A low double digit increase in G. W. S. O P. And then nearly 30 per cent decline and our I S. O P cutting off a year when our development business produced $330 million of operating profit.
The incremental decline in a revised outlook is primarily driven by our view that the capital markets will not recover until next year.
A result, we expect lower investment sales and loan origination revenue than we anticipated 90 days ago, and an extended timelines realized gain both in development and investment management.
Looking at each segment, we now expect advisory S. O P to declined by approximately 20 per cent for the full year a greater decline then we had been anticipating.
And G. W. S. We now expect S O P to reach over $1 billion for the ear or low to mid double digit growth slightly better than we previously accepted with the margin on net revenue in line with 2022 is level.
And Rei, we know respectful your S O P and the low spend your million dollar range, reflecting a 35 to 40 per cent decline slightly worth 70 previously expected.
The primary driver is lower than anticipated coinvestment gains an incentive fees and investment management as well as your development games.
We expect Corey P. As in the second half to be heavily weighted to the fourth quarter beyond normal seasonality. We anticipate most development sales will take place in queue for any investments, we're making and the growth of the gws business will have an increasing benefits through the second half of the year as.
As such we expect the fourth quarter to represent nearly three quarters of second half core EPS.
Without operator will open the call for questions.
Thank you very much ma'am.
And gentlemen at the stage, where we will we will be conducting a question and answer session.
If you would like to ask a question. Please press start and then one no <unk>.
Confirmation tone will indicate your line using the question Q U.
You May <unk>, and then too if you would like to remove yourself from queue.
Participants using speaker equipment and may be necessary to pick up your handset before pressing the star Keith.
Again, if you would like to ask a question. Please press star and then one no.
The first question, we have comes from Steve <unk> <unk> <unk> <unk> sorry. Please go ahead.
Thanks, Good morning, Ah Babar M. A I was just hoping you could spend a little time on the the capital allocation. Yeah, I guess no share buybacks was a bit surprising I know you talked last quarter about looking at a number of Emma.
M&A opportunities and and maybe that was just the focus but just any more color you could share on kinda why no buybacks. Despite you know I guess modest investment in the quarter and it sounds like you have stepped that up already for the slide back in in Q3, but just some more color would be great.
Yeah, Steve So our focus for M&A and capital allocation over the next 12 to 18 months is consistent with what we talked about last quarter. We continue to have a very strong strong pipeline across her emanate portfolio engagement has steadily increased across the number of deals as the years progressed.
N as we said before we're looking at a cross our portfolio of businesses are looking for opportunities to enhance our core offerings going for it but the reality is that deals take time and we're working on a number of them and it takes even more time to do a very well executed deal where we can underwrite to the level.
That we think are required to deliver a really strong return.
So we're encouraged him around where we are and we continue to balance that with buybacks.
And you can see is doing that through the rest of the year.
Okay. Thanks, and then I guess, just turning to the sales environment. You know, it's actually came in a little bit better than I guess, what we had sort of fear or worried about but I guess, Bob I'm trying to figure out from your perspective is is it the actual level of rates that matters or.
Is it just the fact that you know C N B S isn't really open and and functioning in a smooth way and the banks aren't lending.
I I guess, what what do you ultimately need to see to really get the the wheeled squeezed to get the capital markets business. You know back is is it the absolute level of rates or is it just people lending even at higher rates, but that there's capital availability.
It is three things Steve it's both of those things. It's it's the level of <unk> right. It's the availability of that.
But it's also the mindset of buyers and sellers as to whether things have settled out nurse clarity about where.
Of course values of assets are going cost of financing is going so I think we had all three of those things.
Burdening the market in the last 90 days you you you said you thought it was a little better than you expected in our view it was a little worse than we expected.
But we also think things are starting to clarify a bit we are seeing thing signs as we said in our prepared remarks that.
People are getting ready to act, which is good news and we think things will sort out more with the banks now and there'll be dead available from them et cetera. So we're feeling better about where things are gonna be but we're probably going to see that happen next year.
And just one last follow up just if you had to think about 24, I guess you would assume that you know, it's probably more back have waited in terms of just the volume and kind of the business activity. So you know sort of think about more second half twenty-four then first have twenty-four.
For sure one thing that has become clear to us in the past quarter is that the if we're gonna have a recession, it's been delayed of course.
The recovery related to that would then be delayed and also it's just crystal clear that the settling out of interest rate and the availability of that has been delayed which.
<unk> clearly reflected in what happened in our quarter and clearly reflected in what you said about the rest of the year.
Great. Thanks, that's it for me.
Thank you.
Next question, we have is from Anthony pronounce from J P. Morgan. Please go ahead.
Thanks, Good morning.
First one following up on Steve discussion on capital allocation seemed like last quarter, you were pointing to a pretty sizeable M&A deal that you had circled did that far out of bed or is it still.
Potential transaction just wondering if you can give us some cover there.
Yeah, Tony B. The I think the thing that is really important to note and Emma already alluded to it as we are talking about big M&A deals now we're billion dollar deals and we're working on a number of them. We've we've had a steady stream of smaller until deals big deals.
Take on a life of their room, you have to get through agreeing with the other party on a deal working through an integration plan working through an agreement that then becomes a definitive agreement and those things ebb and flow and the notion that they would you would talk about them one quarter and then with her.
My confidence they would land in the next quarter, that's just not how bigger deals play out.
I will tell you 90 days after we last talked about it or view <unk> M&A opportunity is as strong as it was then.
We've got several things we're working on they're not gonna all make we're confident though that some things will make.
And it'll be a very productive use of capital force over the next few quarters and it will be a very good strategic use of capital force, which aren't exactly the same thing. We think we we're gonna be able to move our business forward strategically very nicely with some of the things working on.
Okay does that temper, though just the the amount of buy back to kind of keep capacity for somebody who's larger deals cause I think if you look back over the last year. So you've had some pretty strong buyback quarters, and so just trying to understand what to expect on that side.
Yeah, Tony to work constantly balancing R capital location between buyback and M&A and looking at our pipeline and the time waiting the timing of when we think something may get executed and so that's what you're seeing through the remainder of this year, we expect to complain about 600 million of five acts in the <unk>.
Can have we've done 100 million.
In July and that's what you're saying there is we put attendee five one in place and that's really related to wear price goes throws our pricing with higher or buying back to your insurance as you would naturally expect.
Okay.
Thanks, and then M O separately you'd mentioned, some drags and GW ash from just investment you're making their that those would persist for for the rest of the year could you maybe give us some some ideas to the order of magnitude and whether or not those are lifted that in 24, where we see where I can pick up.
So those are primarily in my remarks that comment on their primarily related to our local business. We did a couple of acquisition smaller acquisitions, where we don't normalize integration cock and you're seeing those integration costs and the quarter, you're also paying investments in our local business as we expand that business outside of their current geographies. So there are some.
Upfront costs required to build out that those platforms, you're saying that in <unk> in this quarter Uhm, we expect that to steadily alleviated through the rest of the year and to end the year overall with a gws margin in line with last year and it's too early to comment on on 2024, but I would expect those.
You know.
<unk> incremental investment, which were always doing our margins will improve going into 2024, I do want to comment on what about on the local business because that is something that we haven't talked about extensively and is a really strong contributor to our growth, especially gws growth over time.
That came out of the acquisition of Norland at the end of 2013 and it was primarily a UK based company and that's really how we entered the local or regional facilities management market and when we have part of them. They had about $40 million of EBITDA and today. They have about we expect for the year or 230 million of EBITDA.
So that's an exceptional growth story for us and this year, we're expecting it to grow another 20 per cent, but as I said it requires investment over time to launch into into new.
Territory, but that well, we'll see operating leverage as those businesses grow.
Okay, and if I could just ask one more.
You talked about some of the investments that affect free cash flow <unk> with with people in recruiting and so forth I guess just casually observing it does seem like there's been a pick up a articles of people moving around can you just comment just generally on the landscape and kind of where the efforts may lie in terms of trying to recruit and retain folks right now.
Yeah, Tony we talk about recruiting and retention, it's heavily skewed toward our brokerage business and our brokerage business is experiencing a good year and an active year recruiting and we think it's gonna measure up for some of the best years, we've ever had.
Recruiting <unk>, even though the tough market recruiting expensive because what you typically doing is recruiting the best brokers in the marketplace and it's like buying great companies that they never they never come cheap, but we're at a time now where people are finding their platforms and the circumstances and the companies they're in.
Today being less supportive of what they Wanna do with their careers less supportive of how they wanted to support their clients.
<unk> <unk> can be so we're finding.
Good hunting out there and a lot of places and bringing on people and as a result spending more money, it's a little bit like Amistad about the land situation would trammell Crow company, there's a lot of people out there that.
Previously were able to buy land industrial land or multifamily land that aren't in a great position to buy it now it's not cheap you still have to pay up to get good land.
But you can get some land sites you couldn't get previously you can get some brokers you couldn't get previously and that's M. As communist centered on about the incremental use of cash for those two types of investments into the future.
Okay. Thank you.
Thank you ladies and gentlemen, just a reminder, if you would like to ask a question. Please press start and then one now <unk>.
The next question we have comes from change your money from K V. W. Please go ahead.
[laughter]. Thank you very much the debt issuance overall that you mentioned the term loan upsizing and also the senior notes would that to be incremental or refinancing of debt is it to add capacity to the company overall.
It's a combination of both we're always looking for we prefer a long-term capital sore. So we've been looking for opportunities to raise that long-term capital in what we did in the near term would be used those proceeds to pay down our revolver, we like having that flexibility and capacity on a revolver. The other positive from it is that <unk>.
Our net interest rate once after we raise the bond and expanded the term loan is actually lower than it was drawn on a revolver. So that's a positive impact which should endure for the next coupla years.
Thank you very much on the cash flow performance side.
Cash flow was negative in the corner just looking at the cash flow statement in the supplemental one of the items was timing related due to the GSE multifamily business I think proceeds from sale of mortgages were below the originations the other big item it looks to be in work.
Capital.
On the payables side and also in receivables.
Is that time and related was there anything outside in the second quarter, you wanted to call out.
Specifically first of all I think it's important to look at <unk> Castle on a trailing 12 month basis, and that's what I spoke to them in my prepared remarks, and and we're really focused on what we expect for the year, which is and that's six to 800 million dollar range and a quarter specifically what's been.
If you what's been impacting the decline is primarily the decline in cornet income all of the adjustments to cast adjustments that can I get a free cash flow are pretty much in line with what you saw last year.
For the second quarter.
Okay. So nothing unusual in working capital.
No.
Okay post second quarter leasing I recently heard that in New York City in particular, that's been a big uptick in office leasing at least interest in certain buildings do you have any views on that.
Yeah, J that that's an interesting story.
And and by the way, it's a story that's being told increasingly and it's this bifurcation between really good buildings and other buildings that are.
Less attractive from our experienced point of view for tenants and.
And what we've seen in New York in particular is the companies that want to get their people back into the office and believe it's important.
Are very very interested in getting the best possible space to create the best environment for those tenants to get them in so there's actually a little bit of a feeding frenzy for the best space.
In a place like Midtown Manhattan in fact, I had a conversation with.
Our senior most brokers and we have 125 or so of them to qualify for this we call Vice Chairman, we have a vice chairman in New York.
That focuses mainly on hedge funds investment companies et cetera in Midtown Manhattan.
She told me a couple of weeks ago that this is going to be his best you're ever unleashing, which is kind of at odds with everything you're hearing about returned to the office attractiveness of office space, but what it is it's it's dose clients wanting to gobble up the best space and by the way it record rental rates.
So they can create this environment for their people. So we are going to see this circumstance continue to play out where the best buildings do quite well and the buildings at the bottom really really struggling in between you're gonna see buildings repurpose because.
In the absence of those buildings in the middle being repurposed and moved up the spectrum in terms of their quality there aren't gonna be places for these companies to go when they do want to create this environment for their people by the way. It's one of the things. It is a bit of an encouraging sign for companies like us who provide a lot of services to office buildings.
Over the longer run.
Actually I'm going to get back in the cube I appreciate it.
Thank you. The next question me half comes from Steven Sheldon from William <unk>. Please go ahead.
Hey, good morning, Thanks for taking my questions first one here just any any general updates on <unk>.
You're thinking about the cost structure it sounds like you're you're actually in baskin behind broker capacity, maybe it'd be better position for recovery does that kind of a fair read through and <unk> have you taken any notable incremental cost actions elsewhere relative to what you would have thought three months ago.
Yeah. So cost is something that we're consistently focused on our chief operating officer of <unk> is is.
Consistently thinking about ways to drive cost management through our company and.
We're moving from this isn't an episodic event, where we cut out a bunch of cross and then we move on if it is something that our leaders are constantly thinking about going forward and what you're seeing right. Now is there is a balance of managing the business and the fixed cost for.
What's required just for our base Foundation are based platform and then investments that should drive future growth. So you you mentioned broke recruiting those are investments that will drive future growth the integration costs that I talked about within local are expanding into new territory. So those are investments that will drive future growth. So the constant balance and we are with me.
The second half of the year very focused on ensuring that we are managing our cost base to an appropriate level further growth that we're expecting going forward.
Got it that's helpful.
And then as a follow up and development I guess.
There's usually not a tunnel visibility, but just how are you thinking about the potential monetization, they're heading into next year.
Would you expect actual harvesting activity to maybe pick up.
<unk> 2024, maybe 2025 once cap rates et cetera.
Some a little bit more favorable just curious curious what visibility you have there on the outlook and Sullivan.
We definitely expect monetization of our trammell Crow assets to pick up if in fact the cap right.
Well, an infant factors capital availability for buyers one of the really great things about that business.
And just to remind everybody we have $17 billion of product in development now and we have another 13 billion behind that in the pipeline. Those are projects that we have control over but we haven't started to develop yet we have those projects capitalized in a way that we have flexibility over when we harvest them. So if you look at a quarter to.
Like this I think and when we sold one building in Q3 <unk> excuse me Q too. We just decided this is not a good time to be selling our assets and that positions as well for profitability in the future. When the time comes to sell those assets. We've got really strong equity partners, we got a little of our own equity in them.
We've got flexible financing, so I think that businesses position to do very good things for US later next year and beyond when the capital markets come back around.
Great. Thank you.
Thank you. The next question we have comes from Michael Griffin from City. Please go ahead.
Great. Thanks, maybe just going back to the M&A pipeline of potential opportunities. There just giving your expected slow down to the capital markets environment. Do you do you expect more of these opportunities for emanates B and the gws segment or advisory or kind of any color on where you're seeing acquisition opportunities.
Well, Michael we don't want to be too specific about where we see them I will tell you we are pursuing M&A opportunities.
That we think do a couple of things number one they advance our ability to serve our clients in areas, where we think we're not as strong as you would like to be.
Number two they are really well run companies.
That we in some cases.
Will bring leaders in to run parts of our business with those acquisitions and they when we announced some of these things.
They'll sound kind of consistent with what people might've expected and some of what we're doing will sound different than what people might've expected when we talked about the norland acquisition, which has been one of the one of the great ones. We made I don't think anybody would have expected that at that acquisition. A few years ago, we had grown to the point, where it makes sense to buy that act by that <unk>.
Company, we've had others like that and I think you should expect to see M&A from us that will expand our capability to serve our company would really well run companies would really good brands and if we can't get those kind of deals done we're not gonna do lemonade, we're not gonna force just to to build scale, we can build scale through organic growth.
Great and then just on the capital markets outlook has anything changed you know across the different regions. Maybe are you expecting you know grey to pick up the mid APAC relative to be America's or any kind of color you could give on on the state of performance with a different regions would be helpful.
Yeah on the sales front and it hasn't I think overall expectations that'd be said to have declined a couple of things to note about the second half of the year overall it we're looking at a much easier compare so the the first half of 2022.
Over 30 per cent growth. The second half of 2022 was down over 30 per cent. We're looking at a very different compare and the Americans because it is expected to decline. The most as we saw in the first half of the year Mia to a lesser extent and then APAC will perform the best and we're expecting that for the year to decline.
My mid single digits.
Alright, that's it for me.
Thank you all final question comes from change your money from Covid W. Please go ahead.
Change your line into my account.
Thank you M&A is always a fascinating topic, yet I know you can't say much can you say, whether your focus is domestic or international.
It's both <unk>.
<unk> and and I don't say that glibly, we have good opportunities both here in the U S and internationally and we have some opportunities to expand the too by the way you know we have several questions today about the pace of M&A. The minute you start looking at acquiring companies the <unk>.
Operate across multiple multiple countries that process takes a long time and you have to make sure that you're confident you can get regulatory approval across those countries that you can integrate across those countries that you can bring people along in a way that is motivating and so I would.
Say, we have how many opportunities that are specific to the U S is specific to countries outside the U S. But importantly, we have opportunities spam countries, which is exciting.
I wanted to also ask about a I if that's in the area you want to invest it.
We're looking at Emma mentioned, our Chief operating Officer, <unk> overseas are digital and technology team, which we've been massively over the last few years. They have an initiative underway and it would be I think jade or invest investors and CBRE would be happy with this.
If you watched what we've done with technology over the years, We've said, we're a real estate company that invest in technology.
To support our business to enhance our business to enable our business. We're looking at artificial intelligence in exactly the same way, we're not going into the artificial intelligence business. We're starting with trying to find places where artificial intelligence can make us more efficient and cost effective.
And then and then moved from there to having a support our market facing businesses, but there's a lot of hubris surround a I know is that I think most people would agree and we're trying to stay clear of that can be very focused on where we can definitively help our business and invest in at a rational patient in in a rational amount.
Thank you very much.
Thank you all for.
Final question comes from Patrick O'shaughnessy from Raymond James. Please go ahead.
Hey, good morning, the development and process pipeline take down a little bit in the second quarter, probably not a huge surprise.
Given the current macro would you expect that in process pipeline to kind of be flattish for the next few quarters.
If it doesn't really make sense to kick off new projects.
Got it. Thank you and then <unk> at least <unk> segment overhead is now a net positive to operating income over the past 12 months, what are your updated expectations and an outlook for that business.
Mmm, Yeah Hot is kind of.
<unk> for US now is the best Red could explain that we've invested in industrious bats are quote flex bet. It's a very good company, we're bullish on flex it as an opportunity.
We've we've we've got 40 present position with some additional debt in the business and we're very supportive of Jamie <unk> and his team as they grow that business and Hannah is <unk>.
And Patrick I'll add it as a reminder, that when we invested in industrious, we actually sold our operations the core of our operation Uhm from Helena.
Two industrious and so it industrious operate with all those properties today.
Got it I appreciate it thank you.
Thank you. Thank you.
And gentlemen, you have reached the end the full question and answer session.
Well I'd like to tell them call back give up something for closing remarks. Please go ahead Sir.
Thanks, everyone for joining us and we will talk to you again at the end of the third quarter.
Thank you so ladies and gentlemen that concludes today's conference. Thank you for joining US let me know disconnect your lines.
[music].