Trade War Pours Cold Water On A CRE Market That Was Heating Up

The ongoing trade war kept CBRE from boosting its outlook for 2025 at the end of the first quarter, CEO Bob Sulentic said on the firm's earnings call Thursday. 

The global brokerage beat analyst expectations in its first-quarter performance, but Sulentic cautioned that the tit-for-tat tariff battle has made clients more hesitant and wary of big decisions about investments in space.

“Things didn't go from good to bad. Things went from really good to not as good,” Sulentic said on the earnings call Thursday morning. “We ended the quarter with strong pipelines. As we've gone through the better part of April, we've seen really good activity, but we have seen some implications of what's going on with the tariffs.” 

CBRE posted $8.9B in revenue for the first quarter, up 12% from the first three months of 2024. Global leasing revenue grew by 19%, fueled by a 38% increase in U.S. office leasing activity. Sales revenue was up 26% in the U.S., driven by rising multifamily and industrial trades. Together, the advisory segment pulled in a $301M profit in Q1, with a 17.9% margin. 

“On office, pretty much all metrics are up, square footage, terms, rents are up slightly,” Chief Financial Officer Emma Giamartino said of leasing activity. “On the industrial side, it’s what you would expect. Square footage is up slightly, term is up slightly and rents have been flat.” 

Sulentic said the industrial sector was the most exposed to tariff impacts but that transaction volume would still be within the firm’s forecasts despite an expected mild pullback. Growing market uncertainty hasn’t translated into office users pausing leasing activity, Sulentic said. 

Despite the earnings beat and revenue for some business lines coming in above CBRE’s own estimates, executives opted not to boost guidance for the rest of the year, citing early signs of a pullback in market activity driven by President Donald Trump’s efforts to reshape global trade. 

CBRE has updated its internal forecasts as the White House rushes to negotiate with dozens of countries for trade deals to avoid the implementation of the now-delayed tariffs announced on April 2. Those tariffs, launched on a day Trump billed as “Liberation Day,” include levies on all of the country's major trading partners, including a 145% tariff on Chinese imports that has not been suspended. 

In a note to investors after the call, JPMorgan Chase analysts said CBRE posted good results but that its go-forward outlook was more important than the Q1 numbers, given the economic landscape. 

“We do expect some pause to likely occur here in the coming months due to capital markets volatility more generally,” they wrote. “But we also note that with so much of the volume in a year seasonally weighted to 4Q, it’s a long ways off before we know how the year will settle out for CBRE and its peers on this front.” 

JPMorgan has an overweight rating on CBRE's stock and a $141-per-share price target.  

Beyond roiling the stock market, the trade war has increased the likelihood of recession and added more volatility to the bond markets that underpin debt underwriting. 

“We've adjusted our view of things to take into account considerable uncertainty, which causes us to have a view of higher risk of recession than we had before, which causes us to have a view of the higher risk of people being on the sidelines because they just don't want to act in uncertain times,” Sulentic said. 

A significant economic slowdown or recession would weigh on market activity, but not enough to push CBRE’s performance beyond the low end of its current guidance, Giamartino said. 

Capital markets activity was only marginally impacted by the trade tumult, and Giamartino said she expected activity would continue at a healthy clip so long as the rate for 10-year U.S. Treasury bonds found some stability below 5%. 

In the first quarter, CBRE boosted earnings per share by 32% and repurchased $600M worth of shares while keeping its debt relatively low and holding on to $1.4B in cash. Its stock was up more than a percentage point in early trading Thursday. 

The Dallas-based firm fueled some of its recent growth through the purchase of Industrious, the coworking company it acquired in January at an $800M valuation, and double-digit revenue growth from activity at Turner & Townsend. The construction and engineering firm that CBRE became a majority owner of in 2021 and fully integrated into its project management business in the first quarter.  

The depth added to CBRE’s portfolio of services from the two firms led CBRE to restructure its financial reporting in the first quarter, and the firm is looking at potential market dislocation as an acquisition opportunity.

“Choppiness builds momentum for us in the M&A work we're doing, and we would expect the approach we take to M&A to play out nicely in a difficult market,” Sulentic said. 

Still, Sulentic reminded analysts that he didn’t have any insight into markets beyond what was available to them. Given the uncertainty that pervades investor sentiment today, CBRE is prepared for a wide variety of outcomes, he said.

“I've been around now for multiple downturns, and we always talk about, ‘When things get tough, we'll take advantage of it.’ And, you know, we do, to varying degrees,” he said. “But I don't think we've ever been as well positioned to take advantage of a downturn.”

UPDATE, APRIL 24, 4:05 P.M. ET: This story has been updated to clarify that U.S. sales revenue grew by 26% in the first quarter and that CBRE acquired a majority stake in Turner & Townsend in 2021.