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Operator: Greetings, and welcome to the CBRE Fourth Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions] It's now my pleasure to turn the call over to Chandni Luthra, Global Head of FP&A and Investor Relations. Please go ahead.
Chandni Luthra: Good morning, everyone, and welcome to CBRE's Fourth Quarter 2025 Earnings Conference Call. Earlier today, we posted a presentation deck on our website that you can use to follow along with our prepared remarks and an Excel file that contains additional supplemental materials. Today's presentation contains forward-looking statements, including, without limitation, statements concerning our business outlook, business plans, seasonality and capital allocation strategy as well as our earnings and cash flow outlook. These statements involve risks and uncertainties that may cause actual results and trends to differ materially. For a full discussion of the risks and other factors that may impact these statements, please refer to this morning's earnings release and our SEC filings. We've provided reconciliations of the non-GAAP financial measures discussed on our call to the most directly comparable GAAP measures, together with explanations of these measures in our presentation deck appendix. Throughout our remarks, when we cite financial performance relative to expectations, we are referring to actual results against the outlook we provided on our third quarter 2025 earnings call in October, unless otherwise noted. Also as a reminder, our resilient businesses include facilities management, project management, property management, loan servicing, valuation, other portfolio services and recurring investment management fees. Our transactional businesses comprised property sales, leasing, mortgage origination, carried interest and incentive fee in the investment management business and development fee. I'm joined on today's call by Bob Sulentic, our Chair and CEO; and Emma Giamartino, our Chief Financial Officer. Now please turn to Slide 3 as I turn the call over to Bob.
Robert Sulentic: Thank you, Chandni, and good morning, everyone. We had a strong end to 2025. Fourth quarter revenue and core EPS rose by double digits with both reaching their highest levels ever for CBRE. Our strength was broad-based. We saw significant gains in sales and leasing in the U.S. and much of the rest of the world, and our resilient businesses continued to post double-digit revenue growth a trend we see continuing. From a strategic perspective, we continue to build businesses that are benefiting from secular tailwinds. An example is the Pearce Services acquisition in November, which expanded our technical services capabilities in the digital infrastructure market. Our Data Center Solutions business is another example. We've created an integrated offering for the most important hyperscalers. This business consists of services related to a data center's technical infrastructure called the white space and the building operating system called the gray space, along with traditional facilities management services. Revenue from this business is expected to reach $2 billion in 2026 and is growing at 20% per year. More broadly, data center and digital infrastructure work across our 4 business segments accounted for approximately 14% of our core EBITDA in 2025. CBRE is positioned for strong, sustained growth. We are taking advantage of this circumstance to streamline our operations while investing to ensure this growth continues further into the future. We expect another good year in 2026 with core EPS in the range of $7.30 to $7.60, reflecting 17% growth at the midpoint of the range. This will be driven by healthy growth in both our resilient and transactional businesses. Before I turn the call over to Emma, I want to address AI. We spend a lot of time thinking about this topic, and we know it's top of mind for investors. I'll begin with how we are using AI in our business today and we'll then walk through market-facing risks and opportunities that we see related to AI. We are using AI today in 2 areas. The first is efficiency. We're deploying AI where its economic value clearly exceeds the economic value of traditional efficiency levers like offshoring. We're very disciplined about understanding the trade-offs before pursuing efficiency-related AI investments. The second area is developing a knowledge advantage to differentiate our product offerings. CBRE has more real estate data than any company in the world. Historically, we have not been able to turn this enormous base of knowledge into a comparably large competitive advantage. With the use of AI, we are moving toward gaining advantages that are more in proportion to the data advantage that comes with our market position. We are encouraged in a balanced way by both of these AI-related opportunities. With regard to the market-facing risks and opportunities, AI introduces to our business, we think about the risks in 3 broad areas: first, our transactional businesses. Second, the businesses in which we create and improve physical assets; and third, the businesses in which we operate assets. The transactional and investment work we do is most protected from AI disruption. For instance, we've known for some time that our opportunity in the brokerage business is enabled by but not anchored to market data. This same dynamic is in play in our REI businesses. Clients engaged CBRE to plan and execute complex transactions because of our creativity, strategic thinking, negotiating skills, deep base of market knowledge and broad relationships. None of this seems likely to be replaced by AI in the foreseeable future. The physical creation and improvement of assets, which relates to our development and project management businesses, entails a level of complexity across such things as site assemblage and entitlement, strategic planning, cost analysis, knowledge of vendor capabilities and pricing, construction supervision, negotiating skills and more. Because of that complexity and the physical nature of this business, we believe what we do is materially protected from disintermediation. Finally, we have the operation of buildings, facilities and property management, which inherently involves both large amounts of data and information and has a labor-intensive element to it. AI can both enable and disintermediate the data and knowledge side of this. We believe the scale and complexity of our client relationships is helpful in mitigating this risk. The labor-intensive side will not be easy for AI to disintermediate. On the market-facing side, we believe there is and will be massive opportunity with owners and operators of data centers and digital infrastructure. We serve those owners and operators in a myriad of ways. We have a strong start in building these capabilities as evidenced by the results we delivered in 2025. On balance, when you add all of this up, there will be risks, risk mitigants and opportunities in our business associated with AI. We are optimistic that the net impact will benefit CBRE in the long run. Early empirical evidence is supportive of this view. With that, Emma will discuss our outlook and results for the quarter and the year in detail. Emma?
Emma Giamartino: Thank you, Bob, and good morning, everyone. CBRE's strong fourth quarter saw revenue increase 12% with both resilient and transactional businesses delivering double-digit growth. Core EBITDA rose 19% for the quarter, while core EPS increased 18%. In Advisory Services, we saw continued double-digit growth in both leasing and sales. Leasing revenue grew 14% globally, EMEA led the way with Continental Europe up 29% and the U.K. up 16%. The U.S. showed continued strength, growing leasing revenue 12% overall, supported by data centers, which more than doubled and industrial, which was up 20%. Demand for big box logistics facilities, a market segment where CBRE has a deep presence accelerated meaningfully, while 3PLs continue to exhibit a strong appetite for space. In Q4, we saw large industrial occupiers act in advance of upcoming lease expirations, often upgrading their space. U.S. office leasing revenue remained strong, in line with our expectations, reaching record levels for both the quarter and full year. Year-over-year office leasing growth decelerated to low single digits versus a then record Q4 in 2024. We saw some large deals slip into 2026, which we expect to benefit our first quarter results. In Capital Markets, both sales and commercial mortgage originations grew at high teens rates. U.S. sales revenue increased 27%, driven by office and multifamily. However, revenue from both asset classes still remain well below prior peak levels. Outside the U.S., sales were strong in India and the U.K. Mortgage origination fees grew over 20%, supported by a 23% rise in loan volume, led by increased activity with debt funds and CMBS. Advisory SOP grew 14%, outpacing revenue growth. Excluding the impact of lower escrow income, operating leverage was even more significant. Turning to the Building Operations and Experience segment. Revenue growth was driven by local facilities management, data center solutions and contributions from the Pearce Services acquisition. As Bob highlighted, we are seeing the benefits of our investment in data center solutions, where revenue grew by more than 20%. Local Facilities Management continued to deliver strong mid-teens growth driven primarily by the ongoing expansion in the Americas as well as notable strength in Western Europe. Enterprise facilities management growth was led by the life sciences, health care and financial services sectors. BOE segment operating profit grew 20%, outpacing revenue. Turning to Project Management. We delivered solid revenue growth underpinned by new real estate projects for hyperscalers in the U.S. and new infrastructure mandates in the U.K. public sector. The integration of Turner & Townsend and CBRE's Legacy business continues to proceed well and our project management segment is now largely operating as a combined business around the world. As we anticipated, margins declined compared with the prior year due to a few unusual onetime expenses. The segment delivered healthy operating leverage for the full year. Turning to our Real Estate Investments segment. SOP showed strong growth, driven by the sale of data center sites in our development business. We still have embedded gains of about $900 million in our development portfolio. Investment Management operating profit was largely in line with expectations. Growth in recurring asset management fees was offset by lower incentive fees and co-investment returns than in the prior year. We raised over $11 billion in capital in 2025 and AUM ended the year at $155 billion, up more than $9 billion for the year. Before moving to cash flow and capital allocation, I want to point out a couple of items that reduced GAAP earnings for the quarter. The first is the noncash impact of the buyout of our U.K. pension plan, which will result in future net cash savings. The second is an increased reserve for fire safety remediation in the U.K. development business. Together, these totaled $279 million. Without them, Q4 GAAP net income would have increased 43%. Looking at our cash flow, we generated nearly $1.7 billion of free cash flow in 2025, reflecting 86% conversion on core net income, slightly above our 75% to 85% target range. Since the end of the third quarter, we have allocated more than $1.5 billion of capital. This includes about $1.2 billion for the Pearce Services acquisition and nearly $400 million for share repurchases. Share buybacks have totaled more than $1 billion since the beginning of 2025. Net leverage ended the year at 1.2 turns. As Bob indicated, we expect to generate core EPS in the range of $7.30 to $7.60 for 2026. This represents 17% growth at the midpoint, supported by continued double-digit revenue growth in our resilient businesses and greater than through-cycle growth in our transactional businesses. In our Advisory segment, we expect low teens SOP growth should be supported by solid increases in leasing and sales activity. As we move further into the recovery cycle, transaction revenue growth will begin to slow from the prior year's elevated levels. In our BOE segment, we anticipate mid-teens SOP growth driven by strength in our data center solutions business, our local facilities management business and full year contributions from Pearce Services. We are focused on sustaining the significant margin gains made in 2025, while we are investing in future growth. In Project Management, we expect low teens SOP growth. the complex integration of Turner & Townsend, and Legacy CBRE project management should be largely complete this year. In real estate investments, we expect both investment management and development operating profit to roughly match our strong 2025 results. We continue to see demand from hyperscalers for sites that can be developed for data centers. However, as we've discussed in the past, it can be difficult to predict when we will complete these land sales due to the long lead times required to secure power. As Bob mentioned, we're positioned for sustained growth and are taking advantage of this position to invest in our functional platform and products. This includes launching a finance transformation, which will include an ERP implementation, process standardization and organizational restructuring. We are also making further organic investments across many parts of our business to support the strong mid-teens EPS growth we expect to deliver this year and beyond. In addition to data center solutions, we're expanding our local business in the Americas which has grown revenue from $330 million in 2021 to $800 million in 2025. Our industrious business is growing profitably and will expand to more than 300 locations by year-end up from about 200 when we acquired the business at the beginning of 2025. We're also building out our Americas infrastructure capabilities in the Project Management business. Traditional infrastructure is growing rapidly, but comprises far less of the segment's total revenue in the Americas than the 25%, it contributes across the rest of the world. Finally, our strong growth in Q4 has continued through the first 6 weeks of the year across our Services segment. Advisory, BOE and Project Management are expected to deliver double-digit SOP growth in the first quarter. Advisory is showing particularly notable strength for Q1, historically its slowest period. As a result, we expect Q1 to comprise approximately 15% of our full year core EPS, a larger percentage contribution than in last year's Q1. With that, operator, we'll open the call for questions.
Operator: [Operator Instructions] Our first question today is coming from Stephen Sheldon from William Blair.
Stephen Sheldon: I really appreciate the commentary around AI opportunities and risk, Bob, I would -- I highly agree with your take. Maybe just starting on capital markets. I mean, can you just give some more detail on what you're seeing in the pipeline and what you've baked into the guidance for 2027. It sounds like you're off to a strong start for the year. And I guess how dependent do you think a continued recovery in activity will be on the interest rate trajectory? And specifically, do we need any additional rate cuts for activity to continue picking up in your view? Or are there plenty of other factors that support activity? Just generally, how are you thinking about it?
Robert Sulentic: Yes, Stephen, we're not counting on that business being driven by interest rate cuts in 2026 at this point. What we do see is that the demand between -- or the balance between asking prices and offering prices has closed. There is capital available, even though not more inexpensively materially than it was recently. And there's a lot of buyers out there that want to buy assets and sellers want to sell assets. And as a result, we expect another good year for sales and financing activity in our business this year. But it won't return. This isn't a business that's rapidly returning to peak levels like some of our other businesses. We've said in prior quarters that we expect this to be a slow, steady recovery. We still feel that way. Am in her prepared remarks noted that the first quarter has started out strong, and we're encouraged by that. But we don't expect to see a big rapid rise in that part of our business this year, just some nice double-digit growth.
Stephen Sheldon: Got it. That's helpful. And then maybe for Emma, and apologies if I missed this, but can you just give us some more detail on the onetime expenses, the weight on Project Management margins in the quarter? And will there be any flow-through impact from those, I guess, are they truly onetime for the fourth quarter? Is there going to be any flow-through impact into early 2026?
Emma Giamartino: Sure. I'll start with saying we now -- we believe that those will be entirely reversed in the first quarter. So we'll see a nice margin expansion in project management. In Q4, as we were going through the balance sheet, we did take a pretty conservative view on some of the receivables on some of our larger projects. And we now think that will be reversed.
Operator: Next question today is coming from Julien Blouin from Goldman Sachs.
Julien Blouin: Bob, I wanted to dig into your comments around the brokerage businesses sort of being hardest to disintermediate by AI. I think broadly the thought out in the market was that this was maybe where the risk was greatest given the ability of AI to sort of empower sales lead generations, perhaps automate other parts of the sales process. Do you think there's a risk that AI maybe eats into some of these more market-making aspects of your brokerage business?
Robert Sulentic: Well, Julien, we watched this business for years with people saying things like, gosh, with the scale you have, with the client relationships you have, with the data you have shouldn't you be able to shift the economics between the brokers and the company. That's been part of the dialogue over the years. And if you go back and listen to my comments over the last several years, I've always said that's not what we're trying to do. What we're trying to do is enable our brokers because what we know our clients want is certain things the brokers bring to the table that we enable, but the brokers bring to the table. The ability to provide strategic input to big complex transactions. We're not we're not selling $2 million condos. These are big complex transactions that we're doing. The ability to negotiate experience in doing these big complex transactions relationships in the market. We don't get our brokerage leads online somewhere. We get our brokerage leads because of deep knowledge about the occupiers and investors in the marketplace that we serve. So we've become quite confident that, that business really is driven by the strategic creative thinking that our brokers do. And we think that's going to continue to be the case. And we haven't seen any evidence to the contrary. What we're really working hard to do in thinking we're finally making some gains on using AI is to provide data to our brokers in a more efficient way and a more cost-effective way for us. It is expensive to collect and provide this data to our brokers from the different sources. We think we've turn the corner on that with the use of AI, we're pretty encouraged in some tools we've built. But the thing that the clients buy from us is creative strategic thinking, negotiating skills, et cetera. It's the same set of skills that go into our investment businesses, which are going to -- and that's development and investment management, which are going to make those difficult to disintermediate.
Julien Blouin: No, that's really helpful. Emma, I wanted to maybe check on the advisory services sort of incremental margins. They appeared lower this quarter. I know you mentioned the lower escrow income. I guess how much of that -- or what would the incremental margins have looked like absent the lower escrow income versus is there any sort of impact here from compensation or sort of fee pressures? And then what kind of incremental margins are you assuming in 2026 in advisory?
Emma Giamartino: Julien, to answer your -- the second half of your question around escrow interest, without the escrow interest, which declined this quarter as interest rates declined. Our incremental margins were above 30%, which we view as very strong. And I think what we have to keep in mind is we have industry-leading margins in this business as we do across all of our segments and we consistently grow above the market. So we're consistently gaining market share. And to do that, we have to continue to invest in the business. Just like Bob just talked about investing in our data for our brokers and our platforms, we're consistently doing that. We're also investing in talent to be able to outperform the market. You have to have the best talent in the industry. So we're making all of those investments and looking to 2026, we expect to continue to do the same.
Operator: Your next question today is coming from Anthony Paolone from JPMorgan Chase.
Anthony Paolone: Bob, thanks for the comments on AI related to CBRE. Can you talk maybe a bit more about what you think the impact might be on your end markets, particularly around office and whether you see any long-term diminution in that just in terms of overall space needs and perhaps also in areas like appraisal, which can maybe get streamlined and perhaps reduce fees or something there?
Robert Sulentic: Well, Tony, 2 very different questions. Let me start with office. If there are less office workers in the long run as a result of AI, there will be less demand for office space. That would be a long-term trend to unfold. What we're seeing right now is tech companies, financial companies, advisory companies, every kind of company you can imagine is using their office space to attract talent and make talent more efficient and effective and excited to come in and go to work. And that's created a lot of opportunity for us. Over the last 5 quarters, we've gone from, well, on main and main, there's more demand for office space -- excuse me, main and main in the gateway markets. Well, then it's Main and Main plus and the gateway markets plus. Now what we're seeing is across primary and secondary and tertiary markets, a lot of demand for office space because workers have come back and companies are using office space to support those workers in all the ways I said at the outset of this answer. In the long run, will there be less office users because AI disintermediates some of the work people do, that's possible. But what we're likely to see is a lot more AI-related workers backfill other types of workers that may go away because of AI. So it would be very difficult to sit here today and say there's going to be less office space as a result of AI in the foreseeable future over the next few years. And certainly, right now, we're in one of the sweet spots we've been in, in my Enpower career for office-based leasing which is a wonderful thing for us because it's at a point in time when we're taking share in leasing. We've had some really good momentum there, particularly in the Americas. The second part of your question, restate the second part of your question, if you would.
Anthony Paolone: It was more on appraisals where...
Robert Sulentic: Appraisals, yes. Well, we -- for years, we've been automating. If you go to Asia and Pacific, Australia, New Zealand, for years, we've had an appraisal business there that was heavily, heavily automated, radically more efficient in terms of the hours of the man hours that go in appraisal in here. And what we did is we built technology systems over there that caused the revenue per appraisal to go down for us, but the number of appraisals we do to go up radically, and that's been one of the more profitable parts of our valuations business around the world. So that cuts in both directions. That probably is a part of the business that's subjected to disintermediation. And the question for us will be, given our scale and our ability to address will we be able to be a net winner in that subject to that set of dynamics, and we're feeling good about that. I think MR assessment is that our valves business is going to grow 10% next year. So we're feeling good about that right now, Tony.
Anthony Paolone: Okay. And then just a detailed question, Emma, for you. I think there's a comment in the deck about OMSR net MSR gains and a change there. Can you -- is that in the guidance and you just haven't shown us like how you're going to disclose it yet? Or just kind of what's happening there?
Emma Giamartino: It's not in the guidance yet. What we will do is we will provide historical restatement of our financials, including the OMSR change and the data center Project Management change going back a number of years. We'll do that well before the Q1 results. But it doesn't change the growth rates on the guidance.
Operator: Our next question today is coming from Steve Sakwa from Evercore ISI.
Steve Sakwa: I think you had a comment about the data centers, I think, being up more than 20%. And obviously, there's a lot of discussion just around AI, data center growth in general and kind of whether we're in a bubble or not. But like what visibility I guess, broadly, do you have on the data center business inside of CBRE broadly? How far out kind of can you see that business? And are there any sort of longer-term concerns or issues that you see with that business?
Robert Sulentic: Yes. Steve, I'm going to answer that question, if you don't mind. So you can imagine, given our business and given how much data centers have grown for us, how much time we've spent discussing that question. How enduring is the growth that we're seeing, what do we need to do to position ourselves to take advantage of all the demand. And one of the very first things that we observed when we ask that question is we couldn't have imagined 5 years ago, if we were talking about the data center business being where we are today. I think we need to keep that in mind. We don't know where we're going to be 5 years from now. It may be -- we may be in something of a bubble or we may find that the explosion gets even bigger. What we know for sure is that given what's already in the pipeline today, we are having trouble keeping up. And others that do what we do are having trouble keeping up and based just on the duration of the work that's out there today, that's going to go on for a few years. I had Vince Clancy, who is the CEO of our Turner & Townsend businesses in from London and he and I had dinner last night. And the #1 subject that he and I discussed was how are we going to get the talent we need to keep up with the demand we have in our data center and critical infrastructure businesses. That's a little bit at odds with the notion that, that talent is being disintermediated. What's happening is that talent being used to support the growth of AI. So we think there's going to be enduring growth there. We have very quickly built this integrated data center solutions business that includes white space projects, gray-based projects, which is kind of the building infrastructure, MEP work, the white space is the technical work and then the legacy facilities management. As I said in my comments, that's a $2 billion business likely in -- $2 billion likely revenue business in 2026. And we have big, big efforts underway to grow that business both organically and in and finding resources, not the financial resources we need to grow that business, but the people resources we need is hard. So we're not sitting here today worried about a bubble or running out of opportunity. By the way, we are not material players in the ownership of data centers. So if there's some bubble around that, that's not a big area of exposure to us. We do have this land data center land business within Trammell Crow Company, but we have very, very little balance sheet investment supporting that. and it's a nice add to our profitability, and we think it's going to continue to be. We have, I think, 30 or so sites that we have under control in various ways that we're working on. But we just -- we don't see a scenario sitting here today just based just on what's in the pipeline and the duration associated with that. our direct interface with the hyperscalers and what we know about the capital they have available to keep growing and what they're asking us to do. We see this running for a few years. And then, of course, once those few years ago in terms of creating data centers, there's going to be a huge amount of work to do to maintain those data centers, refit those data centers, manage those data centers. So we see this as a substantial part of our future and one that we are fortunate enough to have put ourselves in a pretty good position to take advantage of.
Steve Sakwa: Great. Maybe just on capital allocation. You've been both acquisitive buying businesses, but also buying back stock. I know you don't put any of that into guidance as you set the range for '26, but just I guess, where is your head today either Bob or Emma, on kind of the free cash flow you have moving into '26. Are you tilting more in the buybacks given the recent selloff? Or is there a pipeline of deals that seems to be more attractive than buybacks?
Emma Giamartino: So it's very consistent with what we've talked about historically and done historically. We have a strong pipeline. We're actively looking at target companies within data centers within facilities management within investment management within infrastructure, Project Management. And we have a strong pipeline. But as we've always said, it takes a lot for those to convert, and it's very difficult to anticipate which of those deals will convert into a transaction. And so we're going to balance that with share repurchases. And our goal for -- on a consistent basis, is to at least to deploy the level of free cash flow that we expect to generate in a year. So given the levels of free cash flow we're generating, it's unlikely that we'll do M&A, do all of that through M&A. So we'll continue to buy back shares.
Operator: Next question today is coming from Ronald Kamdem from Morgan Stanley.
Ronald Kamdem: Two quick ones. First, it's a little bit difficult. When you -- I think you said that the company has sort of the most CRE data of sort of any other company out there and built through the cycles. I guess the question that we're getting is how -- if you have an AI tool out there can you just remind us what are some of the moats to being able to replicate that sort of data advantage? And how long you think it could take?
Robert Sulentic: We think by the end of 2026, we'll -- there'll be concrete evidence that we've made some real gains in terms of extracting the data we have assimilating it and delivering it to our professionals in a way that we haven't done before. And that is being enabled by AI, and that's one of the areas we're most encouraged to buy. It's going to save us money in terms of accumulating the data, buying the data, and it's going to make our brokers more efficient in terms of using the data. We're also, as already mentioned, we're using that same set of tools to meaningfully cut the cost of our research effort. So we expect concrete evidence this year. We're very excited about it.
Ronald Kamdem: Great. And then my follow-up is just on free cash flow. Maybe one, can you talk about the expectations for '26. And I think the '27 numbers came in at $1.7 billion versus $1.8 billion before. Is that sort of correct? And what sort of happened there?
Emma Giamartino: Yes. And 2025, I think is $1.7 billion. So cash flow for 2025 was really strong. It was above the high end of our -- slightly above the high end of our range of 75% to 85% conversion on core net income. And the reason it was higher than our range is because of those -- we had a really strong year within development. And those gains convert to cash flow above 100%. So that's what drives us above the range. In terms of what the delta between the $1.8 billion that we talked about and the $1.7 billion, that's simply some timing related to onboarding our large enterprise clients, so that's hitting working capital, and that will be reversed in 2026. Going into 2026, we believe we're going to be solidly within that 75% to 85% range. that working capital headwind that we had at the end of Q4, again, should reverse in 2026. But we also do have another headwind in 2026 related to the cash compensation that we're paying in 2026 related to the really strong performance we had in 2025, especially within our development business.
Operator: Next question today is coming from Jade Ramani from KBW.
Jade Rahmani: Could you comment as to whether you see margins in the BOE and Project Management business. Do you expect there to be room for further improvement? Do you see margin expansion in 2026?
Emma Giamartino: Thanks, Jade. I'll start with BOE. First, I'll say, we're very pleased with where we -- where our margins ended up in 2025. The expansion that we delivered resulting from the big cost efficiency exercises we went through at the end of 2024, led to margin expansion beyond what we had expected at the beginning of 2025. And again, like I said about our advisory margins, our BOE margins are industry-leading. So we put a lot of work into getting to those margins and focusing on operational efficiency to get there. We're also really pleased with the growth we delivered. It's exceptional growth in that business. It's above what we've delivered historically on an organic basis and definitely on an inorganic basis. So going into 2026, we are very focused on proactively investing within our BOE business to make sure that we can sustain those levels of outsized growth. So there is some operating leverage in the plan in 2026, but that is being offset by the investments that we're making. So we're expecting BOE margins to be flat in 2026. Going forward, because of these investments and because of the growth that we're putting into these -- some of these newer businesses like our data center solutions like Industrious, like local in the Americas, we should expect to see continued margin expansion, and we'll always be incremental but going forward beyond 2026. And then turning to project management, we are expecting some margin expansion in the year.
Jade Rahmani: On the agency servicing business, there's been a lot of players that have received loan putbacks from Fannie Mae and Freddie Mac. That's when those companies for the originator servicer due to issues of fraud and the like to buy back those loans. Had CBRE experienced any of that? It doesn't seem that way from the disclosure, but I wanted to ask.
Emma Giamartino: We have not seen any fraud in our portfolio, and we are evaluating it consistently on a quarterly basis like all of our competitors do and are very attentive to that. We have really a very rigorous underwriting process. And our loan loss reserves do increase. steadily as our loan book increases. And I think now it's just at about $70 million, but we haven't seen the spikes that you've seen elsewhere in the market. And we don't expect to.
Operator: Next question is coming from Alex Kramm from UBS.
Alex Kramm: Just coming back to BOE for a second. You mentioned local -- the local business continues to be. It sounds like one of the locomotives in that business. So maybe you can just expand on what you're seeing right now in the pipeline. Any changes in the competitive dynamics in that market? And since somebody just asked about margins, can you just talk about how the margins in the local business are trending relative to BOE overall?
Robert Sulentic: I'll talk about the expansion and the strategy for expansion and then Emma can hit the margin question. So I want to start by saying this has been one of the gems for CBRE for years. And I'm not sure that people always recognize when we say enterprise facilities management and local facilities management, what the difference is. Enterprise facilities management is when we handle facilities typically for large corporates across large swaths of geography sometimes the entire world sometimes the U.S. or Europe and multiple asset classes that they have in their portfolio. So big, big portfolios of property sometimes hundreds even over 1,000 people assigned to those enterprise clients. Local FM is when we do typically single complex assets, for instance, maybe a big museum or a particular hospital or we do a group of assets of a similar type within a confined geography, 1 metropolitan area, 2 very different profiles in terms of the portfolios you serve for those clients. Local includes within it also a lot of small project work. So roof replacements, parking lot replacements, et cetera. that's done on a principal basis. And that's typically add-on work. That's typically not in the base contract. It's incremental work you do and nice margins in that business. That business was very centered in the U.K. and Ireland, and then we grew it into Continental Europe. And now we've started to build that business in the U.S. And I think Emma gave the numbers, it's grown from like $300 million to $800 million in the last 3.5 years. And that's the basic FM footprint that we've laid down doing those projects. Now we're starting to build into that business the incremental project work that's higher margin. That model is working exactly as it's supposed to work. We're thrilled with what's going on there. It's 1 of the things that differentiates our business from others. And but it does take organic investment. We're growing that business mainly here in the U.S. organically. That's why Emma commented on some of the -- yes, we -- there's some inherent margin advantage as you take on those projects, for instance, but you also have to do an organic build out of that business. And that's where that's working. And it's driving a considerable amount of growth for the company. And Emma, you might want to comment on the margins.
Emma Giamartino: Yes. So overall, the local margins globally are slightly above what you see for the BOE segment. And then like Bob said, in the Americas, that margin is lower as they're building out those teams, expanding across the U.S. And so that's upside to both local and BOEs as that market matures.
Alex Kramm: Very helpful. And then just a quick follow-up on the data opportunity. It sounds like you just want to do -- you were going to do a lot more work there to enable your brokers, et cetera. But just -- maybe just 2 more questions here. On the savings side, Bob, you gave some opportunities to have savings. Can you expand on that a little bit? Maybe how much are you spending on external vendors? Do you think you can actually cut those out mostly over time as AI gets better? And then also you mentioned research. So is it just a reshaping of the research organization that you have internally. And then just very quickly, on the external side, are you also seeing data monetization opportunities externally to some of your real estate end clients? Or is this really just to enable your business better?
Robert Sulentic: Yes. So there are a number of things there. I'm going to start with an area where we can be empirical about the savings. We think we're going to be able to save over this year maybe extending into next year, about 25% of the cost of our research work using AI and the data that we assemble and manipulate through AI to support the research work. We get data from a lot of different sources in our brokerage business, and we spend money in a variety of ways there. We're not specifically talking about where we're going to save, but through a combination of what it costs us to collect data ourselves and what it costs us to buy data, we will save money. And then we will be able to deliver that data. This is what we're most excited about in a more useful efficient way to our brokers in a more self-serve way to our brokers. So it's a combination of all those things. And that's, I think, as far as we want to go with that right now.
Operator: Our next question today is coming from Seth Bergey from Citi.
Seth Bergey: I guess just to start off, you've touched a lot on AI. And just going back to some of your comments on data and efficient ways for your brokers to kind of serve your clients. How do you think about kind of head count needs just as you balance kind of the accelerating advisory services business and then maybe some efficiency gains that you're kind of seeing with AI over the longer term?
Robert Sulentic: Yes. So I'll talk about 2 kinds of headcount. We are not reducing broker headcount. We're adding brokers. By the way, another thing we have going on here in Dallas this week, we have our Americas brokerage leadership team assembled here in Dallas. I spent time with them today -- or excuse me, yesterday, we've rebuilt -- it's a spectacular team, and they are doing a really good job of adding talented brokers and taking market share in leasing in particular. And they're doing a good job with the team that we've built with -- that's been enabled by our digital and technology team of delivering data to our brokers in a more effective and efficient way, and that's what we were commenting on, that helps us recruit that helps us retain. But the big product there is the talent of that group of brokers. And so that's all going exactly as we would like it to go. But the savings is in things like research, the cost of data and then the efficiency of delivering data to the brokers.
Seth Bergey: That's helpful. And then maybe just getting that kind of some of the things that you're kind of underwriting with guidance what kind of gets you to kind of the top end and the low end of the guidance range that you put out for the year?
Emma Giamartino: Yes. Seth. So similar to last year, the range is almost entirely driven by the timing of our data center land site monetization. Like I said in my prepared remarks and we've talked about before, there is uncertainty around how long it takes to get power to these sites, and that really is the driver of the timing. And so to get to the high end of the range, it's really the -- almost all of what we have in our data center pipeline converts this year and then the low end is very little concern.
Operator: We've reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.
Robert Sulentic: Thanks, everyone, for joining us, and we will talk to you again when we report our first quarter results.
Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.