CBRE Group Inc. has recently expanded its property management business to become one of the world's largest property managers as it acquired its competitor, Global Workplace Solutions (GWS) in a deal which amounted to almost $1.5-billion.
CBRE is known in the industry as a broker of sales and leases of commercial real estate which include shopping centers, warehouses, and offices. This Los Angeles real estate services has been expanding its business to grow revenue and come up with reliable income that does not depend alone on real estate cycles. It has 24,000 employees who manage 3.8 billion square feet of property for clients.
GWS, on the other hand, was a division of a Milwaukee technology company, Johnson Controls Inc., which was founded in 1885 with the invention of the thermostat to regulate indoor temperatures. It had 14,000 employees who managed 1.2 billion square feet of property for clients in 75 countries.
Last year, its property management services generated almost $3.7 billion of the company's roughly $9 billion in gross revenue and GWS will be able to add $3 billion to that as it reaped that amount of revenue in 2014.
CBRE's Chief Executive, Bob Sulentic explained that the acquisition is "... consistent with our strategy to have a more contractual revenue stream. We are not de-emphasizing brokerage. We are growing this business so we have more balance."
Craig Silvers, President of Bricks & Mortar Capital, affirms that the management of large commercial properties is a growing business and that many companies actually want to get rid of their in-house real estate operations and other functions that are not related to their core business. "Everything is being outsourced these days. And a big company like CBRE can take advantage of economies of scale, "Silvers said.
Prior to the acquisition, CBRE was focused on managing real estate for firms in financial service, healthcare and telecommunications while GWS specialized in the fields of life sciences, manufacturing, oil and gas.
