When Bob Sulentich started his career as an industrial rental agent in 1984 with Trammell Crow Co., he said that people believed that real estate was a mass with different economies. President and CEO of CBRE, who heads the world’s largest commercial real estate firm, says industry consolidation is one of the most surprising changes he has witnessed. Sulentik says he has learned that there are different forces at work in the game, and as it has become more institutionalized, it has become an asset class to be looked at instead of stocks, bonds, and private equity.
“This has become more and more evident over the past few years,” he told a group of 275 professionals at TREC’s first Market Issues breakfast of the year. “I was there when we opened Trammell Crow Co. in 1997, when the company had revenues of $ 250 million. There were simply no large global companies in our sector, and there were no large companies covering the U.S. And what happened was that the industry was massively consolidated in almost all areas of business, and as a result, we got several very large companies. here (like CBRE, JLL, Cushman & Wakefield, and Colliers) that are more than any of us ever thought. And what that means for those of us in the industry is that we’ve ended up in places in our careers that we never thought we could get to.
“But I think the most important thing is what happened with the consolidation of the industry.” – the level of complexity of the services, the variety of services, and how the industry has become corporate consultants.
Organized at the Belo Mansion and sponsored by Grant Thornton, D’s editor-in-chief and longtime real estate journalist, Christine Perez took the stage with Sulentic to talk about the real estate industry, his thoughts on returning to the office and one of the most important questions facing the industry today. efforts for diversity and inclusion.
PROSPECTS FOR COMMERCIAL REAL ESTATE
Recently, Sulentik said the real estate industry is doing better as it continues to evolve into a more complex and discerning industry while learning about risks and opportunities and increasing transparency.
When it comes to pandemic recovery – and market adjustments – Sulentik says it will be easier for most to understand why the manufacturing industry is thriving, as much of its success is driven by e-commerce. In the North Texas commercial real estate market, individuals have noticed a shift in the industrial sector due to the widespread growth of e-commerce, primarily due to COVID-19. Sulentik said he has seen record numbers based on rents and takeover costs supported by online shoppers, and he sees e-commerce continue to grow, driving growth in all types of distribution spaces.
And while the industrial market at DFW burns– and continues to thrive by absorbing Just over 10.3 million square feet in the first quarter of 2021, according to a CBRE report – Sulentik says brick and mortar retail is not going anywhere.
Sulentic has encountered increased interest in Dallas dense and multi-unit housing options, especially for young people. And those who live in these establishments are interested in convenience and retail, so the move to e-commerce will not affect small businesses. He reminded the audience that the most successful projects were mixed, with two or three retail options added. Remember the saying, “Shopping is a feeling.”
“What is happening in this office sector is more dependent on the whim of COVID and how we will behave en masse when we go to the other side of COVID,” Sulentik said. “We don’t really know what will happen next.”
But if he had to guess the Dallas-Fort Worth office market – which happens to be the new headquarters of CBRE – Sulentik said it would be closer to where it was before the pandemic than most people think. While most companies may have some work-from-home options and flexibility, “people will mostly come back because they need to collaborate, they need to solve problems and involve young people to get them started. “
But this does not mean that nothing will change. First, Sulentik believes office space will become less dense.
“There is one thing I have to deal with: what young people want,” he said.
So what does this mean for his office? The staff will mostly return to the office, but they will have flexibility. Those who work better from home, such as software engineers, will continue to work remotely. They will be overly focused on helping people when it comes to social distancing and comfort. And they will be very careful what they say because there are political ramifications in addition to practical ramifications.
“And then when the second half of 2021 ends, we’re going to figure out what the future will look like,” he said.
HOT TOPIC: DIVERSITY, CAPITAL AND INCLUSION
To achieve where he is now, Sulentik has worked throughout his career to hone his leadership strategy so that the job gets done efficiently. He learned that the industry is full of cycles, and in the world of commercial real estate, work ends up in transactions. He also discovered the importance of investing in the resources to build a company, although that inevitably doesn’t always work. In return, he keeps a close eye on spending year-round to prepare the company for a bad investment without cutting costs down the line. As a leader, he realized that it is difficult to know what to work on and get the most out of the minimum costs, so when hiring he looks for people with an arrogant mentality and financial sophistication.
“It’s foolish not to attack an entire group of potential people, leaders and others if you don’t consider who you are bringing to the company.”
Diversity, equity and inclusion have been actively discussed by leaders lately, which is why CBRE is taking steps to create an equal space for its employees, customers and shareholders.
“It’s foolish not to attack the entire pool of potential people, executives and others if you don’t consider who you are bringing to the company,” says Sulentik.
He remained in line with the overall philosophy of the company, encouraging different people to take up positions for career advancement, in addition to mentoring and training programs. Right now, the CBRE board has seven members from different backgrounds, and the executive committee has five different members out of 13. This is, of course, a dramatic change from October 2017, when the entire leadership team was made up of white people.
“We didn’t just jump in and tick the box,” says Sulentik. “We have embarked on a long process that we hope will be meaningful in our community and in our industry to show greater depth of engagement.”
When hiring, Sulentik says he is looking for people who can keep up with the pace of the company: people who know what product to use, and people who are leaning towards austerity. These businessmen and women know how to build a business by understanding numbers, amassing capital, and being tech-savvy. While the commercial real estate industry hasn’t disappeared due to technological innovation, it needs employees who know how to work with technology to achieve the highest levels of productivity.
ESTABLISHING REALISTIC STANDARDS
CBRE is doing well this year so far. The stock is up 100% year-over-year and the company is set to well above its 2019 adjusted earnings per share this year. When asked what the driving forces are behind these numbers, Sulentic gave an interesting answer.
“When we spoke to the public markets about three weeks ago about our expectations, we were talking about last year, but last year was not a very good comparison. It was a very depressing year, ”he said. And then, if we look at 2019, he said it really wasn’t the best year to compare because it was a real peak year for CBRE and the industry – and it was big, not just detailed. It was super big for residents and big for investors.
About 13 years ago, a widespread expression that could be heard in the industry was “just give me one more cycle,” Sulentik recalled. And then we got out of the financial crisis and fled for the next decade. “And we all thought, ‘Oh my gosh, how are we going to continue to grow on top of this – 2019 was the final year of how we can grow on top of this, right? “
So instead of comparing themselves to 2020 (or 2019), Sulentik says they are looking back at 2018. And all of this kind of goes back to his previous opinion on how the industry has changed.
“Of course, we are uncomfortable and we are under pressure, but we have a huge presence in industrial real estate development and brokerage refinancing. We sell it. We work with some of the largest companies in the world. We have a huge multi-apartment business, ”he said. “So you kind of march through our lines of business … And what we did as a company is, firstly, we built a base in different countries, and secondly, we very deliberately decided to focus on the areas, where there is a secular tailwind.
“We’ve enjoyed the benefits of a huge industry in many dimensions, parts work exceptionally well and parts are under pressure. And this is what you see there. And we are trying to work to build this routine. And I think we’ve made real progress here. “