Many companies still have many staff working from home and have to make some big decisions about their office space. Do they keep people working from home and need less space? Do they need more space so they can spread their employees out more? Should they relocate out of the inner city so employees do not need to ride the subway?

I am sure you can think of a bunch of other questions being debated in the c-suite.

It seems highly likely there will be a lot of change - so my question is which companies will profit from that change.

Who would help these companies sub-lease the space they no longer want, or lease/buy new premises, identify the best new locations etc?

How about a commercial real estate broker:

CBRE Group, Inc. (NYSE:CBRE)

CBRE provides a broad range of commercial real estate services on a global basis. The company was responsible for more than $432 billion of property sales and lease transactions in 2019. CBRE manages more than 6.8 billion sq. ft. of commercial properties and corporate facilities.

Through more than 530 offices (excluding affiliates) worldwide, CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services.

The company also operates one of the world’s largest real assets investment management businesses (CBRE Global Investors), the largest commercial real estate development company in the U.S. (Trammell Crow Company), one of the largest residential developers in London (Telford Homes) and an enterprise flexible workspace solutions business (Hana).

Yeah - I thought you would like it - but is the business any good. Lets check out some key stats:

Source: QuickFS.net

An average 21% Return on Equity (ROE) over the past 10 years is a nice start. Enterprise Value to Free Cash Flow (EV/FCF) os 20.6 times is higher than I would normally like - but CBRE owns real estate and I think you would find this ratio elevated in many other real estate businesses.

A few interesting Covid-19 comments from the earnings call

Industrial

Clearly, we have a very big industrial business. We develop it, we sell it, we manage it, we finance it. And everything that's about COVID-19 that's driving e-commerce will drive the use of industrial space, and that will be an opportunity.

Multifamily

We think multifamily will continue to grow around the world. We develop it. We finance it. We sell it. And we've got this new business in the U.K. that while in the short run, is under pressure, Telford, because of what's going on, there's going to be a real secular push for institutionally managed multifamily there.

Office

Office space is going to be a little confusing. In the short run, there's going to be a lot of discovery about working from home versus working in offices. Our best guess is that there'll be more working from home and less dense use of office, lots of services provided to get to that state of affairs.
one of the big concerns about that was that occupiers were going to be able to use 65%, 70%, 75% of the space that they had previously occupied. That, in fact, happened. But it also created for ourselves and our competitors, one of the biggest opportunities we've seen in years as there was a lot of opportunity to do new leasing, reconfigure space, etc.

Conclusion

We added CBRE to our portfolio as the price has increased over the past few weeks. In fact it is currently our largest holding.

We also have exposure to the real estate sector indirectly through our investment in Pershing Square Holdings, Ltd. (PSH.AS) which has significant holdings in Hilton $HLT and Howard Hughes $HHC.

Not investment advice

As usual, this is not investment advice. Do your own research. Consult your professional advisors.