CBRE on tariff turmoil: “Uncertainty, choppiness and a risk of recession”

Market volatility caused by US President Donald Trump’s tariff strategies is already leading to a slowdown in capital raising and companies pausing large projects, said CBRE’s chief executive. On an earnings call to discuss the agency’s first-quarter results, Bob Sulentic referred repeatedly to the “choppy” markets the firm now faces, although he said “things didn’t go from good to bad – things went from really good to not as good”. “We ended the quarter with strong pipelines,” Sulentic added. “And as we’ve gone through the latter part of April, we’ve seen really good activity, but we have seen some implications of what’s going on with the tariffs.” Those include a slowdown in capital raising, he said, as well as companies pressing pause on big projects including infrastructure deals, where the agency saw business go from “a really enthusiastic picture to one where there’s some choppiness out there”. The agency maintained its guidance for the year. “Absent tariff uncertainty… given the strong performance in Q1, given the momentum we’re seeing in Q2, we would have likely increased our guidance from the range that we set at the beginning of the year,” Chief financial officer Emma Giamartino said. “Now we would end up in the high end of our range if we simply flowed through our Q1 outperformance. The midpoint of our range would mean something like leasing and capital markets slows down in the back half of the year. And on a downside, it would mean that those transactional revenue slows down even more, but we’re likely not in a recession.” A recession cannot be ruled out, but the degree of uncertainty around the outlook is high. “The big banks have reported and they’ve given their view on [how tariffs will play out and the likelihood of recession],” Sulentic said. “And they spend a whole lot more money to try to figure out that kind of stuff than we do. 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 a higher risk of people being on the sidelines because they just don’t want to act in uncertain times… We just don’t have insight beyond that. It all assumes a lot of uncertainty, a lot of choppiness and a risk of recession that we didn’t have before.” Giamartino said the agency is “significantly more resilient than we were even a few years ago, definitely more resilient than we were coming out of the GFC”.] “Today, if you were to put our business through the same type of a recession that we saw in the GFC, our declines would be materially lower,” she said. “[In the] GFC our declines were 85% peak to trough. Now it would be less than half of that.” And the agency’s top team is eyeing opportunities even – perhaps especially – in a tough market, not least on the dealmaking front. Sulentic said “choppiness builds momentum for us and the M&A work we’re doing”. “We would expect the approach we take to M&A to play out nicely in a difficult market,” he added. “I’ve been around now for multiple downturns and we always talk about, oh, gee, when things get tough, we’ll take advantage of it. And we do to varying degrees, I don’t think we’ve ever been as well positioned to take advantage of a downturn as we are now because of our balance sheet in part, but also because of the success we’ve had with the kinds of companies that we’re interested in acquiring and are interested in being acquired by us.”