CBRE’s surprise move is clever and prescient

COMMENT: It’s not often these days that something truly takes you by surprise. Not since we (or 48% of us at least) got the shock that was the EU referendum vote then a reality TV star businessman billionaire became the president of the United States has any news been that surprising. Clearly this is not as big as either of those things when it comes to global news, but I know I am not the only one who did a double-take when they saw the news that CBRE had made an offer to buy AIM-listed Telford Homes. CBRE, the world’s biggest property agent, was buying a housebuilder. What? I wondered, for a second, if there was another CBRE. It is a fascinating move. Investing in a burgeoning sector – build-to-rent – is not in itself fascinating. As CBRE president and chief executive Bob Sulentic quite rightly points out: “The UK is in the early stages of a secular shift toward institutionally owned urban rental housing, similar to what we have seen in the US over the past two decades.” Investing in BTR makes sense. Billions of pounds has been invested in it in the UK since it became an asset class. But a property consultant, buying a housebuilder? Now that is interesting. And while I’m told that the £267.4m that the CBRE offer effectively values Telford at might be a little high given its financing structure, Telford is small enough for a $21.3bn company to digest if things don’t quite pan out. But CBRE is cleverer than that. It has seen that the world in which it operates is changing, that it can no longer rely on being the “world’s biggest property consultant”, and that it needs to change the game. And change it completely. First it moved into facilities management, or global workspace solutions. Smaller but more regular fees. And a perfect jumping-off point to up-sell a host of its other more traditional services. Then it started to build and buy technologies, becoming a provider of data and digital solutions, another up-sell opportunity. Smart. Then came Hana, a flexible workspace solution, and now BTR. Has the big green giant become the ultimate multi-discipline real estate business? What does this mean for its agent competitors and soon to be BTR rivals? Is it loss of business for all of Telford’s current advisers? “No, no, no,” went the phone calls this week, “it’s business as usual.” Hmmmm. For now. Surely, ultimately, this full service solution that CBRE will have will mean it has the expertise to find land, buy it, get planning, design schemes, build them, sell them, run them, sell them again on the secondhand market and so on and on and on and on. And this move is not just a shot across the bows of CBRE’s rivals but, with tech giants such as Amazon and Google increasingly showing a more than occupational interest in real estate, this looks like a pre-emptive strike against new entrants too. And while Telford may be small today, as part of CBRE’s development business Trammell Crow it is doubtful it will stay that way. In the US, Trammell Crow has built more than 275,000 rental homes and has more than 40 years of practice. And with CBRE Global Investors there’s a funding source there too. Clever. CBRE is no longer an intermediary in a world of disintermediation. It is moving from middleman to principal. It may be the first of the agents to announce such a surprising move, but I doubt it will be the last. The real estate business is changing dramatically and those that don’t change along with it will be left behind. To send feedback, e-mail samantha.mcclary@egi.co.uk or tweet @samanthamcclary or @estatesgazette