With age comes wisdom, so the adage goes, and that’s certainly true for Coldwell Banker Richard Ellis, or as we know it, CBRE Group. The company dates back to 1906, but the CBRE entity only came into fruition in 1989. Today, the commercial real estate and investments firm has 500 offices sprawled across more than 100 countries and has been featured in the Fortune 500 every year since 2008 (currently situated at number 122). As of Christmas Eve, CBRE can boast a market cap of $35.41 billion. But as we know, “old” does not always mean “successful” (as the 129-year-old retail fossil Sears has shown us). In learning from its long history, particularly Sears’ cautionary tale that it witnessed firsthand, CBRE was able to implement a workplace initiative that helped carry it through as the pandemic brought the world to its knees.
The company had some interesting chapters over the years that highlighted its ability to pivot and keep a competitive edge. It started in the aftermath of the San Francisco earthquake in 1906 (one of the deadliest earthquakes to ever hit the U.S.). It was then that CBRE, then known as Coldwell Banker, came into the fray. A few interesting chapters followed, from a failed venture in a rice farm during World War I, having to accept barter instead of money during the Great Depression, to helping the federal government locate production facilities during World War II, to a spending spree of acquisitions in the 1970s. However, in 1981, it was Sears Roebuck and Co. who acquired Coldwell Banker.
In what can only be described as a manic episode, Sears shelled out 80 percent over the asking price of Coldwell Banker to expand its portfolio in an attempt to offset Sears’ dwindling retail sales. For a while, the strategy worked. In 1987, the Los Angeles Times wistfully reported that “by the Spring of 1983, the empire of Sears, Roebuck was finally mending.” But even though Sears’ financial services sector provided 90 percent of Sears’ total earnings at that time, Sears’ shareholders didn’t seem to comprehend that fact. In a perfect case study of business failure, Sears decided to shed its financial services sector and return to its retail roots. Sears sold off Coldwell Banker, and Coldwell Banker pieced themselves back together. In 1998, Coldwell Banker acquired the holdings of REI Ltd. to become CB Richard Ellis Holdings Inc., or CBRE.
Like Sears, CBRE has a long history. Unlike Sears, CBRE paid better attention to the value its portfolio could render. In doing the exact opposite of what Sears chose to do, CBRE aggressively diversified its portfolio. In the last few years alone, CBRE snatched up Noveen Consulting, a healthcare project management services provider, NEF, a provider of IT service solutions, and, interestingly enough, Union Gaming, a gaming industry investment bank. As of today, that strategy appears to be paying off. “The benefits of our diversification strategy,” said CBRE’s president and chief executive officer Bob Sulentic in October 2021, “were clearly evident in the third quarter with both earnings per share 70 percent or more above the third-quarter 2019 peak.” Considering that these branches are more stable businesses with recurring income streams that generally work on multi-year contracts, it makes sense that CBRE could generate a positive cash flow while the markets were on pause.
But going back almost a decade ago, CBRE noticed that a large portion of their portfolio “was turning over in a relatively short period of time,” said Emily Neff, Southeast Region Lead for the Workplace practice at CBRE. “As we took a closer look at those offices, we realized most of them weren’t being very well utilized. Knowing that we were at lower utilization, we started a research initiative among our employees.” CBRE surveyed the employees at these locations and used their findings to rethink the workplace experience altogether. The result? A complete redesign of how their offices functioned.
Following their employee feedback, it became apparent that their productivity was hindered by tasks like assigned seating and cumbersome undertakings that could be achieved wirelessly. Employees wanted choice and ease, and CBRE wanted to optimize employee productivity. So, CBRE experimented with a “free address” office layout. CBRE employees were no longer tethered to an assigned desk and were instead given laptops and free reign. They could book a conference room for a meeting or a focus room at their own discretion. Offices limited touchpoints by going paperless, so employees had wireless printing capabilities and phone line extensions on their smartphones. If these trends sound familiar, it’s because most businesses had to follow suit after the pandemic completely upended the traditional office layout. By shrewdly watching their portfolio, CBRE built the perfect model for adapting to hybrid work.
By 2017, they formalized the program they call Workplace 360. At that time, 50 of their offices had deployed the redesign. In 2019, CBRE launched “CBRE 360,” a workplace app that bridged the “free address” office layout with smart building technology. The app enabled office workers to locate their colleagues, reserve workspaces, and access building and concierge services. Since then, their workplace services branch has ballooned. According to their 2019 financial report, in the fourth quarter of 2019, their Global Workplace Solutions (GWS) segment showed rapid growth in an expanding market. “Occupier demand for multiple services remained robust,” the report said, “with new contracts encompassing the full suite of GWS services accounting for 40 percent of the new business.” The success of this workplace advent all came just in time for when the virus would rear its ugly head.
COVID-19 demanded that organizations restructure their offices, not just to limit occupancy rates and keep employees six feet apart, but also to make the office functional for a foreseeable future of hybrid work. Because CBRE had designed their office services with employee flexibility in mind, suffice to say that this was an earthquake they were prepared for. Lewis C. Horne, President for Advisory Services for CBRE’s Greater Los Angeles, Orange County, and Inland Empire region, wrote an aptly-titled statement called “The New Hybrid Office? You’re Already in it.” Hor admitted that CBRE “didn’t consider the implications of a global pandemic–but as it turns out, the free-address, flexible-work approach that underpins Workplace360 is proving to be an ideal format for accommodating the increase in hybrid work accelerated by COVID and its variants.”
CBRE has become the largest commercial brokerage and property manager thanks to a number of fortunate events. But good fortune doesn’t come from a stroke of luck, rather it comes when preparedness meets opportunity. For a company that has had since 1906 to prepare for the changes we are seeing today, it’s no wonder that it’s a global leader.