So, we believe over time we’ll evolve to a place where we will do more work and invest more in infrastructure, but real estate is our core business for the time being.
Operator: Thank you. Next question today is coming from Stephen Sheldon from William Blair. Your line is now live.
Stephen Sheldon: Hey, thank you. Really nice job here and congrats on the J&J deal. With J&J likely to close here in the coming months, I just wanted to ask kind of what your appetite is for pursuing other large acquisitions? I know you guys are kind of looking at least a few larger deals. So, just curious if you have any commentary on what your appetite is if you’re still pursuing or looking at some larger acquisitions.
Bob Sulentic: M&A work is a fundamental foundational element of what CBRE is about. We are committed across all of our lines of business to be a grower. We have built within our market-facing businesses capability to identify M&A opportunities in all of our businesses. We clearly have some places we’re more interested in at any given point in time typically because they’re secularly favored because we have more of a right to win but it is fundamental and if you look across our business, our people are in the market identifying opportunities at all times. We have built up our M&A capability in the center our corporate development capability to the point where we think it’s quite unique within our sector and is relatively strong against the broader base of companies out there outside our sectors — are outside our sector.
We have a strong balance sheet and willingness to use that balance sheet to do M&A. So, you should expect us to continue to build the business through M&A. We aren’t going to do deals that we aren’t — that we don’t think are smart either financially or because they’re hard to integrate or too hard to integrate. And it wasn’t hard to watch us in the past year and say that maybe listening from quarter-to-quarter there was more going on than you were seeing where you saw the J&J deal at the end. There will be other things but we won’t force M&A. We’ll do M&A where we think we can grow our business the way we want to grow it into areas with secular tailwind, in the areas where we have the right to win and as Emma has said, it will likely be over the long-term our number one use of capital.
Stephen Sheldon: Got it. Thanks. And then just in capital markets just kind of just as we think about the last few months how did activity progress through the fourth quarter into early January. I’m just curious whether you’ve seen fits and starts of activity based upon what’s happening with interest rates? And just generally, how dependent do you think any capital is improvement in 2024 and I guess into 2025 will be on the overall trend in interest rates?
Emma Giamartino: So, let’s start with what we’ve been seeing over the past through 2023 and through the end of the year. And we did see a significant deceleration in the decline, especially getting into Q4. So, through the third quarter, you’re looking at 40% decline up to that point. And then in the fourth quarter, we were down to below 20% decline. And what was notable about Q4 was that we actually saw a significant deceleration in December. So October, November had greater declines than December, which was in the single-digit decline in territory. So pulling that into 2024, we are not expecting a material uplift in capital markets activity, but we do expect it to grow at a mid single-digit rate globally. If the recovery picks up faster than we’re expecting if rates come down further than the market is expecting then there could be upside from there. But our base case scenario is that there won’t be a significant uplift.
Stephen Sheldon: Great. Thank you.
Operator: Thank you. Your next question is coming from Michael Griffin from Citi. Your line is now live.
Michael Griffin: Great. Thanks. Just maybe going back to the guidance for a minute, and I appreciate you guys including it this year. I’m just curious if you can quantify give us a sense of if there are any cost savings initiatives factored into your outlook? I want to get a sense of how much of this growth is organic versus cost cutting?
Emma Giamartino: So there are cost savings embedded in our outlook, and where you will see the majority of it is within our advisory business, which I talked about earlier about 100 basis points of margin expansion in advisory. We talked about $150 million of run rate cost savings in — on our Q3 call that we’re going to go after this year. We have identified opportunities to reduce $150 million of run rate cost. You’ll see about half of that in year and most of that will be in the advisory segment. A piece to note about that is those cost savings are largely offsetting our bonuses resetting and our discretionary compensation in our profit shares resetting to levels that are in line with our positive financial performance for the year, but it isn’t embedded in numbers that you’re seeing.
Michael Griffin: Got you. That’s helpful. Then maybe on the REI segment. I was curious, if you could give us some insights into how development costs have been trending and where return hurdles and IRR is currently in the space what would get you more interested in starting projects?
Bob Sulentic: Well, I’m going to start with cost. That is starting to come under control. We had challenges, everybody that was a developer in the United States and around the world had challenges with cost the last few years. Now that was all typically rescued by accelerating rental rates and declining cap rates, and we think all of that has stabilized. Cap rates have gone up. Rental rate growth has slowed, but cost growth has also come under control. So that’s all come back into balance. We are underwriting projects now at spreads between current cap rates and yields on projects that should deliver profitability consistent with what has been delivered in that business historically. And I mentioned this earlier and I’ll mention it again within that business over the last year we’ve secured good volume of development sites, not at steel prices but what’s happened is sites that were otherwise not available have become available.
