Does CBRE Group (CBRE) Present Compelling Return Potential in the Future?

Baron Funds, an investment management company, released its “Baron Real Estate Fund” fourth quarter 2023 investor letter. A copy of the same can be downloaded here. The fund had a strong performance in 2023 and generated a gain of 25.04% (Institutional Shares). This is more than double the MSCI US REIT Index (the REIT Index), which rose 12.27% and also outperformed the MSCI USA IMI Extended Real Estate Index’s 23.09% return. In addition, please check the fund’s top five holdings to know its best picks in 2023.

Baron Real Estate Fund featured stocks such as CBRE Group, Inc. (NYSE:CBRE) in the fourth quarter 2023 investor letter. Headquartered in Dallas, Texas, CBRE Group, Inc. (NYSE:CBRE) is a commercial real estate service and investment company. On January 22, 2024, CBRE Group, Inc. (NYSE:CBRE) stock closed at $87.41 per share. One-month return of CBRE Group, Inc. (NYSE:CBRE) was -5.61%, and its shares gained 5.06% of their value over the last 52 weeks. CBRE Group, Inc. (NYSE:CBRE) has a market capitalization of $26.642 billion.

Baron Real Estate Fund stated the following regarding CBRE Group, Inc. (NYSE:CBRE) in its fourth quarter 2023 investor letter:

“Our other real estate-related opportunities category includes three investment themes and various companies that do not fit neatly in our traditional REIT, residential-related real estate, and travel-related real estate categories. They currently include three investment themes: Commercial real estate services companies Examples: CBRE Group, Inc. (NYSE:CBRE) and Jones Lang LaSalle Incorporated.

We remain bullish on the long-term growth opportunity for the commercial real estate brokerage category because of structural and secular tailwinds that should benefit leading global companies such as CBRE and Jones Lang LaSalle.

Tailwinds include: • The outsourcing of commercial real estate: A growing number of companies are increasingly looking to outsource their commercial real estate needs. CBRE estimates that the overall facilities management market will be $1.9 trillion in 2024, representing a massive growth opportunity for large global commercial real estate services companies. • The institutionalization of commercial real estate: Institutional allocations to real estate continue to increase, in part due to real estate’s diversification, inflation protection, and stable long-term growth attributes. • Opportunities to increase market share: The commercial real estate industry remains highly fragmented and is likely to continue to consolidate. Customers tend to prefer commercial real estate companies that can provide a broad set of services. We believe CBRE and Jones Lang LaSalle are best positioned to drive market share gains given that they are the clear #1 and #2 commercial real estate services firms, respectively, and they have the capability to provide the full array of real estate offerings on a global scale.

CBRE and Jones Lang LaSalle have scale, product breadth, and leadership positions across their diversified real estate business segments. They continue to gain market share and are well positioned to capitalize on ample attractive acquisition opportunities in the years ahead given strong and liquid balance sheets. Though growth in certain segments of their businesses has slowed and is likely to remain under pressure in the months ahead due to the global economic slowdown, higher interest rates, and the likelihood of more restrictive bank lending, we believe both are attractively valued and present compelling return potential over the next few years.”

A real estate broker viewing a commercial property as part of a loan consultation.

CBRE Group, Inc. (NYSE:CBRE) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 40 hedge fund portfolios held CBRE Group, Inc. (NYSE:CBRE)at the end of third quarter which was 48 in the previous quarter.

We discussed CBRE Group, Inc. (NYSE:CBRE) in another article and shared Vulcan Value Partners’ views on the company. In addition, please check out our hedge fund investor letters Q4 2023 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.