Cushman & Wakefield Ltd (CWK) 2021 Q3 法說會逐字稿

Welcome to Cushman & Wakefield's Third Quarter 2021 Earnings Conference Call. (Operator Instructions)

It is now my pleasure to introduce Len Texter, Head of Investor Relations and Global Controller for Cushman & Wakefield. Mr. Texter, you may begin the conference.

Thank you, and welcome again to Cushman & Wakefield's Third Quarter 2021 Earnings Conference Call. Earlier today, we issued a press release announcing our financial results for the period. This release, along with today's presentation, can be found on our Investor Relations website at ir.cushmanwakefield.com.

Please turn to the page labeled forward-looking statements. Today's presentation contains forward-looking statements based on current forecasts and estimates of future events. These statements should be considered estimates only, and actual results may differ materially. During today's call, we will refer to non-GAAP financial measures as outlined by SEC guidelines. Reconciliations of GAAP to non-GAAP financial measures, definition of non-GAAP financial measures and other related information are found within the financial tables of our earnings release and appendix of today's presentation. Also, please note that throughout the presentation, comparison and growth rates are to comparable periods of 2020 and are in local currency. For those of you following along with our presentation, we will begin on Slide 4.

And with that, I'd like to turn the call over to our Executive Chairman and CEO, Brett White. Brett?

Thank you, Len, and thank you to everyone joining us today. Before we speak to the quarter, we have invited John Forrester, our current President and incoming CEO as of January 1, to join us on the call today to provide some comments on our operations and performance for the quarter. Following John's comments, Neil will provide additional detail on our financial results for the quarter.

I'd like to once again thank our incredibly talented team of Cushman & Wakefield professionals around the globe. We are proud of the hard work you perform every day to help our clients, and we are thrilled to see those efforts come through in another quarter of very strong results. First half momentum continued in the third quarter with consolidated fee revenue of $1.7 billion, improving 27% compared to prior year. Third quarter brokerage revenue, including our leasing and capital markets businesses, was up 64% compared to a year ago and up 10% versus 2019 pre-COVID levels. We continue to observe a sustainable recovery in capital markets and non-office leasing. As expected, office leasing continues to lag other sectors, but we are continuing to see green shoots emerge each quarter, which I will touch on shortly.

Additionally, our recurring revenue streams in our PM/FM service lines continued to perform well with fee revenue growth of 5% for the quarter, and valuation and other growth of 11% year-over-year. In the third quarter, we reported $219 million of adjusted EBITDA, which represents an adjusted EBITDA margin of 12.9%. This improvement of adjusted EBITDA, up 85% and margin expansion of 405 basis points year-over-year reflects the impact of stronger brokerage activity and savings generated from cost reduction actions. On a year-to-date basis, comparing our results to 2019 as a baseline, the business is well ahead of 2019 levels as margins of more than 190 basis points higher year-to-date. It's a tremendous accomplishment given the environment, but ultimately, this has been and continues to be our goal. There is significant operating leverage inherent in our model as we have experienced throughout the year.

This quarter, we announced strategic partnerships with 2 industry leaders as we continue to build out our platform and service offerings for clients. First, we entered into an agreement to acquire a 40% stake in Greystone's Agency, FHA and Servicing businesses, which will fully round out our service offering to investors in the U.S. multifamily sector. Greystone is a top multifamily lender, including Fannie Mae, Freddie Mac and HUD, giving our client base more direct access to a broad range of debt products for property acquisition, refinancing and rehabilitation or new construction. We are very excited about this partnership and expect it will be immediately accretive to our operating results upon closing later this year. Neil will touch on some of the other specifics of the transaction a bit later.

Second, we have formed an exclusive strategic partnership with WeWork. Let me begin with the strategic rationale for the partnership. For years now, WeWork has been seen as an innovator in our industry for 2 very good reasons. First, they have demonstrated an ability to create an experience that tenants are drawn to from office programming to amenities to workplace design. And secondly, they've been a pioneer in using technology to efficiently manage that experience and the office space around it. Cushman & Wakefield has a deep history of operating buildings for the world's largest landlords and owners. And in solutioning and executing large-scaled facilities management outsourcing strategies on behalf of Fortune 500 occupiers. Through this partnership, we will help scale WeWorks' tenant experience platform from beyond just their branded centers into the rest of the office market, starting with our clients.

While, it's only been a few weeks since announcing this partnership, we've already had a strong positive reaction from our clients as managing employees' in-office experience is a top priority right now. John will share more details on how we expect this new offering will help differentiate Cushman & Wakefield with both investor and occupy our clients.

We are confident partnering with industry-leading firms like Greystone and WeWork will continue to strengthen and differentiate Cushman & Wakefield as one of the premier commercial real estate platforms for both occupiers and investors. Before providing some market commentary, I'd like to make a few comments about the pandemic. The situation remains fluid, and although the world is making progress towards herd resiliency, the pandemic continues to disrupt economic activity in certain parts of the world. Despite the ongoing challenges presented by the pandemic, the commercial real estate sector has proven extremely resilient to nearly every obstacle thrown its way as evidenced by the strong performing property sectors. The trends we experienced in the first half have continued their momentum into the third quarter with substantial growth in industrial, data centers, multifamily and life sciences assets.

In the third quarter, the U.S. industrial sector absorbed 141 million square feet of space, an all-time record high. Year-to-date, the sector has absorbed 366 million square feet of space, which is already higher than the previous peak in 2018. The U.S. capital market sector is also booming. According to Real Capital Analytics, third quarter property sales transactions registered at $193 billion, which is an all-time high. Year-to-date, sales volumes totaled $462 billion, which again is a record-setting pace. This surge in activity is being driven by different property types relative to past boom cycles. However, it is notable that investors are beginning to warm up to the office sector recovery as well. In the third quarter, office sale volume increased by nearly 140% relative to a year ago and office cap rates tightened by 30 basis points.

In terms of office leasing, as we have said before, this sector faces a prolonged recovery relative to other asset classes. Moreover, Delta clearly pushed back some of the return to the office for some employees. That being said, green shoots continue to emerge each quarter, supporting our thesis that the office sector will fully recover from this event. Gross leasing activity is picking up in virtually every market we track. Tour activity remains extremely robust. And as I've said on past calls, that is a great leading indicator for future leasing, and we are observing businesses returning to signing longer term leases. In fact, nearly 75% of leases signed during the third quarter have been for more than 5 years, which is consistent with the pre-pandemic norms.

Finally, there is perhaps no single factor more important for office leasing than job creation, and that has been absolutely spectacular in this recovery cycle. The U.S. cut 2.9 million office jobs last spring, and through August 2021, 2.3 million of those jobs have already been recovered. At the current pace, we estimate the U.S. will return to pre-pandemic peak levels of office employment by mid-2022, a little more than 2 years to full recovery. As a comparison, it took 6 years to fully recover from the great financial crisis. Amidst a fluid environment and ever-changing requirements, a few things continue to be apparent. First, a recovery in office is inevitable based upon the behaviors we are seeing; and second, companies require high-quality service providers like Cushman & Wakefield now more than ever to help them navigate and develop their workplace strategies.

Before I turn the call over to our incoming CEO, John Forrester, for a few remarks, I'd like to quickly welcome our newest member of the Board of Directors, Angela Sun. Angela is an accomplished executive who will add a unique perspective to our Board, given her diverse range of experiences across numerous sectors, including data and technology, financial services, government and healthcare. We are thrilled to have her on the Board.

With that, I'd like to go ahead and hand the call over to John.

Thank you, Brett. I'm thrilled to be on the call today as our leadership transition approach is at the beginning of 2022. I'm pleased to report that the execution of our strategic realignment and multiyear transformation to become a leaner, more efficient and agile organization is well on track. The actions taken across the entire platform have been material and impactful, allowing us to better serve our clients, drive significant operating leverage and enhance our ability to generate cash to reinvest back into the business.

We're on track to achieve $125 million of permanent savings this year and $250 million permanent savings in total over the past 2 years. This focus on operational excellence and continued tight management of cost is driving performance improvement and meaningful margin expansion, which, as you heard from Brett, now materially exceeds 2019 levels through the first 9 months of the year. Today, we are well-positioned to drive shareholder value through our scale, significant operating leverage, our strong liquidity position and cash flow generation. We have continued to execute a disciplined capital deployment framework, highlighted by the recently announced investments in Greystone and WeWork, both strategic in growing high-value market penetration. These partnerships will continue to strengthen and further differentiate our service offering.

Going a little deeper into the WeWork partnership, we are now able to provide clients with expanded best-in-class office operations through the combination of WeWork's proprietary hospitality and technology-enabled services together with Cushman & Wakefield's industry-leading asset and facilities management services. As Brett mentioned, in the time since the announcement, both firms have reported a positive reception from major institutional real estate owners and Fortune 500 occupiers, leading to early opportunities for pilot programs.

As an example of the real estate investor opportunity, one of the largest institutional investors in the U.S. historically used Cushman & Wakefield to perform asset services on a portion of their portfolio, along with a mix of third-party flex space operators, many of whom have struggled through the pandemic. Today, this client is planning the consolidation of their service providers through the proposition of one seamless asset services and flex space solution. This, of course, is a highly replicable and scalable model.

Turning to the occupier opportunity. At the very top of every corporate priority list today is managing the employee experience as workers return to the office. Whilst Cushman & Wakefield has been a leader in serving the technology sector for many years, we are now seeing increased interest from other industries such as manufacturing and financial services as a result of our WeWork partnership, particularly where facilities management is seen as a critical link in the employee experience relationship.

Finally, ESG is fast becoming a fundamental consideration in every real estate decision. Preliminary analysis highlights the growing focus on ESG in investor choice as demonstrated by a 17% increase in ESG commitments from closed private capital funds in 2020. ESG assets now performing 19.3% higher in terms of average market sale price compared to the non-ESG buildings and those more environmentally sound assets, now consistently achieving higher rents when compared to the non-ESG counterparts. Cushman & Wakefield intends to lead our industry in this area as demonstrated by our science-based targets and net-zero commitments announced in September.

We are taking bold actions that will materially reduce our own environmental impact and also that of our clients. Our 3 sustainability targets include reducing absolute greenhouse emissions by 50% by 2030, engaging with our clients to set science-based targets by 2025 and achieving net-zero across our entire value chain by 2050. The response to the commitments we have made from our clients, investors and colleagues has been incredibly positive, and we are excited about the lasting impact this important work will have on our communities and the environment.

Before I hand over the call to Neil to take us through the financial performance for the third quarter, I'd like to echo Brett's sentiments on our team here at Cushman & Wakefield. Thank you all for your commitment and hard work. I'm proud of our singular client focus and the progress we have made as a company through relentless execution throughout this year. Our expertise, market intelligence and thought leadership continue to be at the center of delivering exceptional outcomes for our clients every single day.

With that, I'd now like to turn the call over to Neil to discuss our financial performance. Neil?

Thank you, John, and good afternoon, everyone. We are very pleased with our financial results this quarter. We had strong revenue growth driven by the recovery in brokerage and significant margin expansion due to our operating efficiency initiatives. In addition, our strong balance sheet allowed us to make key strategic investments this quarter. Fee revenue for the third quarter of $1.7 billion was up 27%, and adjusted EBITDA of $219 million was up $102 million as compared to 2020. Our adjusted EBITDA margin of 12.9% increased by more than 400 basis points compared to a year ago. This increase was driven by strong brokerage revenue growth of 64%, continued focus on execution of efficiency initiatives and disciplined cost management. Additionally, operating cash flow of $250 million year-to-date was driven by strong earnings and efficient management of working capital. Adjusted earnings per share for the quarter was $0.48, an increase of $0.32 over prior year.

Taking a look at our fee revenue by service line for the quarter. Leasing and capital markets revenue increased 41% and 111%, respectively. In capital markets, the environment remains favorable for capital investment as momentum has continued since the end of 2020, particularly in the Americas. Brokerage revenue exceeded pre-COVID levels by 10% when compared to third quarter of 2019. Our non-office leasing sectors continue to demonstrate resiliency amidst disruptions from Delta, most notably within the industrial sector, where we are seeing record levels of absorption. In office leasing, the trends of the recovery remained constant with a mid-to-end of 2022 recovery. And as we have indicated for several quarters now, we are confident in that recovery given the following observations: increases in gross leasing activity, robust tour activity and execution of longer-term leases that are consistent with pre-pandemic norms.

PM/FM and valuation and other service lines were up 5% and 11%, respectively, for the quarter. These businesses have proven to be incredibly resilient during the downturn and have continued to perform well and grew strongly over the past year. Within PM/FM, facilities services represents just under half of the fee revenue and generate solid cash flow and a stable revenue stream. Facility services was up mid-single digits in the third quarter, reflecting continued demand for COVID-related cleaning services, principally in the Americas.

Turning to our financial results by segment. Revenue in the Americas was up 33%, driven by leasing and capital markets growth of 45% and 116%, respectively. This equates to 12% growth in brokerage versus 2019 pre-COVID levels. Adjusted EBITDA of $161 million was up almost $80 million in the Americas segment, which is principally driven by stronger brokerage activity, coupled with continued execution of cost savings initiatives. EMEA and APAC both grew revenues 13% versus prior year, driven by brokerage up 39% and 50%, respectively. In EMEA, adjusted EBITDA of $29 million was up $17 million versus prior year, while APAC adjusted EBITDA of $30 million was up $6 million.

Our financial position remains strong. We ended the third quarter with $2.2 billion of liquidity, consisting of cash of hand of $1.2 billion and availability on our revolving credit facility of $1 billion. We had no outstanding borrowings on our revolver. Net leverage was 2.8x on a trailing 12-month basis at the end of the third quarter, down from the 4.3x we reported at the end of 2020 and down from the 3.4x reported at the end of the second quarter. We are well-positioned to continue to fund operations and invest in future accretive info M&A and broker onboarding opportunities.

As you've heard, we've announced a strategic joint venture with Greystone, which will combine 2 industry leaders with capital markets and lending capabilities in the multifamily space. The company will contribute $500 million or a 40% stake in the joint venture upon closing later this year. We expect the joint venture to be accretive on both an adjusted EPS and adjusted EBITDA contribution basis with a contribution to EBITDA that equates to a 6 to 8x EBITDA multiple based on historical performance. The investment will be accounted for as an equity method investment in our financial statements, which will reflect the impact of all revenue streams, including origination fees, MSR gains and servicing.

As we finish up the year, we see a continuation of the strong trends that we've seen all year. These trends, combined with our strong performance in the third quarter, result in us raising our expectation for both fourth quarter and the full year. For the full year, we now expect total consolidated revenue growth in the range of 18% to 20% year-over-year with brokerage revenue growth of more than 35% versus prior year. Our non-brokerage service lines are anticipated to grow in the mid-single digits. As a result of the revenue growth and our performance on driving operating efficiencies, we now anticipate adjusted EBITDA for the full year to be in the range of $800 million. This level of performance for the full year meaningfully surpasses pre-COVID levels of 2019 and represents more than 100 basis points of margin expansion. This is consistent with what we've been saying that assuming similar levels of brokerage activity as 2019, the impact of efficiency initiatives on our cost profile will drive a meaningful improvement in our margins.

With that, I'll turn the call back to the operator for the Q&A portion of today's call.

(Operator Instructions) Our first question is from Anthony Paolone with JPMorgan.

Great. Appreciate the color and the margin context and the numbers that are shaking out there. I was wondering, maybe if you could help with us thinking about where that goes over time and what headwinds may exist to think about as we start thinking through 2022? Just seems like you're -- you've shaken out pretty high here in terms of what the second and third quarter and even implicit in what the fourth quarter number might be?

Anthony, are you referring specifically to margin?

Yes.

Okay. Let me take a quick shot and then, hand it to Neil. So the first thing I would say is a little history lesson, which is 5 years ago, when we put the business together, we talked aspirationally with the time we were trading about 7.5%, 8% EBITDA margin. We talked aspirationally. Someday, trying to get the business to something in the mid-11 range, maybe high 11 range. And so where we sit today, I would tell you, is far exceeded that aspiration. We feel that the margins that we're producing now are really very, very strong margins for business of this mix and this sort, and really pleased with where we've taken those over the past few years and specifically this year. But in terms of forecasting margin, I'll hand that to our CFO.

Yes. Tony, as Brett said, exceptionally pleased with where margins have gone this year. We are not going to provide any guidance right now for 2022. What I will say is we do expect continued margin expansion. We'll get both organic margin expansion and inorganic from the acquisition of Greystone.

Okay. Great. That's helpful. And then second item, just in terms of capital markets and how strong they've been in the U.S., any thoughts on how much activity maybe just got bunched up or pulled forward as, again, you start to think about what next year might look like and just the sustainability about -- the sustainability of this clip of activity?

Sure. I think the easy answer would be this, which is we saw a rapid uptick in capital markets transaction activity fourth quarter last year. So I think what we saw fourth quarter last year and probably first quarter of this year, maybe a little bit in the second quarter was some of that pent-up demand from 2020. But at this point, late in 2021, it would be hard to imagine that what we're seeing today is structurally demand from over a year ago. It's just unlikely. I think what you are seeing is really a result of the same story we've seen in the last 5 or 6 years, which is we're in a very, very low interest rate environment, very, very low yield environment and commercial real estate provides a terrific investment opportunity in asset class for investors searching for yield. So we don't see anything in the -- to answer this, we don't see anything in the capital markets right now that would pretend a rapid slowdown in activity, but we see our improving fundamentals and dynamics support a growing business.

Okay. And then just last one, if I could sneak in. Just you talked about the liquidity remaining quite strong. Can you talk about if there's much appetite in using liquidity for your own stock or potentially using it as it relates to sponsor shares?

Yes, Tony. Now, we look constantly at all ways in which to deploy capital. Certainly, buybacks are one of the areas that we do continue to look at, but we will evaluate that as we go forward and see whether that's the best way in which to deploy capital.

Our next question is from Stephen Sheldon with William Blair.

This is actually Patrick McIlwee on for Stephen, but yes, you mentioned that the Greystone JV should be immediately accretive to performance upon closing. And I just want to ask, do you expect that to ramp at all? Or do you expect the full run rate EBITDA contribution upon closing? And then kind of a second part to that, in an environment that's still somewhat remote, just would ask if you could talk a little bit about how you plan to effectively manage the integration of those operations with -- between Greystone and Cushman?

Sure. So first of all, the integration side. What's really nice about this particular venture is that neither firm had what the other has. And so the integration becomes very, very simple. There's no competition for space in the market, there's no competition for clients. In fact, it's quite the opposite. I had the pleasure this afternoon to meet with Stephen Rosenberg, here in New York, who runs the Greystone business, and he's been out on the road talking to our people the last 2 weeks. And his level of excitement, enthusiasm around what's possible here on revenue synergies was terrific to see firsthand. So the integration, this one, is going to be very simple, very easy. And it's really a situation of more than anything else, explaining to each firm's sales forces how to work with the other. But again, no competition for space, no competition for clients. The business we gave you, the multiple we paid on the business on historical profit, you should expect -- that multiple represents what we would bring to the business in the following year.

Okay. Okay. And then one more. On the facilities management side, how much -- if you could quantify or just kind of frame how much of an impact wage inflation has had on the growth side and/or the profit piece of the business? And if you could frame it all, how much of those contracts are cost price versus fixed price?

Don't have the latter data point at hand and perhaps Neil can get that to you folks later. But I would tell you that when it comes to wage inflation in the facility management business, most of those contracts have wages built into the contract. So we don't suffer profit diminution of wage inflation, generally speaking, in those contracts. So they are exceptions to that. I would answer the question in a different way, which is that business is a very strong grower for us at the moment. The profitability in that business in 2022 should be greater than it was in 2021. So all things taken together, share gains, growth of contracts, services we can sell-through to existing clients is covering whatever wage inflation is extending the business at the moment.

Our next question is from Rich Hill with Morgan Stanley.

On your earnings deck, you highlighted some strong leasing levels were driven by the non-office sectors. I was hoping you could give some insights into which sectors drove that strength? And then maybe any developments on the office leasing post quarter that you could provide some transparency on.

Sure. And by the way, welcome to the call. I think this is your first time with us.

I was going to say first time call or long time listener, but I wasn't sure if you're going to ask...

Wrong show. Okay. Well, first, on the leasing numbers. A couple of things really, really interesting and encouraging around leasing at the moment. We're seeing very good improvement in the leasing numbers in almost every major market in the world right now. There are a few exceptions, countries that probably don't move the needle very much. But there's no doubt that we are now beginning to see across the board improvement in the leasing fundamentals and actually in the leasing revenues that are coming through the business as compared to prior year.

Certainly, this year and much of last year was a story of industrial. So when you look across leasing revenues, and this is true both here in the United States but also in Europe and in Asia, industrial logistics is the big driver at the moment. That should be very good news for investors because historically, it's been office. And so what you're seeing here as leasing recovers and you're seeing here as these businesses recover, yes, that recovery being driven by those 2 groups that historically were not the biggest needle movers. And so that upside that we think about in coming years and coming quarters from office is yet to come. However, to your point or to your question, we're seeing many, many green shoots in the office leasing sector.

Specifically, I think, most importantly, 2 things. First, and you heard this in the prepared comments. First, lease terms have now gone back to traditional norms. So we're no longer in an environment where people are going out to the market and kicking the can down the road a year to wait and see what is going to happen. They're writing traditional lease terms, so 5, 7, 8, 10 years. The second thing that we're seeing, and we've seen this now for a couple of quarters is very, very strong tour activity. So that's the actual taking a tenant out into the marketplace and showing them buildings. Think of that, that's probably a 6 to 9 months, maybe a year, lagging indicator to leasing revenues. It takes that long for a tenant -- particularly a sizable tenant to start the tour process, find the space they want, negotiate a lease, get the lease signed and then we get our first payment. So we're -- so those green shoots matter, and they're very real. They're in the market, which leads us to believe, as Neil mentioned in his comments and I mentioned in mind, we're seeing good leasing recovery coming in '22 and '23.

Got it. And look, I want to ask some bigger picture questions here. Let me preface what I'm about to ask by saying we're pretty bullish on commercial real estate fundamentals right now. But with transaction volumes standing above pre-COVID levels, one of the questions that we get asked from some maybe more skeptical investors is, is this just a pull forward given tax code changes? What are you hearing -- what are you seeing, what are you hearing that would push back on that?

Well, first and foremost, I would say that with a lot of the institutional investors, you have investing entities that don't pay tax. So pitch your plans and so forth, it's -- that's irrelevant to them. The activity in the marketplace right now -- this is not -- what you saw in Q3 and what you saw in Q2, I don't believe, was a rush to the exit prior to a potential change in tax regime. And I'll go right back to the comments I made when Anthony asked a similar question, which is commercial real estate every year is a more transparent asset class. Every year, it's a bigger asset class. Every year, you have more and more large institutions allocating a higher percentage of their allocated capital into commercial real estate. All those are fairly structural fundamental dynamics that support investment in commercial real estate.

Now add into that the environment we've been in the last few years with low rates and low yield. All those things together, as I mentioned to Anthony earlier, create a real perfect storm where commercial -- high-quality commercial real estate assets are just very, very desirable to institutional investors. So maybe I can be wrong on this, but my guess is you're not seeing any material increase in our trading volumes or the market's trading volumes because of the impending tax policy. There's certainly some of the margin. But our biggest institutional investors, I really don't think this is a significant criteria for them on investing.

Yes. That's very helpful. And sorry for somewhat of a duplicate question. So just one quick other question. By our account, there's about $2.5 trillion of commercial real estate mortgages maturing over the next 5 years. Are you seeing any pull forward of refinancing of those loans just to lock in the low rates? I guess I'm ultimately asking, could that be an upside surprise to your earnings estimates?

Yes. Not much. I think, again, it's a massive asset class. You characterized it appropriately and accurately. I think people are refinancing when it's time to refinance, rates are very good right now. I don't -- look, whether we're at 1.65% or 2.1% interest rates, we're at historical lows. And I think when people are looking at commercial real estate assets and looking at refinancing or new financings, in that neighborhood, in that ZIP code, people are very happy with rates. So no, I don't think there's a lot of pull forward to try and capture 40 bps of rate benefit over the next couple of years.

Great. Congrats on a really nice quarter. I'm happy to be covering the stock.

Our next question is from Alex Kramm with UBS.

Just on the WeWork partnership, obviously, this is a, I guess, preferred partnership on the facilities management side, mostly. But just curious, I mean, you made an equity investment in them. To what degree can you become a preferred partner elsewhere, for example, being the preferred leasing agent or so forth? Just curious if there's any other discussions or any other extensions already?

Sure. Well, so first, let me give you some data points on the WeWork relationship. And by the way, before I do, I just want to mention that our global President, soon to be CEO, John Forrester, who's in London at the moment, just texted me with a very good data point on the last question. Keep in mind that the capital markets growth numbers we're seeing are global, not just U.S. And of course, U.S. is where the tax issue -- the tax question relates, but globally, there is no impending tax change. So John made a good point, which is keep in mind that this is just one geography that has that issue.

And so thank you, John, for that. On WeWork, let me just take you back a moment before I talk about FM and leasing. So the WeWork venture is very, very important to us. It's very strategic to us. And let me explain to you very clearly why. It is an exclusive venture between us and WeWork, where we are able to take the amazing technology and the amazing workplace experience tools that WeWork has developed over the many -- last few years. And we -- and we are the only firm that can take those tools in partnership with WeWork and deliver them to our largest corporate and institutional ownership customers. Now why does that matter? Today, our largest corporate outsourcing clients or what we call our GOS clients.

So these are multinationals with dozens, if not hundreds of locations around the world. Those folks bid out their work every 4 or 5 years. And the largest of those transactions are needle movers for us on profitability. They matter a lot. Those customers today, top of list for them and how they're going to decide who they're going to hire. 2 things they're looking at, among others, but are probably at the top of the list. First is, how do you help us get our employees back in the office? What is it that you know? What is it you can bring to us that is real knowledge and differentiated knowledge on what people like in the office? How do we make them excited to go back to work? I think we can all agree that both old WeWork and new WeWork, there was no firm probably better on the planet at figuring that out than they were.

So we're able to bring those experiences, and those tools, and those products and that knowledge to our clients on an exclusive basis with WeWork. Secondly is the technology around the workplace that WeWork developed. So these very, very large corporate customers are asking us, tell us exactly the analytical tools, the technology tools you have to help us better manage the workplace environment. We now -- and we're the only firm that can do this, we now can bring in their technology, their experience, their knowledge, their AI on behalf and to the benefit of our largest corporate customers. This is and will be a clear differentiator for Cushman & Wakefield among the largest corporate outsourcing bids that we'll pitch.

So very, very important to us. Those -- that ability to pitch to these corporate clients in a differentiated way and win more of those big customers was driver reason #1 around this partnership. #2 was WeWork allows us to provide to our biggest institutional owner customers, office building owners, a white label co-work product that is, I think, recognized by everyone is best-in-class. So again, we can bring to our customers something no one else can bring to them. What came along with it, which is snow on the mountain was we are going to be doing a material amount of facility management work for WeWork in their facilities.

So as WeWork has this massive footprint of offices around the world, we'll be helping them for those offices, and that will be a revenue stream. And then finally to your question on leasing, we would certainly hope that as time goes on and this partnership continues to grow and evolve, certainly, of our aspirations to do all of WeWork's business. Probably will never happen, but we'll certainly try. So a lot of benefits to the WeWork relationship. First and foremost, our ability to differentiate Cushman & Wakefield in the eyes of our largest corporate and institutional ownership customers; and second, business we can do for WeWork in their own facility.

Very good. And then maybe this is maybe like a follow-on to some degree on this one. But when you think about post-COVID in terms of facilities and property management in general, what kind of changes and asks have you seen now? I think you've talked about it a little bit in the past. But curious of how this business may be different from a competitive environment or just from the services provider in the future? And how that may change the growth rate in this business going forward? And if you could just remind us what kind of growth rates do you think that business should have over the next few years? That would be helpful, too.

Sure. John, get ready because I'm going to come to you on the changes we're seeing in the contract natures and FM and PM, and what you think about the business long term. But I would tell you that we've always talked about growth rates in FM and PM being mid to -- mid high single digits. And I think you can expect that to be the case for the foreseeable future. I think what's really interesting about the business though, and before I hand it over to John, is particularly on the corporate occupier side, just this continued evolution of bigger and bigger contracts coming to market. And the larger those contracts become the fewer service providers can actually pitch them. And so as I mentioned earlier, with your question on WeWork, your ability to compete for and win these large corporate occupier opportunities is a very, very big deal, something we think we're well positioned for. But John, would you want to take a shot at the changing -- what you see changing in PM/FM bids in the business?

No. Happy to, Brett. I'll just repeat, first of all, that our overall thesis is that over the next relatively short period, the office will return largely to the same level of overall utilization as before COVID. But within the building itself, we are already beginning to see changes as to how the occupier needs to use that space. Top of the list, again, as Brett said, is the experience. I think in a hybrid working environment, there won't be less office, it will be the office that has to do more to attract the employee and to benefit from the collaboration and all of the issues that we very clearly saw were missing during COVID. So we'll return to those overall long-term average fundamental growth rates and the amount of space that the world needs and the growing amount of space that the world needs year-over-year.

And secondly, and also Brett touched on this, I'll expand a little is this bundling of services in the outsourcing of the large corporate is itself a strong, long-term growing trend and the definition, though, of the bundle of services or the market's view of what is the definition of a full-service offering has changed over the last 2 years to now include a flex offering as part of the base ask in any outsource. And again, that's where we will benefit significantly from our exclusive partnership with WeWork.

(Operator Instructions) Our next question is from Patrick O'Shaughnessy with Raymond James.

Now that you spoke that companies are starting to sign long-term leases, again, at a more rapid clip, and they're thinking about their office floor plan layouts and build-outs, are you seeing any tangible evidence yet that square footage per employee is going to start pushing higher?

That's a really good question. John, do you want to take a shot at that and I'll start picking up some data here on my -- with the iPad.

I'm very happy to take it. I have some data at hand. The world sort of really started bearing down on the amount of office space it was offering to each employee over a very long period. Up to 2010, it bottomed out just after the GFC, where we reached a what's felt to be a sustainable minimum of the amount of space you could happily give each employee in a sort of a gateway city, high-quality office building. But since 2010, it's been growing. It didn't need COVID to -- and its experiential requirements for the office space per employee to begin to grow out because the war of talent really began way back at the emergence from the GFC.

So 2010 onwards, on the whole, around about 1% every 2 to 3 years was added to the amount of square footage per employee at a global level to cover all of the last few years push on the office space being a greater benefit and use to the employee in that war for talent. So it's -- I think we're going to just see a continuation of that growth, which, of course, fundamentally drives a need for long term more office space and the return, not just of pre '19 levels of office market performance, but growth thereafter.

Got it. Very helpful. And then. turning to Greystone. So you guys are buying 40% of it now. Do you have a call option at some point to purchase the remainder if you feel it's appropriate down the road?

No, we don't have a call option in the agreement. But at the same time, we certainly look to be a key partner with Greystone and certainly invest if that opportunity -- invest more if that opportunity does come up in the future.

This concludes the question-and-answer session. I would like to turn the conference back over to Brett White for any closing remarks.

Great. Well, thanks, everyone, for dialing in. Welcome our new analyst who's covering us. And we'll talk to you folks at the end of the fourth quarter. Have a good holiday season.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.