Good morning and welcome to the Third Quarter 2020 CBRE Group Incorporated Earnings Conference Call. Operator instructions were provided. As a reminder, this call is being recorded. It is now my pleasure to introduce your host, Kristyn Farahmand, Vice President, Investor Relations and Corporate Finance. Please go ahead.

Good morning, everyone, and welcome to CBRE's third quarter 2020 earnings conference call. Earlier today, we issued a press release announcing our financial results, and posted it on the Investor Relations page of our website cbre.com, along with a presentation slide deck that you can use to follow along with our prepared remarks, as well as an Excel file that contains additional supplemental materials. Our agenda for this morning's call will be as follows: first, I will provide an overview of our financial results for the quarter; next, Bob Sulentic, our President and CEO; and Leah Stearns, our CFO will discuss our third quarter results in more detail. After their comments, we will open up the call for your questions. Before I begin I will remind you that this presentation contains forward-looking statements that involve a number of risks and uncertainties. Examples of these statements include our expectations regarding CBRE’s future growth prospects, operations, market share, capital deployment, acquisition integration, financial performance including profitability and margin, the effect of cost savings initiatives in our 2020 outlook, including the impact of COVID-19 and any other statements regarding matters that are not historical fact. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained on this call to reflect subsequent events or circumstances. You should be aware that these statements should be considered estimates only and certain factors may affect us in the future and could cause actual results to differ materially from those expressed in these forward-looking statements. For a full discussion of the risks and other factors that may impact these forward-looking statements, please refer to this morning's earnings release and our most recent annual and quarterly reports filed on Form 10-K and 10-Q, respectively. We have provided reconciliations of adjusted EPS, adjusted EBITDA, fee revenue and certain other non-GAAP financial measures included in our remarks to the most directly comparable GAAP measures together with explanations of these measures in the appendix of this presentation slide deck. Now please turn to Slide 4 of our presentation, which highlights our financial results for the third quarter of 2020. Total revenues and fee revenue fell by about 5% and 13%, respectively, driven by the declines in the advisory services segment. Lower revenue was partially offset by disciplined cost management and temporary cost reductions, as well as the initial benefits of transformation initiatives targeted to improve the ongoing cost structure of the business, which limited the adjusted EBITDA decline to 3%. Overall, adjusted EPS for the quarter was $0.73, while GAAP EPS, which includes around $0.13 of transformation initiative costs, totaled $0.55. Now for insight on the quarter and our longer-term outlook, please turn to Slide 6, as I turn the call over to Bob.

Thanks Kristyn, and good morning everyone. The results we reported this morning highlight the progress CBRE has made in building a more resilient business since the last downturn occurred more than a decade ago. We were a markedly different company from the one that endured the global financial crisis. I'll briefly cite some specific ways the company has evolved and improved. Facilities management, which provides steady recurring revenue, has grown exponentially with the portfolio up by 3.7 billion square feet in 10 years, and now totaling 4.2 billion square feet. And we have added a data center management capability that is growing robustly. Our industrial and multifamily offerings have also grown dramatically and are proving to be very resilient in the current environment. These offerings together cut across leasing, sales and mortgage origination and servicing. They also comprise the majority of our real estate development portfolio. U.S. project management has grown five-fold in 10 years, and COVID is further catalyzing demand for this group's specialized services. Finally, our investment management business' core asset portfolio, which has grown more than 300% over 10 years and now comprises nearly 85% of total AUM, has held up quite well this year. The resilient aspects of our business are helping us weather the sharp COVID-driven fall in property leasing and sales. Another key contributor was quickly aligning our expenses with reduced market demand. A significant portion of our compensation structure falls automatically in the current environment, and our global leadership team has rapidly implemented other cost management actions. Many of these actions were contemplated before COVID following a strategic review designed to enhance scalability and efficiency. This work has been quite effective, cutting where appropriate without compromising our future. I want to briefly comment on the macro environment before handing the call to Leah. At the present time, COVID is putting downward pressure on parts of our business and creating larger opportunities in other parts, several of which I highlighted earlier. Inevitably, the magnitude of COVID's impact will diminish considerably once the public health crisis passes. We can expect our sales and leasing businesses, for which decision making is now largely frozen, to be prime beneficiaries. However, a significant amount of the COVID-driven change will be permanent. For instance, our work with occupier clients confirms that companies will continue moving towards a hybrid model that combines working from the office and from home. Occupiers will take space for fewer employees but that space will be less densely populated, more intensely managed, and more flexible. There will be a premium on high quality, well-managed buildings with great infrastructure. We are continuing to take advantage of the strong secular growth trends that were driven by the last cycle, including occupier outsourcing, industrial and logistics space, institutional quality multifamily assets, and workplace experience services. We expect new secular opportunities to be created in the wake of COVID in our positioning, our strategy and leadership focus, and in allocating our capital to make the most of them as the new cycle unfolds. With that, I'll turn the call over to Leah, who will take you through the quarter in detail.

Thanks Bob. Turning to Slide 8, our Advisory Services segment fee revenue and adjusted EBITDA fell over 23% and nearly 32%, respectively, reflecting weakness in high margin sales and leasing activities that Bob alluded to. While our advisory adjusted EBITDA margin fell about 180 basis points year-over-year, it improved sequentially approximately 560 basis points to about 15.5%. This sequential improvement was due to the combined impact of short-term cost reductions including continued furloughs, lower bonus accruals and tight management of travel and entertainment expenses, as well as the initial impacts of transformation and workforce optimization efforts. Additionally, about 190 basis points of the sequential improvement was due to the cadence of COVID-related items. Global leasing revenue declined about 31% as the pandemic continued to negatively impact our major global markets. In the U.S., Continental Europe and the U.K., which together comprised about 81% of global leasing revenue in the period, revenue decreased 36%, 22%, and 6% respectively. The U.K. benefited from a large industrial transaction during the quarter, which helped to offset weak demand for office space. Globally, industrial leasing, fueled by the continued shift to e-commerce, increased 10% in Q3, and 8% year-to-date. Advisory sales improved sequentially, falling 34% year-over-year in Q3 versus 48% in Q2. All three regions saw sequential improvement, paced by Continental Europe where advisory sales revenue fell just 7% in Q3, compared to 26% in Q2. In the U.S., we added 280 basis points to our market share according to RCA, as investors seek out the best advice and execution in a challenging market. Given the high level of institutional dry powder and continued low interest rates, investor demand for quality real estate assets with strong rent rolls and creditworthy tenants remains solid despite the pandemic. Commercial mortgage revenue fell 21% in the quarter. The lending environment improved marginally from the second quarter, but lenders remain quite conservative in their underwriting standards which weighed on volumes. Notably multifamily volumes rebounded sequentially during the quarter and by September exceeded the prior-year level. Refinancing activity comprised 60% of our year-to-date originations, up from the typical 40% to 50% range. Our other advisory services business lines were less impacted by COVID during the quarter. Valuation revenue fell about 10% in line with the last quarter, while advisory property and project management and loan servicing each saw fee revenue growth of over 2%. Slower growth in loan servicing was the result of lower loan prepayment fees; excluding prepayment fees, our servicing revenue would have grown at a low double-digit rate consistent with previous quarters. The loan servicing portfolio grew 13% over the prior year period and 3% sequentially to nearly $253 billion. Forbearance requests also continued to be immaterial for this business. Turning to Slide 9, our global workplace solutions business increased fee revenue nearly 6% as 9% growth in facilities management, and 13% growth in project management offset a steep decline in GWS transaction revenue. Adjusted EBITDA margin expanded nearly 480 basis points to nearly 17% despite the loss of high margin transaction revenue. And this was our second consecutive quarter of record profitability. This strong improvement in profitability was partially driven by temporary measures primarily associated with lower discretionary spending and bonus accruals. Long-term cost efficiency initiatives and about $12 million in expenses in the prior year period that did not recur also contributed. Structural changes to the cost structure contributed about one-third of the margin improvement. We also expect to drive gradual long-term improvements in profitability as our client relationships expand and mature. Long-tenured satisfied clients typically expand their scope of service and engage us to support their project and transaction management needs. While our margins are improving and our new business pipeline is strong, we continue to feel the effects of pandemic-related delays in securing and onboarding new GWS clients. Several large contract decisions slipped from Q3 to Q4, while others are temporarily on hold. As a result, we continue to expect top-line growth to be more muted than we would typically expect in a more normal recessionary environment. Turning to Slide 10, let's now look at our real estate investment segment where we achieved $65 million of adjusted EBITDA, a $51 million increase from the prior year period. Development was the standout performer with adjusted EBITDA rising to approximately $50 million, reflecting a large number of asset sales, and a small contribution from the U.K. multifamily development business we acquired last October. We are benefiting from positioning our portfolio to meet elevated demand for multifamily, industrial and healthcare assets. In fact, these three property types, plus office buildings that are at least 90% leased, comprised over 80% of our in-process activity. Because of this and our sizable pipeline, we expect our development business will remain resilient moving forward. Our investment management business also had an impressive quarter. Adjusted EBITDA rose over 12% and, importantly, adjusted EBITDA from recurring sources increased nearly 70%. This reflected continued strong growth in assets under management, which reached a new record at $114.5 billion, and more than offset a lower contribution from carried interest revenue and co-investment returns. Lastly, Hana’s adjusted EBITDA loss of nearly $10 million was slightly higher than in the last quarter. Hana’s results continue to be impacted by lower than anticipated occupancy as a result of the pandemic, as well as costs associated with expanding our enterprise-focused flexible space solutions. Turning to Slide 11, given COVID-19’s uncertain trajectory and adverse economic impact, we will again refrain from providing explicit EPS guidance, but will provide an update on our expectations for the full year and fourth quarter. In advisory, we are taking a conservative view of transaction activity in Q4. Transaction revenue has performed better than expected during this crisis, which is partially driven by the transaction size and geographic diversification embedded in our business. In the U.S., deals less than 250,000 square feet, which comprise over half of total transaction revenue, declined about 26% year-to-date versus a 40% decrease from transactions over 2 million square feet. We anticipate a similar benefit of this diversification in our Q4 results, but also expect the transaction business to recover more gradually. We expect sales and leasing revenue together to be down approximately 30% to 40% in Q4, in line with the trends we saw in the second and third quarters with the Americas slightly lagging other parts of the world. For the rest of the advisory business combined, we foresee a mid-single digit revenue decline in the fourth quarter. This reflects the expectation that Q4 will be our highest revenue-generating quarter as it usually is. Given this uptick in revenue and our continued focus on cost management, we expect advisory adjusted EBITDA fee margin to continue expanding by around 2% compared with Q3. Moving to GWS, we now believe growth in fee revenue will rise in the mid single-digit range for the year with growth in contractual facilities management and project management revenue offsetting continued weakness in GWS transaction revenue. This is marginally lower than our previous growth expectation and reflects our view that the pandemic-related delays I mentioned earlier will improve more slowly than we had previously expected. At the same time, we expect double-digit full-year adjusted EBITDA growth, reflecting the benefit of stronger-than-expected Q3 performance and the continuation of our cost management efforts into Q4. We expect margin expansion will be slower sequentially as the benefit of temporary cost actions dissipate. Looking at REI, our global investment management and development business lines are well positioned for the current environment and we foresee more resilient performance than during the last downturn. In investment management, we anticipate adjusted EBITDA will grow in the high teens range from the $91 million achieved last year. We now expect growth in recurring EBITDA stemming from our growing AUM to be complemented by higher expectations for incentive fees and carried interest than we previously anticipated. We now project U.S. development adjusted EBITDA to exceed the more than $100 million generated in 2019. Demand for quality assets has been stronger than we previously anticipated and we now expect to complete more asset sales before year-end. We again expect sequential growth in adjusted EBITDA from U.K. multifamily development in Q4. The pace of improvement since the peak of the pandemic has exceeded our expectations and we now expect a small but positive EBITDA contribution from the U.K. multifamily development for the full year. This is an improvement from the breakeven performance we expected previously. And finally, our expectations for Hana remain consistent with our previous outlook with an adjusted EBITDA loss of around $35 million to $40 million for 2020 which is marginally higher than the loss incurred in 2019. Turning to Slide 12, we continue to fortify our financial position throughout the COVID-19 crisis. On a run-rate basis, we have lowered our expense structure by nearly $200 million. We expect to realize about $120 million of this in 2020 and approximately $80 million in 2021. We primarily achieved these reductions by making structural changes in the design of our workforce, while also focusing on right-sizing our cost base and teams to meet future demand. In addition, our liquidity has increased by almost $1 billion from a year ago period to $4.2 billion and we ended Q3 with just 0.2 turns of leverage down over 0.4 turns from a year ago. This improvement reflects the long-term strategic work we initiated well before the pandemic to drive improvements in profitability and cash flow conversion. Given that we've been able to strengthen our financial position meaningfully at the depths of the COVID-19 crisis, we are highly confident we have ample capacity to attend future challenges while simultaneously deploying discretionary capital. As Bob highlighted at the outset of the call, we strongly believe there will be parts of our business that will benefit from COVID-driven secular trends as well as portions that are likely to be adversely impacted. We plan to focus our discretionary capital deployment on areas where we believe the crisis is likely to accelerate demand. At the moment, we are deploying capital for internal investments and actively evaluating a steadily increasing M&A pipeline as we begin to see strategic opportunities. This means we’ll prioritize internal investments and M&A rather than share repurchases. We want to ensure we are using our liquidity and financial capacity to enhance the revenue and profitability growth trajectory of our business as well as the resiliency of our business over the long run. We are also recognizing that the cost actions we've taken this year have impacted our people. As we've said before, once the time is appropriate, if we are unable to identify suitable and properly valued acquisition opportunities, we will then consider share repurchases. While the environment remains highly uncertain, we're more confident than ever that our business and our capital structure should not only weather the challenges presented by COVID, but build on our industry leadership position and maximize long-term earnings and cash flow growth. With that, please turn to Slide 13 and I'll turn the call back to Bob.

Thanks Leah. Before we take your questions, I want to briefly acknowledge our CBRE employees. Their hard work and strong focus on our clients are truly distinguishing our company at a time of significant challenges stemming from the public health crisis. These challenges have also brought us closer together as a company. The $6.1 million we raised from our people and the company for the CBRE Employee Resilience Fund has enabled us to provide more than 9,000 grants to our colleagues who are facing financial hardship. We are pleased to help make their lives a little easier during this stressful time. Now, operator, we'll take questions.

Operator instructions were provided. And we'll take our first question from Steve Sakwa with Evercore ISI.

I just wanted to circle up on a couple of things. Leah, the $55 million in expenses that you talked about related to these transformation initiatives, I just wanted to get a little bit more understanding. How much of that was to benefit the current quarter, and how much of that is really kind of longer-term benefits to the company and how do we sort of measure or see those benefits going forward?

Sure, Steve. The $55 million was one-time costs that we recognized in the quarter attributable to the separation and other expenses related to the transformation. Those will, in combination with workforce actions that we took in the second quarter, amount to about $200 million of run-rate savings. A little more than half of that will benefit this year, and the rest will commence in 2021.

Okay, great thanks. And then I know you can't be too specific about the M&A activity, but I guess I'm just trying to get a little bit better feel for the areas, maybe if you think about your three divisions where you're more likely to deploy capital or maybe where you are more likely to see opportunities arise or maybe where you're seeing more opportunities today?

Yes Steve, this is Bob. We've gone through our business pretty carefully in the past year; it was subject to a very thorough strategy update that we did. And we've identified areas of our business that we think either we're well positioned to grow disproportionately in or there will be secular tailwinds. And we're targeting those areas of our business for M&A activity. Now we'll do M&A activity in other areas if we think we can get a particularly good deal or if we think we have holes in our geographic coverage, things of that nature, and the ability to add to our capability for our clients. But we're really focused on some areas of the business that we think are going to have nice secular tailwinds and they're very much in line with what we do as part of our core offering. We're pretty excited about what's out there for us right now, but I will say we're going to be patient. We're not going to run out just because we have the dry powder we have, because we're in a low point in the market cycle and buy up a bunch of stuff unless we think we can integrate it well, it's got a good cultural fit and we can make a reasonable deal.

We'll go next to Anthony Paolone with JPMorgan.

First question is, I guess we'll stick with the M&A side of things, are you considering deals that just add to businesses that you're already in as you think about this, or are there new places you think you can go into? Similarly in the last several years you've done more around data centers and built infrastructure on the investment management side. So just curious if what you're focused on is additive or new to the platform?

Yes Tony, we will look for things that are closely adjacent to what we do, that are consistent with our skill set and relevant to our client base. We would not want to go too far afield from that, because we think there is enough opportunity that would meet that requirement or be more core to what we do, and that's basically how we think about that.

Okay. And do you see the opportunity size you had mentioned— it sounds like putting buyback on the back burner. So it sounds like are these potential sizes that you would not be able to do both?

So Anthony, it's Leah. Our current pipeline is actually larger than we could reasonably entertain in any one quarter. So we are being very cognizant of the opportunity set that we have. We want to make sure that we have sufficient dry powder to act quickly if we find the right opportunity. And so from our perspective, we think it's the prudent measure, given one, we have a very active M&A pipeline, and two, we are taking actions that directly impact our people. For us to balance our approach on the buyback and put that off makes sense.

Okay great. And then on the cost side, thanks for all the detail there. Just wondering if there is a way to think about it: of the $200 million for instance, if we thought of 2019 as a baseline what piece of that should we think about as being more permanent that would change the margins on a more long-term basis?

That is all incremental reduction from 2019 levels. So it is all run rate.

And you think that's all permanent and not just part of the current environment and doing things more temporarily?

Correct. There have been other actions that we've taken. For example, furloughs and deferred compensation outcomes, our compensation structure naturally reduces because of commissions and bonuses based on certain targets that were set at the outset of the year that won't be achieved. So those were not included in the $200 million. The $200 million is actual structural cost reductions, really through reducing overhead and headcount.

And then last one from me. You had mentioned in GWS a couple of items just slipping. I think last quarter you had mentioned mid-to-high single-digit topline and high single-digit EBITDA. Does that change? I didn't catch if you had updated that part of it?

So, we now expect the GWS revenue to be in the mid single-digit range for the year. However, we do expect profitability or adjusted EBITDA growth to be double-digit. So we have updated that.

We'll go next to Jade Rahmani with KBW.

Thanks very much for taking the questions. Just to start off with, I think last quarter you said that the average office lease duration in your pipeline was down by about 16%. What kind of trend are you seeing in terms of how occupiers are looking at their office exposure? And are you seeing a reduction in average lease maturity?

Yes Jade, the overwhelming thing that’s impacting average lease maturity is that a lot of the big long-term leases just have been put on hold; decisions aren't being made. We have that circumstance with our own portfolio of office space for our CBRE people. As everybody tries to figure out what space use is going to look like post-COVID, those big decisions aren't being made. By the way, that's something that will definitively come back. Will it all come back? Probably not, but much of it will come back and that's on hold. So the average lease is shorter as a result of that. What you're seeing now is renewals, extensions, small deals getting done. But all of that impacts the averages and we expect that to continue as long as COVID is having the impact it’s having now.

Thanks very much for taking my question. Just separately I've gotten a lot of calls from investors today on the restructuring charges and I was wondering if you could provide any insight as to what types of actions those relate to. Were those in the advisory services business, related to infrastructure and administrative back office functions? Where did the actions occur and should we really be expecting, in terms of the fixed run-rate benefit, $200 million in annual savings?

So Jade, the distribution is about 60% of it was in our advisory segment, about 30% was in GWS and about 10% was in REI. That's a combination of the workforce actions we took in the second quarter as well as the transformation initiative that we launched in the third quarter. The third quarter actions were principally around a standalone exercise that we did—just looking at the overall shape and structure of our organization and making sure that we were appropriately structured to be as efficient as possible coming out of this. So most of it is related to severance and other separation costs related to that action. We do have some lease terminations and other items that have come through as we've sought to consolidate our workforce. But the vast majority of that is represented in terms of severance costs.

And to what extent does it reflect an expectation of a very moderate and drawn out recovery in transaction volumes with respect to perhaps 2021 and 2022 in the advisory segment?

We are certainly very cognizant—and as I said earlier we do expect it to be a more moderate recovery. Therefore we are being very cautious around the expense structure for our advisory business. You should expect we'll continue to look at ways to make sure we're right-sized to ensure that our business and our workforce reflect the level of demand that's coming from our clients.

And I guess if you could stratify the cost savings in terms of headcount reductions versus other structural changes you mentioned like lease terminations—how would that be split amongst those two categories?

The majority of it is severance costs.

Okay. And then finally, on the EMEA outperformance on capital markets which you mentioned, what do you think is driving that and could that be a leading indicator as to a pickup in demand on that side of the transaction pipeline?

We actually had some really strong performance across EMEA, particularly in Continental Europe. Europe did come out of the COVID lockdown before the Americas and we're seeing some of that come back. We're being overly cautious right now in terms of level of activity that we're expecting in the fourth quarter headed into 2021, but we did see relative strength in Continental Europe during the quarter.

We'll go next to Stephen Sheldon with William Blair. This question will be posed by Josh Lamers on behalf of Stephen Sheldon.

This is Josh Lamers on for Stephen Sheldon and thanks for taking questions here. I'm going to start with the recurring question but always good to gauge. Wondering how far along you characterize we are in the price discovery process on the investment sales side? Wondering if there are any indications that bid-ask spreads could come in over the last couple of months and if not, can you just outline why there is some valuation gap?

I think it's going to be really important for us to see larger transactions on the leasing side occur before there are significant transactions that come back from an overall capital markets activity perspective. So I think we are still a better ways away from seeing significant capital markets activity resume. One of the benefits though is that we are seeing more liquidity in the market and that will certainly help bring our investment property sales business back with more strength than we've seen in prior cycles where there was more credit constraint in the market.

And then just picking up with one of the prior question lines here just generally speaking on the leasing front, I mean we noted longer term delays in making longer-term leasing decisions. Based on the conversations more recently has it influenced your thought process in any way about leasing activity picking up in a more meaningful way in 2021, or does it seem that leasing activity is not going to resume at a higher level until there is more health resolution?

This summer we saw the level of activity and discussions start to pick up some, but the fact of the matter is we are deeply engaged with most of the big occupiers around the U.S. and around the world and how they're thinking about this. They really are looking for clarity related to COVID before they make their big decisions. And this is an important point: there are two separate things going on here. One, we do think there will be some real change in the way office space is used going forward. We think there will be fewer people in the office. We think offices will be used less densely, more intensively managed, and buildings with great infrastructure will be favored. There is a whole separate issue from that though: the leasing is going to get done, it just isn't being decided on in this environment and that will come back. It's not all one thing; it's two separate things.

And then switching gears to GWS, it's good to hear that interactions continued. Although I have to say it's a little surprising to hear that occupiers are delaying their decision making on this front given that there is usually first-year cost savings associated with outsourcing and then added risk of managing operations due to COVID. Could you expand a bit more on the reason behind the contract delays and what's your confidence at this point in GWS returning to double-digit growth next year?

We had very big backlogs of opportunities not only relative to earlier this year, but relative to prior years, but the simple thing is there is so much physical presence that's needed to get these things done. People need to examine space. People need to think about moving people from one place to another. People need to think about bringing project managers on site and getting work done. All of that is hard to do in this environment. Decision makers traveling and visiting space is inevitably slowed. Clients very directly tell us that their decision making has been delayed for those reasons. They don't know how the space is going to get laid out when they move into it or when they move out of it. So again, it's important to separate the absence of decision making—which will come back—from the different way space will be used on the other side of COVID.

Okay, that all makes sense. And then last one from me, just looking to grab some comments from you on Hana. You've noted that you're targeting to have tenants open by early next year now. Given your comments around office considerations and the outlook for the future, does this become more of a priority looking ahead? Or is it being rolled out as you expect to maybe a year ago?

We believe that given what we've learned about the way space is likely to be used going forward—greater flexibility and more satellite-type users because of people working from home—companies are hesitant to put capital in because they're not sure how they're going to think about their space long-term versus short-term. We believe there is evidence that flex space like Hana will become more necessary than it is today. But like every other kind of office space, most markets around the world are seeing people not going into office space in the short-term. They're working from home because of COVID. So in the short-term Hana has been impacted materially. It performed like we thought it was going to perform this quarter. But in the long-term we believe that it could be a more prominent strategy than it has been historically, and we're pretty encouraged about the prospects for flex space in Hana.

We'll go next to Patrick O'Shaughnessy with Raymond James.

How are you guys thinking about pressure in office rents and the knock-on to leasing and capital markets revenue? Does transaction volume more fully rebound?

As we look at the level of activity that we see today, there has been a smaller impact on secondary and tertiary markets relative to the large top 25 cities in the world. So if we look at space needs, I think near-term there will be less impact on rents in some of those smaller markets, particularly on smaller-sized leases. In those cases and in certain asset classes like industrial and multifamily, on the capital markets side I think you will also see price discovery happen sooner. But certainly from an office perspective, we're watching those smaller markets and those smaller space transactions really lead the path for that price discovery. We would expect that as COVID begins to attenuate and we have a vaccine and better therapeutics, we will see occupancy levels increase in office space and that should lead to more leasing decisions as Bob alluded to and help to drive more capital market transactions in office. So transactions are happening where you have strong credit rent rolls and long-term tenant leases in place. Pauses are really in the larger cities and in value-add asset classes where there's too much risk for underwriting today.

But when you do see the bid-ask narrow in your major city centers in New York and Boston and San Francisco and those transactions start to happen again, do you think rents and building prices have to move lower to hit that market-clearing level? And if so, is there concern that presents a long-term headwind in terms of the commissions that you're making off of those transactions?

I would say it's really ultimately going to depend on how leasing decisions are made post-COVID. I think it's too early to say specifically where rents are going to go relative to where they are today. There may be some distressed assets where you do see some concessions, but it's not as though there is a massive amount of vacancy or new assets coming online. You really have to see a radical shift in terms of occupancy needs all at once, and remember most of these leases are renewal or long-term leases coming up over a long period of time. You don't see massive changes in occupancy being executed in a very short period of time.

And then I guess on the theme of major city centers versus secondary and tertiary areas: how are you thinking about the potential impact of urban flight on the multifamily business, as people maybe want to live in the suburbs and not in city centers? Do you still see the same sort of structural demand for multifamily units as you would have expected a year ago?

Multifamily has really been driven by an underlying affordability issue for housing, and so we don't see that abating. In fact, it's getting more challenging from a single-family perspective, so we certainly think there continue to be secular tailwinds for multifamily.

And the last one from me and sorry to go back to margins again. Specifically with regard to your Global Workplace Solutions commentary that approximately one-third of the margin expansion was driven by structural improvements, does that imply the remaining two-thirds was due to more temporary cost reduction measures and those costs do come back in a more normalized environment?

Correct.

We'll go next to Michael Funk with Bank of America.

Yes, thank you for the questions. So, just going back to your market share comments in the U.S., the 280 basis points during the quarter—can you comment on how you see that in 4Q and if you expect that market share gain to improve, and what you attribute that improvement to?

So Michael, I think it's a bit too early to speculate on market share for the fourth quarter. Certainly it's something that we were pleased to see and we will continue to monitor it, but I think it's just too early to make a call on that.

Okay. Maybe a little more if I could then. So obviously early on, COVID put a pause on all the activity and you commented before that capital availability is driving sales activity right now. Are you seeing any impact over in Europe in the recent surge of cases?

It's way too soon Michael to make a definitive call in terms of how that's going to impact the market in Europe.

Okay. I'll try one more time then. The comment about more of the volume activity towards the low end of the market—meaning smaller deals and more multifamily and industrial—are these more opportunistic deals, and is there enough potential pipeline there to continue that, or do you think it's more of a shorter-term benefit and we need to see a fuller recovery to see carry-through on the sales cycle?

You're asking about the fourth quarter? We will see 1031 exchange activity on transactions from a capital markets perspective, and that tends to be when we see quite a bit of multifamily transactions come to market in that smaller to mid-tier range. So that is something we would expect to help build the market particularly in the U.S. But we do have transactions happening within the sales part of our business. There are well-diversified, strong credit tenant, long-duration rentals underlying certain assets as well as certain asset classes like industrial and multifamily that are commanding a tighter bid-ask spread and that's resulting in transactions happening in the market. So we certainly think there are transactions out there to be done and that was evidenced in the third quarter around our leasing and sales results. But it's certainly a more muted market just because there is such a significant pause going on around decisions that are being made.

We have reached the end of our question-and-answer session. I'd like to turn the floor back over to Bob Sulentic for closing remarks.

Thanks everyone for joining us today during this move from morning to afternoon, and we look forward to talking with you next time when we report our year-end results.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.