Colliers (CIGI) Q1 2026 Earnings Transcript

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Date

Tuesday, May 5, 2026 at 11 a.m. ET

Call participants

• Chair & CEO — Jay S. Hennick
• Global Chief Financial Officer & CEO, Commercial Real Estate — Christian Mayer

Takeaways

• Consolidated revenue growth -- Increased 12% year over year in local currency, with consolidated net revenue reaching $1.15 billion.
• Adjusted EBITDA -- Rose 8% to $125 million, reflecting broad-based segment growth and stated effective execution.
• Adjusted EPS -- Gained 5% to $0.91, with management noting a higher-than-expected European tax rate as a moderating factor.
• Commercial real estate segment revenue -- Net revenue increased 13%, supported by capital markets and leasing activity.
• Commercial real estate capital markets revenue -- Surged 43%, with market share gains highlighted in the U.S. and parts of Europe across both sales and debt finance; sales growth was broad-based by property type, particularly in data center development land and office.
• Commercial real estate leasing revenue -- Increased 9%, led by U.S. industrial property leasing.
• Commercial real estate net margin -- Reached 6.3%, up 20 basis points year over year, with operating leverage from higher transactional revenue partially offset by continued investment in recruiting.
• Engineering segment net revenue -- Grew 13% through a combination of recent acquisitions and internal demand in infrastructure and related areas.
• Engineering segment net margin -- Registered 9.5%, down modestly, attributed to "lower workforce utilization in residential development and telecommunications."
• Investment management segment net revenue -- Increased 8%, supported by recent acquisition and capital deployment.
• Assets under management (AUM) -- Rose 9% to nearly $1.9 billion.
• Investment management segment net margin -- Declined to 37.4% due to integration and streamlining under the Harrison Street Asset Management brand; management reiterated expectations for a return to "low 40s" net margin after next couple of quarters.
• Fundraising -- Nearly $1 billion in new capital commitments raised in the first quarter, with the full-year fundraising target maintained at $6 billion to $9 billion.
• Ayesa Engineering acquisition -- Management expects closing in the coming weeks, utilizing enhanced liquidity following $400 million in new long-term debt and an extended revolving credit facility.
• Leverage -- Ended the quarter at 2.3x; expected to move up to 2.9x–3x after Ayesa closes, before declining in the second half with seasonal cash flow.
• Full-year outlook -- Management reiterated "mid-teens revenue EBITDA and EPS growth" for 2026, citing robust pipelines and segment momentum.

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Risks

• Christian Mayer cited that Engineering segment net margin fell due to "lower workforce utilization in residential development and telecommunications," both of which management expects will improve as the year progresses.
• Jay S. Hennick said, "Europe is slowing, and we're watching it very carefully," attributing part of the softness to geopolitical risk and reduced financing access in those regions.
• Management noted continued net margin pressure in the Investment Management segment due to planned integration costs, stating margins would remain below "low 40s" for the next couple of quarters.

Summary

Colliers International Group (NASDAQ:CIGI) reported double-digit consolidated and segment revenue growth, led by outperformance in commercial real estate capital markets and continued resilience in its diversified services. Management detailed strategic investments in talent and technology across business lines, the integration of recent acquisitions, and cited robust fundraising momentum while affirming a strong full-year growth outlook. European and Asia Pacific regions were explicitly identified as presenting near-term headwinds due to macroeconomic and geopolitical uncertainty.

• Christian Mayer stated, "We are maintaining our full year 2026 outlook for mid-teens revenue EBITDA and EPS growth," supported by a broad geographic and business line mix.
• Christian Mayer explained that 70% of earnings now derive from recurring and resilient business lines, which management believes insulate results from market cyclicality.
• Management outlined that planned investments in recruiting and IT—including increased AI spending and a partnership with Google—are underway to strengthen long-term positioning and enhance client service productivity.
• Leadership confirmed a pipeline of further tuck-in acquisitions, with strategic focus shifting to smaller targets after closing Ayesa Engineering, while emphasizing strict leverage discipline.
• Harrison Street was identified as the focal point for integration and future fundraising, with management referencing growing demand for infrastructure and demographic-driven assets such as data centers, senior housing, and healthcare properties.

Industry glossary

• Harrison Street Asset Management: Colliers' dedicated investment management platform, specializing in alternative real assets including data centers, healthcare, senior, and student housing.
• Ayesa Engineering: Engineering and consulting firm Colliers is in the process of acquiring, expected to expand Colliers' geographic reach and capabilities, especially in infrastructure markets.
• Adjusted EBITDA: Non-GAAP earnings measure reflecting earnings before interest, taxes, depreciation, amortization, and certain adjustments, used by Colliers for performance tracking.
• Capital markets revenue: Commercial Real Estate segment sales and debt financing fees derived from transactional activity in global property markets.
• Leverage (2.3x, 2.9x etc.): Net debt-to-EBITDA ratio, measuring financial indebtedness relative to earnings and used by management as a risk and liquidity indicator.

Full Conference Call Transcript

Jay Hennick: Thank you for joining us. With me today is Christian Mayer, our Global Chief Financial Officer; and also Chief Executive Officer of our Commercial Real Estate division. This call, as always, is being webcast and the presentation materials are available on our website. Colliers delivered strong results for 2026 for the first quarter underscoring the durability of our company. We have made solid progress in a still uneven market, supported by continued strength in our resilient businesses and improving activity in commercial real estate. Colliers is built to compound shareholder value through 3 growth engines across the build environment. Commercial Real Estate, Engineering and Project management and Investment Management.

From an earnings perspective, more than 70% of our earnings come from resilient businesses, Engineering, Project Management, Investment Management, Property Management and Mortgage Servicing. This mix gives Colliers greater stability through market cycles and more growth opportunity than others. These attributes, together with our enterprising culture and meaningful inside ownership have supported a 31-year record of delivering 17% compound annual growth in per share value. Importantly, we achieved these performance numbers at a time when our shares are trading well below their intrinsic value, creating significant upside potential for shareholders.

During the quarter, we strengthened our leadership team to better capture growth opportunities in engineering, appointing Elias Mulamoottil as the CEO; and Christian as the CEO of our Commercial Real Estate business. We also increased our financial flexibility through a $400 million long-term debt financing and an extension of our revolving credit facility, supporting the acquisition of Ayesa Engineering, which we expect to close later this quarter. In Commercial Real Estate, the recovery continues to gain momentum. Transaction services, including both capital markets and leasing were up an industry-leading 25%, reflecting market share gains across the globe for Colliers and improved investor sentiment industry-wide.

Engineering also delivered strong performance, providing highly technical support across attractive end markets like infrastructure, transportation, property and buildings, water and environmental. This work also has strong visibility and consistent margins while creating meaningful opportunities for growth and for collaboration across our other businesses. The acquisition of Ayesa will accelerate our momentum in engineering even further by expanding our geographic reach adding in-demand capabilities and extending our growth runway into new markets. In Investment Management, assets under management increased 9% year-over-year to almost $1.9 billion.

At Harrison Street, we invest capital along institutional and high net worth individuals across high-growth infrastructure-related assets, including data centers as well as demographic driven defensive sectors such as senior housing, student housing, medical office and health care delivery. Over more than 2 decades, our differentiated investment strategies have delivered strong returns for investors and are supported by powerful secular and demographic tailwinds that continue to support our growth. We are very excited about Harrison Street's prospects as we continue to scale the business and capitalize on the many opportunities ahead. We believe we are well positioned to continue to generate attractive growth opportunities for our investors and for our shareholders.

With that, I'll turn things over to Christian after which we'll open the line for questions. Christian?

Christian Mayer: Good morning, everyone. Following up on Jay's overview of our strategic progress this quarter, I will now dive into the financial details that support our strong start to 2026. Please note that the non-GAAP measures discussed are defined in our press release and quarterly presentation. Unless otherwise noted, all revenue growth figures are presented in local currency. We have realigned our Engineering and Commercial Real Estate segments. This realignment resulted in a modest increase in CRE segment revenue with an offsetting decrease in the Engineering segment. Prior periods have been recast and historical comparative excel file is available on our Investor Relations site. Our first quarter consolidated revenues were up 12% and net revenues also increased 12% to $1.15 billion.

Adjusted EBITDA was $125 million, up 8%. Adjusted EPS increased 5% to $0.91 and was tempered by a higher-than-expected tax rate related to certain European operations. We expect our tax rate to moderate in the coming quarters. The solid performance met our expectations and reflects effective execution across our business. First quarter Commercial Real Estate segment net revenue was up 13%. Capital markets revenues increased 43%, led by market share gains in the U.S. and in parts of Europe, both in sales and debt finance. We reported sales growth in all property types, most notably data center development land and office. The U.K., Germany and Japan also posted strong year-over-year gains in office and industrial sales.

Leasing revenues were up 9% with U.S. industrial property leading the growth. Segment net margin was 6.3% and up 20 basis points over the prior year first quarter, with operating leverage from higher transactional revenues, partially offset by investment in recruiting across the segment. Third quarter Engineering segment net revenue was up 13% from a mix of recent acquisitions and solid internal growth. End market demand continues to be strong, especially in infrastructure and related areas. Net margin was 9.5%, slightly lower than last year, reflecting lower workforce utilization in residential development and telecommunications, both of which we expect will improve as we progress through the year. Our overall Engineering backlog continues to be robust.

Investment Management net revenues increased 8%, driven by our recent acquisition and internal growth from new capital deployed. Net margin declined to 37.4% as expected, as a result of planned investments to integrate and streamline under the Harrison Street Asset Management brand. These costs will continue to impact margins for the next couple of quarters after which we expect to return to a low 40s net margin profile. The IM segment raised just under $1 billion in new capital commitments during the first quarter and we expect increasing momentum as the year progresses. Our fundraising target for 2026 remains unchanged at $6 billion to $9 billion.

Our balance sheet is strong, with leverage at 2.3x, reflecting seasonal working capital usage and with $1.5 billion in total credit availability as of March 31. We expect to complete the acquisition of Ayesa Engineering in the coming weeks funded from available credit. We are maintaining our full year 2026 outlook for mid-teens revenue EBITDA and EPS growth. Our solid Q1 performance, which met our expectations is the foundation for this outlook. Our continued confidence stems from robust pipelines in Commercial Real Estate transactions and sustained momentum in our resilient businesses.

While we acknowledge the recent increase in geopolitical risk and macroeconomic volatility, these risks are not expected to materially impact our 2026 results at this point, reflecting the inherent geographic service line and client diversification of our platform. That concludes my remarks. Operator, can you please open the line for questions?

Operator: [Operator Instructions] Our first question is from Anthony Paolone from JPMorgan.

Anthony Paolone: My first question relates to, I think, an engineer -- in Engineering, some of the utilization being down a little bit. And I think you mentioned it was related to residential. Can you just talk a bit more as to whether you see that as temporary and how you manage margin in instances where some of these end markets may ebb and flow? And just maybe give us a little bit more insight into how that business works in that manner?

Christian Mayer: Yes, it's a great question, Tony. We have a well-diversified Engineering business that currently operates in 3 major markets: Canada, the U.S. and Australia. And in each country, we have a number of highly predictable and high demand end markets, including infrastructure, transportation, property, buildings, resi development, telcommunications, program management, institutional project management. So a wide variety of end users. And that is intentional. We try to also have a well-balanced business between public and private sector clientele so that we can manage ebbs and flows like we are seeing today in residential development and in telecom. So we manage the business for consistency and margins from time to time.

A couple of these areas will be stronger or weaker and over time, we're able to generate a consistent margin, and we do expect that these 2 areas will rebound in the coming quarters.

Anthony Paolone: Okay. And then my follow-up question relates to you are mentioning making some investments into the CRE segment. Can you talk more specifically about what types of investments those maybe whether it's people or other types of items and kind of where you see the opportunity in making those investments?

Christian Mayer: Yes. Tony, there's really 2 areas, and you hit the nail on the head, it's people, first and foremost. We continue to recruit at an accelerating pace and bringing people into our cap markets and leasing business in major markets around the world. And so that's the primary focus. Secondarily, we've talked with us before, we are increasing the pace of our IT spending, both OpEx and CapEx. That is to enable AI and technology and efficiencies are going to come from that as well as enhanced abilities for our producers to be of service to clients and hopefully, more productive. So those are the areas that we're investing in.

Operator: And our next question is from Frederic Bastien from Raymond James.

Frederic Bastien: So we had some pretty solid results from the CRE segment. However, outsourcing was -- outsourcing growth was a bit on the soft side. Was there any tough comparables that you're lapping? Or -- I just want to get a bit more color on what transpired here.

Christian Mayer: Frederic, no real notable tough compares. We had slightly slower than we had hoped, growth there, still in the low single digits, but nothing really of note. And then we hope on a full year basis that our growth will accelerate in that outsourcing area.

Frederic Bastien: Okay. Switching gears to Investment Management. We saw some pretty good growth, obviously, some acquired growth in there as well. But as we look at the next couple of quarters, how do we -- how can we expect the pace of revenue to ramp both on an organic basis, fundraising, acquisition and the like?

Jay Hennick: So IM is very interesting because, as you know, we have spent the last couple of quarters, and it's going to continue for a while, bringing together our 4 platforms under the Harrison Street brand. Needless to say that has a lot to do with bringing people together, rebranding funds, streamlining accounting systems across the board. IT and a variety of other areas. So we're very excited about the -- that particular platform. It's got some great momentum in terms of -- first of all, it's got unique and strong differentiated strategies, as I talked about in my comments, but fundraising in particular is gaining momentum as you -- as Christian mentioned.

We're holding our forecast at $6-plus billion of new capital. We've also returned a lot of capital this past quarter to our investors in terms of property sales versus new assets acquired. So there's a lot going on in that segment. We're building what we think is a very strong Harrison Street Asset Management that's a truly global business with a streamlined and one management team. These things take time and building companies like this is something that we've done many times over the years. So we feel like we're on pace or ahead. We feel like we're walking into a fundraising environment that's -- that should be more buoyant going forward.

And the teams are excited, and we have several new strategies all around infrastructure and deep relationships that we've built with leading academic institutions, hospitals, all of which we have been serving for over 2 decades. But now new opportunities in 3P partnerships and a variety of other things are materializing, which are creating unique investment opportunities for our investors. So a lot there to unpack. But suffice it to say, we're very excited about but where I am -- will be in the next several quarters.

Frederic Bastien: Great. Last one. Maybe a follow-up. With respect to the pace of fundraising, do you expect it to be even over the next quarters or just more -- ramp up more into the back half of the year?

Jay Hennick: I'm sorry, I didn't hear that full question there, Frederic?

Frederic Bastien: Yes. With respect to the pace of fundraising, do you expect that to come evenly over the next quarter or be more back-end loaded towards back...

Jay Hennick: It never comes evenly as you can appreciate. It is quite unpredictable. We have bigger pipelines in terms of fundraising than we've ever had before. We've had good first closes or we're in the process of having first closes in the Basalt fund and in the Harrison Street closed-end fund, all of which there's only a limited amount of capital we can take. So it's a function of when the final decisions are made and when that comes in. So we're expecting both of those to be substantially completed before the end of the year. But when the exact commitments are made is still up in the air, but -- and will be. I can't really predict it.

Operator: Our next question is from Erin Kyle from CIBC Capital Markets.

Erin Kyle: Maybe just a follow-up to that last 1 on the fundraising environment. Jay, I appreciate your comments around the unpredictability of the fundraising quarter-to-quarter. But maybe on that note, what gives you confidence on the trajectory towards that $6 billion to $9 billion in 2026? Maybe you have an idea of how much advanced fundraising is already soft circled or in discussions? And how that compares right now versus to where it did, yes, last year?

Jay Hennick: Well, for sure, it's way ahead of last year. And the confidence that we have is that we have new strategies in the marketplace this year, which we didn't have last year. We were completing our investment cycle in several of the funds last year. And this year, we're open with new funds and new investment opportunities. So there's a lot of investors looking at some of the unique Harrison Street products. Infrastructure is all the rage, as you know. Everybody is talking about data centers. That's a significant part of our business. I think we own 64. We've been in the data center business and Harrison Street for 6 years now. So this is a well-worn path for us.

In fact, we're considering in a couple of cases, selling assets early because of the heat to buy data center assets but our infrastructure doesn't end with data center. Data centers, there's all kinds of other infrastructure-related assets, long-term investment opportunities that are a part of our open-ended funds, new opportunities in our closed-ended funds. There's some separate investments that our teams are making. And then of course, let's go back to the demographically driven assets that we have in seniors, students, health care delivery, all of which have huge tailwinds. So one of the great things about this platform is that we have designed it to focus on a specific group of assets that have these tailwinds.

And that's what's giving us the confidence that -- and our results have been very good over decades. So all of that gives us confidence that this will be a strong year for us fundraising-wise. And we hope that we'll raise more money than the range that we give you that we've given you, but we are optimistic.

Erin Kyle: That's a lot of helpful color there. Maybe I'll switch gears to the Commercial Real Estate business. The capital markets growth was exceptionally strong this quarter. you're lapping a weaker comparative period, but are you able to identify like how much of that growth reflects pent-up demand versus a sustained improvement in buyer confidence here?

Christian Mayer: So Erin, we won't watch our capital markets business very carefully. I believe this is our seventh quarter of capital markets growth on a quarter-over-quarter basis. So the conditions for transacting continue to improve, credit availability, bid-ask spreads, the desire of our clients and market participants to transact is improving because they see more transactions happening, which gives more confidence to investors as well as to sellers. So nothing really in particular to note this quarter, but it is a continuation of this multi-quarter recovery in capital markets activity that we think we're in the early to mid-innings of a recovery. We have a couple of years at least to go to recover to prior peak transaction levels.

And I'd say we also have today, a bigger, stronger, more productive producer workforce in our Capital Markets business than we ever have had in the past. So we're feeling really positive.

Jay Hennick: And I would underline a comment that I made, 45% in capital markets growth was significant. But when you take it together with our transactions, we were at 25% between leasing and capital markets, we were industry-leading. And that's very telling when you consider the other players in the industry on a global basis.

Operator: Our next question is from Nevan Yochim from BMO Capital Markets.

Nevan Yochim: Nevan on for Steve today. You provided a little bit of color so far on the Outsourcing segment. I was hoping you could just touch on your expectations for growth in capital markets as well as leasing for 2026 and how that's expected to trend through the year?

Christian Mayer: Sure, Nevan. Obviously, we talked about the strong growth in our transaction business in the first quarter. I would expect that to continue on a full year basis. Capital markets growth on a full year basis somewhere in the 25% range. Leasing in the 8% range or so on a full year basis. And then rounding out our Commercial Real Estate business, outsourcing growing in the 5% range on a full year basis. So continuing to see strong growth, not necessarily at rates that we saw in the first quarter, which is the seasonal slow quarter. So growth there can be made to higher percentage numbers, but certainly on a full year base is looking very solid right now.

Nevan Yochim: Great. And we're seeing a strong recovery here in the capital markets and the CRE business. I'm wondering if you're able to quantify the remaining upside in a full recovery scenario?

Christian Mayer: Well, Nevan, I talked about we're probably a couple of years away from a full recovery. And as I mentioned, we have a bigger, better stronger and more productive workforce today than we've ever had in the past. We've been investing heavily into our debt finance business, capital markets, producers and various specialty asset classes. Multifamily being a big area of focus for us, which is a huge market that we have significant opportunity in for growth of market share. So we're -- we think we're going to have a nice long runway of recovery ahead here and looking to exceed prior high water marks at some point in the next couple of years.

Operator: Our next question is from Julien Blouin from Goldman Sachs.

Julien Blouin: Just curious any signs of caution in EMEA or APAC, maybe that decision-making is slowing one of your peers commented that they were seeing deals being canceled or delayed in Europe due to the geopolitical instability. So just wondering if you're seeing any of that and then how is that sort of working its way into your thoughts about the back half of this year?

Jay Hennick: I think it's true that Europe and APAC both are slowing. The strength of our results in the first quarter really came from North America. And the North American market continues to do well. We have some insight into the current quarter as well. But Europe is slowing, and we're watching it very carefully. And it's -- I think it's -- the geopolitical piece is part of it. There's other reasons as well. There's not as much access to financing in Europe, which is an opportunity we see long term.

Asia Pac is interesting because you've got some markets that are doing very well and you've got other markets that used to do well last year, for example, and all of a sudden, they're just stalled. So the beauty of having a global business and strong positions in many markets is you're geographically diversified. Not too many people talk about geographic diversification, and that creates another sort of stable business for us because you'll have some markets that will exceed in some markets that will be soft. And it will happen within service lines as well. I mean there was an earlier question, and I'm expanding your question here a little with an earlier question about outsourcing.

Well, what's happened in some markets in property management, for example, as developers are running into financial difficulty, they're deciding that they're going to take property management in-house and in our view, it's -- we've seen it so many times over the years. They do it for -- they do it for a year or two. They realize it's a very difficult business. It's a lot of employees to manage over wide geographies. And the better way is to have somebody that has a national platform like us to manage nationally and focus on the asset management side, but that doesn't stop some of those property -- some of those property owners that in-source property management.

So there's those kinds of things that are happening. But if you double-click and move back a little bit, the geographic diversification is what gives us confidence and strength in this wonderful platform we have called Colliers.

Julien Blouin: That's really helpful. Maybe latching on to that last point I'm seeing some in-sourcing from property owners. Do you think at all this is being impacted by AI that some of them are feeling maybe bolder or more capable with sort of advancements in AI to go ahead and in-source the property management functions?

Jay Hennick: There's no question like -- we have a massive property management business on a global basis. And there's no question that AI over time, will not only provide us with unique information that will hopefully differentiate us in this business, but also helps us streamline back office functions. But property management is -- it's a fair margin business. And so yes, there'll be a pickup in margin. We'll be better at what we do but I think you need a major player like us to be able to invest in the IT platforms necessary to bring better margins.

And so when a small player is in-sourcing because he thinks AI is going to enhance its margin, I think, is a bit naive.

Operator: Our next question is from Himanshu Gupta from Scotiabank.

Himanshu Gupta: So first on Investment Management, IM. I mean, it looks like $1 billion of fundraising in Q1. Was it in line with your expectations? And was there any funding done in Q2 so far?

Christian Mayer: Yes, Himanshu, we always want to raise more capital, of course. So our progress in Q1 was good. And I guess, what gives us more confidence and as part of the second part of your question, we have had closes here through April. So off to strong start. But look, we are continuing to focus on the full year fundraise with the products that we have in the market and our visibility and confidence is high. We raised over $5 billion last year, and we're very confident we're going to raise more than that this year with the -- the work we've done in terms of our products and our strategies as well as our fundraising capabilities, quite frankly.

Himanshu Gupta: Okay. And then within IM, how much private credit exposure do you have? And have you seen any impact so far in terms of redemptions or any read through for your business?

Christian Mayer: Himanshu, I want to be very clear on this. We have no corporate credit exposure at all in our business. We provide certain real estate asset-backed credit strategies and products. They're tied to real estate directly. We're not -- as I mentioned, not participating in any of this corporate type credit or these other troubled areas they may read about in the news.

Jay Hennick: And it's part -- it's also a small part of our business. you guys -- you can correct me if I'm wrong, but I'm thinking it's 6% of the AUM.

Christian Mayer: 8% or 10% of the AUM.

Jay Hennick: 8% or 10% of the AUM.

Christian Mayer: Backed by multifamily real estate very primarily very strong asset classes with strong underlying cash flows.

Himanshu Gupta: Got it. And no redemptions as such, I mean regarding this exposure?

Christian Mayer: No, exactly.

Himanshu Gupta: Moving on. Q4 margins in IM expected to be in below 40% net margin you mentioned. Is it predicated on you raising this $6 billion to $9 billion of fundraising? Or do you think if the fundraising is softer, this margin expectation will be revised down as well?

Christian Mayer: Well, Himanshu, our forecast, all assembles and fits together. So -- of course, we need -- we expect to raise $6 billion to $9 billion to expect to achieve the financial results that we've talked about for Investment Management, including that margin goal. A few things have to happen. Integration is progressing and we'll continue to progress towards year-end. And then, of course, fundraising will, by year-end, lead to higher quarterly revenues, which will which will give us the visibility going forward in terms of our margin profile.

Jay Hennick: Yes. And just to be clear, you raise capital and then you have to put it to work. So if we raise a range of capital during the year, and we start to put it to work, it doesn't pay dividends until the following year. There'll be some modest pickup but not material.

Himanshu Gupta: Yes, that's a good point. Okay. Maybe the last question here on CRE, Commercial Real Estate. Clearly, strong capital markets revenue, strong leasing revenues, as you mentioned. Maybe we did not see much operating leverage in Q1 in terms of incremental margins or incremental revenue. Is that correct?

Christian Mayer: Well, we did see some operating leverage Himanshu, in the quarter as I mentioned earlier on the call, which was partially offset by our investments in recruiting and in IT infrastructure. So I'll just mention that, again, the Q1 is our seasonal slow quarter in the business. We achieved a good flow through. And we have a couple of things I've pointed out as well as some things like seasonality in our producer mix that impact the flow-through in the quarter, but we're confident that we'll have higher flow-through later in the year as we did last year. You saw our margins pick up significantly in the third and fourth quarters, and that will happen again this year.

Himanshu Gupta: Got it. Maybe my final, final question here. So the question is really on synergies. Like synergies between Engineering and CRE, Commercial Real Estate. Have you identified? Can you even quantify and how did -- will be realized over time? And that's my final question.

Christian Mayer: Yes. So Himanshu, your question is about synergies between Commercial Real Estate and our Engineering business, and I think we've talked about a couple of times over the last few quarters about how our engineers are working with our capital markets professionals to help identify opportunities to qualify land acquisition to help with design activities, environmental assessments, property condition assessments. So that work continues in our Engineering business in consultation with our capital markets professionals, and it's something that is bearing fruit. I don't have any exact numbers for you at the moment in front of me, but it's an exciting additional avenue to differentiate ourselves and provide additional value to our clients, including some of our largest clients.

Jay Hennick: I mean let me just add some obvious ones we've talked about it on previous calls. If a client wants to assemble land, whether they want to build multifamily development, a data center, et cetera, et cetera, our CRE professionals know the land business, know where the opportunities are. They bring it forward. We are co selling to our clients, not only will we find the land, but we'll also entitle it. And that's where the engineers start getting involved, roads, power sources, water, a variety of other things. The client makes a decision, do you want to buy the land based on the engineering information.

If they do buy the land, we then go into what can be built, we can project manage the construction of the project and deliver it at the end of the day. And frankly, our Investment Management team is also looking at opportunities to invest in some of those applications. So more and more, our complementary services are working more closely together to either find, finance, entitle, build, own, all of these types of assets. And that's one of the unique features of what Colliers is trying to build as a provider of multiple services across the build environment. We believe all of these things are complementary. It's the same client base or similar client base.

It's high-value often very complicated services that need to be performed and having deep client relationships and knowledge of the market, both locally and internationally when it comes to financing these transactions gives our professionals huge advantage. So there's many examples, but I hope that 1 gives you sort of a deep understanding of what we're seeing out in the marketplace. This merger of these various professional services.

Operator: Our next question is from Jimmy Shan from RBC Capital Markets.

Khing Shan: Most of my questions have been answered. Just 2 quick ones for me. So first, just following up on capital markets. Are you seeing any impact from the recent rate volatility in decision-making even within North America, which has been strong? And then second, in terms of leverage. So on a pro forma basis, I think you'll be about 2.7x. And how should we think about the pace of M&A for the balance of the year?

Christian Mayer: So Jimmy, rate volatility that we've seen in North America has been a little bit higher. But at this point, not a major concern. Obviously, we'd like to see rates lower and more stable. But with these rate conditions still seeing significant interest in capital markets activity. In terms of our leverage profile, you will see with the Ayesa acquisition closing in the next few weeks, you'll see our Q2 leverage at the 2.9 to 3x level based on the seasonality of the business that in Q1 as our starting point, and we will see that leverage come down meaningfully in Q3 and Q4.

In the meantime, we're going to continue to be active looking at acquisitions of all kinds, but we're going to focus our efforts in the near term on tuck-in acquisitions that we can do at -- that are smaller, that we can do at reasonable prices and then make great strategic sense for us as we build out our platforms.

Jay Hennick: Christian makes a very good point. Acquisition pipelines are very interesting right now. And yes, on smaller transactions that expand capabilities, fill white space, et cetera. And let's not forget the Ayesa acquisition. One of the key strengths of that is it opens up 4 or 5 major markets for our Engineering business. And since the transaction was announced and consistently since then, we've been approached both at Colliers head office, but also the Ayesa management team about potential additions those that want to join as partners in the Ayesa business. So we're quite excited about what the future holds there.

And it was one of the great strengths of that potential acquisition for us because it gave us a significant foothold in so many different markets, mostly infrastructure related, highly complex. Ayesa's backlogs are stronger than ever. and the excitement level to enter the next phase of their growth is palpable. So all of these -- all -- the reason I raise all of this is we've got a buoyant pipeline of acquisitions. And -- but we are cognizant of our leverage ratio -- and that is -- that's something that we'll manage as we always have historically, but lots of stuff on the horizon.

Operator: Your next question is from Daryl Young from Stifel.

Daryl Young: Just one quick one for me on the Canadian Engineering and Project Management platform. Have you started to see any early signs of infrastructure spend or the defense industrial strategy working through into your pipelines? And do you anticipate that being an opportunity in the next few years?

Christian Mayer: Daryl, it's a definite opportunity for us. I know we're working on the port expansion in Quebec as an example. Also defense construction, there's a number of things going on there that are active on, on both project management and engineering. So that is work in the -- on the East Coast, work in the Arctic. The opportunities there are going to be manifold over the next few years.

Operator: Your next question is from Stephen Sheldon from William Blair.

Matthew Filek: Jay, Christian, you have Matt Filek on for Stephen Sheldon. On leasing, are you seeing any change in average lease duration on new lease signings? Just curious if the current macro environment has tenants maybe taking a more cautious approach when it comes to making longer-term lease commitments?

Jay Hennick: It's an interesting question because I think it's a bit of a bifurcated market. When you're -- when the leases are in AAA type properties, the duration seems to be longer. In suburban properties, it's about the same as it's always been. And that's primarily because people are returning to the office and -- number one. And number two, the lease rates in suburban office have fallen so much. It's very attractive for many to take on more space. Everybody is talking about increased spend around technology and that's helping office occupancy as well. So yes, those are the kinds of things that we're seeing out there.

Matthew Filek: Okay. I appreciate that. And then I just had a quick one on data centers. I think you've previously mentioned that roughly 10% of AUM in Investment Management isn't tied to data centers. I'm just curious how you see that mix evolving over time given the obvious tailwinds supporting that asset class? And related to that, if you could provide any additional color on how other parts of the business are benefiting from the data center theme, that would be great.

Jay Hennick: Well, I don't have the exact number, the exact numbers, but I do know that we've been in the business for 6 years. This isn't a Johnny come late lease situation. And we're looking at a lot of opportunity right now, but we're also looking at the opportunity of selling some strategic assets that we've owned for a while because the prices are significant. And so all of those types of things are being factored in. I know everybody's raving about data centers and is there enough computing power and all of those kinds of things.

But our teams at Harrison Street have been deep in this area for a long time, and they're looking at it as they would any other real estate investment. And they believe that if they can deliver some significant returns to their investors because of the market timing right now, it will just help them raise capital for the next fund. So that's some additional color for you.

Operator: Your next question is from Maxim Sytchev from National Bank Capital Markets.

Maxim Sytchev: First, I was wondering if you don't mind mentioning the organic growth in the Engineering space because I guess we're lapping on Global suburb, but I'm not sure if you have the number for it somewhere?

Christian Mayer: Yes. Max, the growth was in the mid-single digits, but we don't talk about quarterly growth on a segment basis, as you're probably aware. So not nice growth, though, as I mentioned, a mix of organic growth and acquisitions in the Engineering space.

Maxim Sytchev: Okay. And then do you mind maybe talking about potentially digital investments in the Engineering business as obviously, some of the peers are sort of looking to ramp up the capability there? I was wondering what you guys are doing internally?

Christian Mayer: Yes. Max, I didn't catch the first part of that question, if you could repeat it.

Maxim Sytchev: Sorry, yes, just your strategy around digital investments and sort of augmented AI capability when it comes to the design side of the business as generally speaking, the bigger players seem to be moving in that direction. I'm just wondering what is sort of your color, your strategy from that perspective?

Jay Hennick: Well, as I mentioned in my comments, we've increased significantly our spend around IT. A significant portion of that is around AI. We think, as we move down as we move down the decision -- and the other thing I should say is it is not only have we increased our expenditures, but we partnered with Google, and it's a very deep partnership. And Google brings with it leading cloud capabilities, world-class engineering talent and also additional databases, property databases that will help us differentiate ourselves in the marketplace, will help us streamline some of our back office functions, many of which we've been working on for the past couple of years.

But the increased expenditure is in part because we believe that we have to take control of some of the delivery of technology for the first time perhaps in our history. And that's bearing some interesting fruit as we move through this. So that hopefully gives you a little bit of an overview.

Operator: There are no further questions at this time. I will now hand the call back to Jay Hennick for the closing remarks.

Jay Hennick: Thank you, everyone, for joining us on the first quarter conference call. We look forward to speaking to you again at the end of the second.

Christian Mayer: Thank you.

Operator: Thank you, ladies and gentlemen. This concludes the conference call. Thank you for your participation, and have a nice day.

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