Jay Hennick: In terms of re-ups, we’re seeing the same percentages as prior years or prior fund re-ups. What we are seeing is we’re seeing adjustments in the allocation. So some of them, if they’re tight or they’re not balanced properly, will increase or reduce the amount of commitment to the next fund, but virtually 92% or 93% of re-ups has been sort of a consistent theme for us for many years and then introducing — and that’s one of the great things about this business. It’s so recurring as long as your investors are happy with the results and the way in which their investments are being managed and then we’re introducing new investors, especially during these times and especially to the types of assets that we focus on, which are alternative asset classes, which are very much in demand.
And so I would say there’s a softness in fundraising generally. It’s changing but it’s changing for the better. But in terms of re-ups, we’re where we need to be. The other thing that we’ve invested in is the RIA channel through one of our platforms that has a very significant presence. We’ve doubled our investment around raising capital up through the RIA channel. And — so we’re quite excited about the asset management component of our business and think that all these investments, particularly in times like this, will pay dividends down the line. And it’s not just going to be this year, it’s going to be next year and beyond. So new products in the marketplace, more investment in distribution capabilities. All of those types of things are the things that you do to build a great platform, which we’re doing.
We’re also investing in — I should say — I should have said this at the outset, topgrading our people. We’ve got some exceptional people, but there’s opportunities to add different asset classes, which means you need to bring in different expertise around data centers and a variety of other things that we’re working on that just make our platform that much better.
Operator: The next question comes from Stephen Sheldon at William Blair.
Stephen Sheldon: I want to start with Chris. Curious what you’re seeing in terms of industrial leasing activity. It sounds like the 2% overall leasing growth in the quarter was driven by pickup in office. So it would just be great to get some color on what you’re seeing on the industrial side and whether things are weakening there? Just kind of how the trajectory is looking on the industrial side for leasing?
Christian Mayer: So I think in the industrial leasing, there’s been a natural cooling after the record-breaking run up after the COVID boom in e-commerce in ’21 to ’23. Occupiers today are generally concerned about economic conditions and the geopolitical concerns and they’re also focused on looking at efficiencies and looking at their existing locations and what can automation do to their facilities. There’s also been an increase in vacancy in a number of markets, and so there’s more options for occupiers to look at. And so they’re taking some more time to analyze what their footprint should look like going forward. So I think it’s a natural pause in the cycle. The market is still a good market. But I guess the level of velocity of leasing transaction in industrial is not the same as it was in the record-breaking times just after COVID.
The one outlier is that in Canada, we had considerable leasing growth in industrial up 41% year-over-year. So that was the one bright spot. Most of the places around the world, industrial leasing was down. In talking to our operators in the field, I think there’s also a little bit of a delay from quarter-to-quarter, so some slippage. I’ve heard of some larger deals in Australia, Poland and the U.S., notably that could show up in Q2.
Stephen Sheldon: And maybe just thinking about the US, how are you thinking about your producer capacity and positioning for when capital markets activity picks up? I think you talked last quarter about record recruiting in the US during 2023. You now also have some more scale with the Philadelphia acquisition. So are you getting closer to the scale that you’d like in the US? And how important is it to continue how do you scale, I guess, through acquisitions, specifically in the US.
Christian Mayer: So I think we continue to recruit top talent, and we’ve got lots of white space in the US. Our market share is still quite low compared to our major competitors. So this is a priority focus of management to continue to bolster our teams, and we’ll do that through either acquisitions like our affiliate in Philadelphia or teams or individuals. So it is still very much a priority. In addition, we’re looking at productivity, how do we get more production out of our existing talent and making sure that if there’s any nonperformers that — we’re moving them out and then our high potentials, we’re investing in those people to make sure that they can perform when the market comes back. So this is still a major initiative of ours to continue to push into capital markets in the US.
Stephen Sheldon: And then just one last one for Christian. As we think about our models, tax rates were a little elevated relative to at least what we had modeled for the quarter. So just curious if you have any framework for how we should think about the tax rate over the rest of the year and what you’ve assumed in the guidance.
Christian Mayer: Yes, Stephen, there was a onetime item in Q1 for a couple of million dollars. So absent that, the rate would have been 30% in the quarter, and we expect the rate to be 30% on a full year basis as well.
Operator: The next question comes from Himanshu Gupta at Scotiabank.
Himanshu Gupta: So just on the 2024 guidance, just clarifying, do you have M&A built into in this guidance? I mean, I know you have done the equity offering now, which was previously not there at the time of original guidance.
Christian Mayer: Himanshu, I think you’re asking about acquisitions in the guidance? The answer is no. There’s no acquisitions built into the guidance. And the guidance does include the impact of the recent equity offering.
Himanshu Gupta: And then, I mean, given that the guidance is unchanged, has the outlook changed within the segments? I mean are you — were you still expecting one third of the growth from IM and one third of the growth from capital markets business last quarter as well?
Christian Mayer: Himanshu, I think the components of that outlook are the same, one third from outsourcing and advisory, one third from investment management and one third from the transactional business. That’s consistent with what we thought back in February.
Himanshu Gupta: And any incremental weakness baked into the capital markets business? I mean, it looks like the leasing looks to be performing better than expectation and maybe capital markets given the interest rate could be a bit softer. So within two segments, any change in direction?
