Christian Mayer: The traditional funds.
Unidentified Analyst : Got it. Thanks, thanks helpful. I’ll get back into the queue.
Operator: Thank you. Next question will be from Frederic Bastien at Raymond James. Please go ahead.
Frederic Bastien: Hi, good morning.
Chris McLernon: Hi, Frederic.
Frederic Bastien: Hey. Guys, your margins in the Americas region held up quite nicely in the back half of the year, which really speaks to the solid work you did rightsizing your cost structure. How should we think about the margin profile evolving over the course of 2024 as you turn your focus on growth again and really start loosening the belt? Thanks.
Christian Mayer: Yes, Frederic, that’s a good question. We’ve taken, particularly in the Americas, very aggressive cost control actions through 2023. And as we look ahead, we’ve also taken action to – on recruiting, which has been a cost that we borne through this period. But as we look ahead, we expect obviously revenues to grow in the Americas, both on the Outsourcing business as well as in capital markets and to a lesser extent, leasing. Margins will improve somewhat, but we do have some variable costs coming back into the business and also some incentive compensation that will come back to the business, so expecting a modest margin improvement in 2024 across the Americas.
Jay Hennick: The only other thing I’d add to that is any acquisition growth, particularly in the recurring segments of our business, would have higher margins naturally. So the mix might change.
Christian Mayer: The mix might change. Yes.
Frederic Bastien: Right. No, no, correct. I was just more curious about capital markets and leasing, that type of the brokerage business, but you provided some great color here. Thanks. That’s all I have. It looks like looks obviously positive outlook going forward. It’s nice to see and good luck on the year.
Christian Mayer: Thanks, Fred.
Chris McLernon: Thanks, Fred.
Operator: Thank you. [Operator Instructions] And your next question will be from Maxim Sytchev at National Bank. Please go ahead.
Maxim Sytchev: Hi, good morning gentlemen.
Chris McLernon: Hi.
Maxim Sytchev: Jay, Christian, I was – if you don’t mind, maybe talking a little bit about some cross-selling traction/successes now that you have, obviously, a bigger portion coming from engineering and outsourcing stresses, and they are a bigger part of the overall portfolio. Just maybe any KPIs you can share with us it would be helpful. Thanks.
Jay Hennick: There is cross-selling all over the place. As we get bigger, the actual examples are smaller in dollar value, but very significant cross-selling between our engineering segments and our real estate segments because we’re really – in most of our engineering, particularly around property level, we’re helping developers set the land up for zoning, putting in the necessary support services so that our developer clients can build houses, can build high rises, and so on. And so it gives us a great opportunity to stay longer with the existing client. That’s just one example. The other example that just keeps continuing to bear fruit is from a project management standpoint, when our developer clients want to build a multifamily building or an office building, not happening as much particularly in North America, but there is lots of medical office, there is lots of seniors, there is lots of other infrastructure assets.
They need third-party project management firms to manage the construction project on behalf of the owner to ensure that the costs are in accordance with the budget. And if not, there is immediate action taken. We’ve enjoyed some great cross-selling opportunities between our project management clients and our developer clients in areas such as that. And we think it’s going to continue to accelerate because construction is becoming much more costly, much more sophisticated, there is a lot of value engineering that’s happening. So the partnership between an exceptional project manager and a developer becomes more important than ever. So as Colliers continues to evolve as an organization, our philosophy is to move upmarket and to be a more valued partner to our clients that are either developing, and/or renovating and/or upgrading their buildings.
The same thing applies with ESG and the initiatives that we have around ESG. And somebody has to analyze the building and determine how to bring the building up to a better standard from an ESG standpoint, or as Chris McLernon mentioned earlier, to be more attractive as an office building, for example, to leasing clients. Well, once that determination has been made and capital has been allocated, somebody has to do the work, somebody has to estimate what that has – what happens, somebody has to manage the construction project. Generally, there’s a long tenure to that. It could be a five-year construction project, it could be a 3.5-year construction project or a renovation project of two years. So all of these services that Colliers has entered over the past five years have all been additive from a standpoint of recurring revenue, obviously.
But I think your question is an excellent one because what it doesn’t – what we really haven’t articulated as I think about it, is the great synergies that happen between the various component parts of what we do for clients on the field. And so that’s bearing some exceptional fruit for us virtually around the world.
Chris McLernon: Just to add to that, Colliers has a culture of collaboration. I can give you a benchmark. Within the U.S., 20% of the revenues come from collaboration and cross-selling.
Maxim Sytchev: Okay. Is there a figure that you think you’d like to target over time? Like obviously, I understand you’ll have to do work for kind of external clients. But can the 20% become 30% in ten years? Or how should we think about this?
Chris McLernon: Yes, I think it’s something that we’re always working on, taking a holistic approach with our clients. So selling multiple service lines and what we call as a sticky client, if you can get four or five different service lines. So, it’s constantly part of what we’re trying to offer to our clients and 20% is a great benchmark. And if we can improve that, so be it.
Maxim Sytchev: Excellent. That’s super helpful. Thank you. And then just one last question, in terms of sort of the discount interest rates, and I’m not trying to sort of belabor it, but when you kind of think about sort of the back half resumption on the transactional set of things, are you looking potentially I don’t like the dot plot and assuming five rate cuts that are necessary to restart the transaction velocity? Do you mind maybe providing a bit of kind of a range of potential outcomes that you are imputing into the guidance, or maybe it’s a little less mechanistic from that perspective? Just maybe any color there would be super helpful. Thanks.
Chris McLernon: Yes, Max, we’re not quite that scientific about it. Obviously, we can’t control what the Fed is going to do next month or three months from now. But certainly, we gauge market sentiment. We have operators around the world that are talking to clients every day. And as Chris mentioned in his comments, these conversations are turning more positive. We’re more engaged than ever with clients and looking at transactions that they want to complete, both on the buy side and on the sell side. And it has been an 18-month period of quiet in the market. So there is pent-up demand, and we’re seeing it. And that gives us, I think, a reasonable amount of visibility here into the back half of the year and a resumption of some level of activity. I think it’s a relatively modest resumption, and that will hopefully be the catalyst for a more significant rebound in activity in 2025.
Maxim Sytchev: Makes sense. Thank you so much.
Operator: Thank you. And at this time, Mr. Hennick, we have no other questions registered. Please proceed.
Jay Hennick: Well, thank you, everyone, for joining us on this fourth quarter conference call. We look forward to reporting hopefully, positive results in the first quarter and convening another call like this. So, thank you for participating, and we will speak to you soon.
Operator: Ladies and gentlemen, this does indeed concludes the conference call. Thank you for your participation, and have a nice day.
