Colliers International Group Inc.

Welcome to the Collier's International First Quarter Investors' Conference Call. Today's call is being recorded. Legal counsel requires us to advise that the discussions scheduled to take place today may contain forward-looking statements that involve known and unknown risks and uncertainties. Actual results may be materially different from any future results, performance, or achievements contemplated in the forward-looking statements. Additional information concerning factors that did cause actual results to maturely differ from those in the forward-looking statements is contained in the company's annual information form that's filed with the Canadian Securities Administrators and in the company's annual report on Form 40F that's filed with the U.S. Securities and Exchange Commission. As a reminder, today's call is being recorded. Today is Tuesday, May 5, 2026. And at this time, for opening remarks and introductions, I would like to turn a call over to the Global Chairman and Chief Executive Officer, Mr. Jay Hennick. Please go ahead, sir.

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 in the presentation materials are available on our website. Collier's 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. Collier's is built to compound shareholder value through three growth engines across the built 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 Collier's greater stability through market cycles, and more growth opportunity than others. These attributes together with our enterprising culture and meaningful insight ownership has 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 Malamuto 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 program and an extension of our revolving credit facility, supporting the acquisition of IESA 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 IESA 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 healthcare delivery. Over more than two 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?

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 a 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 of the 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, but most notably data center development land and office. The UK, 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%, up 20 basis points over the prior year first quarter, with operating leverage from higher transactional revenues partially offset by investment and 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 a 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 to $9 billion. Our balance sheet is strong with leverage at 2.3 times, reflecting seasonal working capital usage and with $1.5 billion in total credit availability as of March 31st. We expect to complete the acquisition of AESA 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 and 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. Operators, can you please open the line for questions?

Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you wish to ask a question, you may press star 1 on your telephone keypad. Should you wish to cancel your request, you may press star 2. Once again, that is star 1. Should you wish to ask a question, Our first question is from Anthony Polanyi from JP Morgan. Your line is now open.

Great. Thanks. Good morning. My first question relates to, I think, in engineering, some of the utilization being down a little bit. 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 somebody's end markets may ebb and flow, and just maybe give us a little bit more insight into how that business works in that manner.

Yeah, it's a great question, Tony. We have a well-diversified engineering business that currently operates in three major markets, Canada, the U.S., and Australia. And in each country, we have a number of companies highly predictable and high demand end markets, including infrastructure, transportation, property, buildings, revenue development, telecommunications, 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 as it flows like we are seeing today in residential development and in telecom. So we manage business for consistency in 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 that we do expect. then these two areas will rebound in the coming quarters.

Okay, thanks. And then my follow-up question relates to you all mentioning making some investments into the CRE segment. Can you talk more specifically about, you know, what types of investments there may be, whether it's people or other types of items and, you know, kind of where you see the opportunity in making those investments?

Tony, there's really two 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 account markets and leasing business in major markets around the world. And so that's the primary focus. Secondarily, and we've talked about this 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, you know, those are the areas that we're investing in.

Okay. Thank you.

Thank you. And our next question is from Frederick Boston from Raymond James. Your line is now open.

Good morning, everybody. So we had some pretty solid results from the theory segment. However, outsourcing growth was a bit on the soft side. Was there any tough comparables that you were laughing or just want to get a bit more color on what transpired here?

Uh, no, uh, no real, uh, notable, uh, tough compares. Um, we had, uh, uh, you know, uh, slightly slower than we had hoped growth there, uh, still in the low single digits, but, uh, um, you know, nothing really of note. And then we hope on a full year basis that our growth will accelerate in that outsourcing area.

Okay. Thanks. Uh, switching gears to investment management. We, um, Saw some pretty good growth, obviously some acquired growth in there as well. But as we look at the next couple quarters, how do we, how can we expect the pace of revenue to ramp both on an organic basis, fundraising, acquisition, and the like?

Thank you. So, IM is very interesting because, as you know, we have spent the last couple quarters, and it's going to continue for a while, bringing together our four 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 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 Christian mentioned. We're holding our forecast at six plus a billion of new capital. We've also returned a lot of capital this past quarter to our investors in terms of property sales versus revenue. 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 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 two decades, but now new opportunities and 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 where IN will be in the next several quarters.

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 ramp up more into the back half of the year?

I'm sorry, I didn't hear that full question there, Frederic.

Yeah, 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 the back end?

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, 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. You can't really predict it.

Okay. Thanks, Jay. Appreciate the call.

Thank you. Our next question is from Erin Kyle from CIBC Capital Markets. Your line is now open.

Hi. Good morning. Thanks for taking the question. Maybe just a follow-up to that last one 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 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 last year.

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. You know, 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 at Harrison Street for six 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, you know, let's go back to the demographically driven assets that we have in seniors, students, healthcare delivery, all of which have huge tailwinds. So one of the great things about this platform is that we have 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, 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, you know, we hope that we'll raise more money than the range that we've given you, but we are optimistic.

Thank you. 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 how much of that growth reflects pent-up demand versus a sustained improvement in buyer confidence here?

So, Erin, you know, we 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, you know, the conditions for transacting continue to improve. Credit availability, bid asks, 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 You know, we think we're in the early to mid-endings of a recovery. We have a couple of years at least, you know, to go and 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.

And I would underline a comment that I made. You know, 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.

Thank you. I'll pass the mic.

Thank you. Our next question is from , from BMO Capital Markets. Your line is now open.

Thanks. Good morning, guys. 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 and capital markets as well as leasing for 2026 and how that's expected to trend through the year.

Sure, Nevin. 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, you know, continuing to see strong growth, not necessarily, you know, at rates that we saw in the first quarter, which is the seasonal slow quarter. So growth there can lead to higher percentage numbers, but certainly on a full-year basis looking very solid right now.

Great. Thanks, Christian. And You know, we're seeing a strong recovery here in the capital markets and the CRA business. I'm wondering if you're able to quantify the remaining upside in a full recovery scenario.

Well, you know, Nevin, I talked about, you know, we're probably a couple years away from a full recovery. And as I mentioned, we have a bigger, better recovery. stronger and more productive workforce today than we've ever had in the past. We've been investing heavily into, you know, 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, you know, we're... You know, we think we're going to have, you know, 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.

Great. Thanks for taking a stab at that question.

Thank you. Our next question is from Julian Bloom from Goldman Sachs.

Yeah, thank you for taking my question. Just curious, are you seeing 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?

I think it's true that Europe and APAC both are slowing. You know, the strength of our results in the first quarter really came from North America, and the North American market continues to do well. You know, we have some insight into, you know, the current quarter as well. But Europe is slowing. And we're watching it very carefully. And I think 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. AsiaPAC 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, you know, 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 you know, another sort of stable business for us because you'll have some markets that will exceed and some markets that will be soft. And it'll happen within service lines as well. I mean, you know, there was an earlier question, and I'm expanding your question here a little. There was 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, you know, in our view, we've seen it so many times over the years. They do it for money. You know, 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 owners to insource 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.

Thank you. That's really helpful. Maybe latching on to that last point on seeing some insourcing 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 insource the property management functions?

You know, 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 a fair margin business. And so, yes, there'll be 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 insourcing because he thinks AI is going to enhance his margin, I think is, you know, is a bit naive.

Great. Thank you, Jay. Very helpful.

Thank you. Our next question is from from Scotiabank. Your line is now open.

Thank you, and good morning. So, first on investment management, looks like $1 billion of fundraising in Q1. Was it in line with your expectations, and was there any fundraising done in Q2 so far?

Yeah, 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 is part of the second part of your question. You know, we have had closes here through April. So off to a 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. You know, we raised over $5 billion last year, and we're very confident we're going to raise more than that this year with the work we've done in terms of our products and our strategies, as well as our fundraising capabilities, quite frankly.

Okay. Thank you, Christian. And then within IAM, How much private credit exposure do you have and have you seen any impact so far, you know, in terms of redemptions or any read-through for your business?

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 that you may read about in the news.

Okay.

Thank you so much. And it's also a small part of our business. You guys can correct me if I'm wrong, but I'm thinking it's 6% of the AUM.

Yeah, it would be 8% or 10% of the AUM. 8% or 10% of the AUM. you know, very, you know, primarily very strong asset classes with strong underlying cash flows.

Got it. And no redemptions as such, I mean, regarding this? No.

No, exactly.

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

Well, Himanshu, our forecast all assembles and fits together. So, you know, of course, we expect to raise $6 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. You know, integration is progressing and will continue to progress towards year-end. And then, of course, you know, fundraising will, by year-end, lead to higher quarterly revenues, which will give us the visibility going forward in terms of our margin profile.

Yeah, and just to be clear, You raise capital and then you have to put it to work. So if we raise, you know, our 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.

Yeah, that's a good point. Thanks. Thank you for that. Okay, maybe the last question here on CRE, commercial real estate. Clearly, you know, strong capital markets revenues, strong leasing revenues, as you mentioned. Maybe we did not see much operating leverage in Q1, you know, in terms of incremental margins and incremental revenue. Is that correct?

Well, we did see some operating leverage in Manchu 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, you know, a good flow through and, again, We have a couple of, you know, 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'll happen again this year.

Thank you. Maybe my final question here. So the question is really on synergies, you know, like synergies between engineering and CRE, commercial estate. Have you identified, can you, you know, even quantify on how they will be realized over time? And that's what I'm asking.

So to answer your question is about synergies between commercial real estate, and our engineering business. And, you know, I think we've talked about a couple times over the last few quarters about how our engineers are working with our capital markets professionals to help identify opportunities to qualify, you know, land acquisition, to help with design activities, environmental assessments, property condition assessments. So that work, you know, continues in our engineering business and in consultation with our capital markets professionals. And it's something that is bearing fruit. I don't have the 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.

Let me just add some obvious ones. We've talked about it on previous calls. You know, if a client wants to assemble land, whether they want to build a 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 the unique features of what Collier's is trying to build as a provider of multiple services across the built 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 one gives you sort of a deep understanding of what we're seeing out in the marketplace, this merger approach. of these various professional services.

Go ahead. No, this is a great color. Thank you, Jay and Christian, and I'll turn it back. Thank you.

Thank you. Our next question is from Jamishan from RBC Capital Markets. Do you remind us of open?

Thanks. Yeah, most of my questions answered. Just two 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 it will be about 2.7 times. How do we think about the pace of M&A for the balance of the year?

So, Jimmy, you know, You know, rate volatility that we've seen in North America has been, you know, 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, we're still seeing, you know, significant interest in capital markets activity. In terms of our leverage profile, you will see, you know, with the ISA acquisition closing in the next few weeks, you'll see our Q2 leverage at the 2.9 to 3 times level based on the seasonality of the business 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 that are smaller, that we can do at reasonable prices, and that make great strategic sense for us as we build out our platforms.

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 IESA acquisition. One of the key strengths of that is it opens up four or five major markets for our engineering business. And since the transaction was announced, And consistently since then, we've been approached both, you know, at Collier's head office, but also the IESA management team about potential additions, those that want to join as partners in the IESA business. So we're quite excited about what the future holds there. and 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. AESA's backlogs are stronger than ever, and the excitement level to enter the next phase of their growth is palpable. So the reason I raise all of this is we've got a buoyant pipeline of acquisitions, but we are cognizant of our leverage ratio, and that's something that we'll manage as we always have historically, but lots of stuff on the horizon.

Okay. Thanks for the call.

Thank you. Your next question is from Darrell Young from Seagull. Your line is now open.

Hey, good morning, everyone. Just one quick one from 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 couple of years?

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

Okay, great. Thanks very much.

Thank you. Your next question is from Stephen Sheldon from . Your line is now open.

Hey, Jay and Christian. You have Matt Filek on for Steve and Sheldon. Thank you for the questions. 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.

It's an interesting question because I think it's a bit of a bifurcated market. 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, yeah, those are the kinds of things that we're seeing out there.

Okay. Thanks for that color, Jay. Appreciate that. And then just had a quick one on data centers. I think you previously mentioned that roughly 10% of AUM and investment management is tied to data centers. And just curious how you see that mix evolving over time, given the obvious tailwind 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.

Well, you know, I don't have the exact number, the exact numbers, but I do know that we've been in the business for six years. This isn't a Johnny-come-lately 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 into I know everybody's reading 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.

Got it. Yeah. Thank you both. Appreciate the time.

Thank you. Our next question is from Maxine from National Bank Capital Market. Your line is now open.

Thank you, gentlemen. Christian, I was wondering if you don't mind mentioning the organic growth in the engineering space, because I guess, you know, overlapping and global, et cetera, but I'm not sure if you have the number floating around somewhere.

Yeah. Max, the growth is in the single digits, but we don't talk about quarterly growth on a on a segment basis, as you're probably aware. So, nice growth, though, you know, as I mentioned, a mix of organic growth and acquisitions in the engineering space.

Okay. Thanks a lot. And then, Jim, I may be talking about potentially digital investments in the engineering business, as obviously some of the peers mentioned. are sort of looking to ramp up the capability there. I was wondering what you guys are doing internally. Thanks so much.

Max, I didn't catch the first part of that question. If you could repeat it.

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

Well, you know, as I mentioned in my comments, we've increased significantly our spend around IT. A significant portion of that is around AI. And we think as we move down the decision, and the other thing I should say 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, you know, 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.

Yeah, that's a great call. Thank you so much, Jay.

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

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. Thank you.

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