Cushman & Wakefield plc

Welcome to the Cushman and Wakefield fourth quarter 2020 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star followed by the number two. It is now my pleasure to introduce Len Texter, head of investor relations and global controller for Cushman and Wakefield. Mr. Texter, you may begin the conference.

Thank you and welcome again to Cushman & Wakefield's fourth quarter 2020 earnings conference call. Earlier today, we issued a press release announcing our financial results for the period. This release, along with today's presentation, can be found on our investor relations website at ir.cushmanwakefield.com. Please turn to the page labeled forward-looking statements. Today's presentation contains forward-looking statements based on our current forecast and estimates of future events. These statements should be considered estimates only, and actual results may differ materially. During today's call, we will refer to non-GAAP financial measures as outlined by SEC guidelines. Reconciliations of GAAP to non-GAAP financial measures and definitions of non-GAAP financial measures are found within the financial tables of our earnings release and appendix of today's presentation. Also, please note that throughout the presentation, comparison and growth rates are to comparable periods of 2019 and are in local currencies. For those of you following along with our presentation, we began on page five. And with that, I'd like to turn the call over to our Executive Chairman and CEO, Brett White. Brett.

Thank you, Len, and thank you to everyone joining us today. Before I start with a brief review of our fourth quarter performance, including some color by region and service line, I wanted to let you know we have again invited Kevin Thorpe, our Chief Economist, to join us today to provide some commentary on the recovery, and more specifically, office. Following Kevin's comments, Duncan will provide additional detail on our financial results for the quarter and the full year. First, I want to thank our team of Cushman and Wakefield professionals around the world. It goes without saying that 2020 was incredibly challenging, and our employees' perseverance, creativity, and service to our clients continue to go above and beyond. From those who have continued to support frontline operations through the pandemic to those delivering new and unprecedented solutions to our clients, I continue to be extremely proud of how our people have risen to the occasion. Second, as previously announced, our Chief Financial Officer, Duncan Palmer, will be retiring as of February 28th. Duncan is a first-class CFO. He's been a terrific partner to me, and has added significant value to Cushman and Wakefield, and I can't thank him enough for his work and friendship over the past six years. From the merger to numerous acquisitions to a very successful IPO, a global pandemic, and everything in between, he has excelled, and we wish Duncan all the best in his next chapter. Neil Johnston, our incoming chief financial officer, has an impressive pedigree as well, and we are lucky to have him and look forward to him becoming CFO on February 28th. Neil brings 30 years of finance and executive leadership experience, having previously served as the CFO of Presidio and Cox Automotive. Neil is looking forward to meeting our investors and analysts in the coming months, and we look forward to him joining us on our first quarter earnings call. And with that, let me turn to our results. Richmond and Wakefield reported fourth quarter consolidated fee revenue of $1.6 billion and adjusted EBITDA of $198 million. Overall, we were encouraged by the performance across our portfolio, including brokerage, where revenue exceeded expectations, particularly in America's capital markets. Additionally, we delivered significant cost savings in the quarter, from the decisive cost management actions taken earlier in the year, as well as our continued tight management of discretionary costs. For the full year, we reported fee revenue of $5.5 billion and adjusted EBITDA of $504 million. The impact of leasing and capital markets revenue declines of 34% and 26%, respectively, were partially offset by the continuing stability of our PMFF service lines and over $300 million of cost savings realized in-year in 2020. For the year, our decremental margins were 24%, which was consistent with our guidance. Duncan will provide additional detail on our results for the quarter and full year. I would summarize our fourth quarter results as a balance of encouraging signals on business activity, especially in brokerage, and validation of our commitment to operational excellence. We have executed very well in a very fluid and uncertain environment. With that, let me provide an overview of the market and what we saw across our service lines in the fourth quarter. As expected, our PMFM service lines were a continuing source of stability this year. These contractual fee-based revenue streams represent just over half of our total portfolio this year. Throughout the pandemic, our teams in these businesses have been directly supporting our clients by keeping essential buildings open, reconfiguring offices and retail outlets for social distancing, providing enhanced cleaning and specific facility services to ensure buildings are safe for tenants. In addition, our global occupier services business continue to win new assignments and renew existing client engagements for outsourcing services, as large occupiers continue to focus on operational efficiency through the down cycle, including recent wins or renewals with Citibank, Digital Realty, and Sun Life Financial, just to name a few. On balance, we expect to continue to benefit from these trends, as Cushman & Wakefield is one of the three large firms that provide comprehensive and scaled outsourcing solutions on a global basis. As mentioned, brokerage activity was ahead of what we expected for the quarter, as leasing and capital markets were down 37% and 14% respectively. More specifically, we saw capital markets in Americas decline just 3% versus the fourth quarter of 2019. Capital markets revenue was driven by a couple of factors. First, there remains a significant amount of capital that has been raised for commercial real estate investment sitting on the sidelines. Transaction velocity that had been lower at peak pricing has accelerated as sales prices and resulting buyer return requirements have narrowed over the year in a very low interest rate environment. We believe that sellers were more active in anticipation of potential changes to tax rates with the new U.S. administration. In leasing, we continue to see positive momentum for industrial warehouse and data center space, which was already performing well. As we have discussed, near-term office fundamentals remain less clear as businesses continue to assess space requirements, as vaccinations become more abundant, and the recovery advances. As you will hear from Kevin in a minute, we believe, and as the data shows, the structural impacts of work-from-home trends will likely be offset by economic growth and office-using job growth, which will lead to a full recovery in office over time. I regularly hear from other CEOs on the significance of the office to their organizations. Kevin will highlight some recent data that echoes these sentiments and more specifically points out the importance of the office for collaboration, team building, and culture. Turning to the balance sheet, our capitalization remains strong with cash at more than $1.1 billion and liquidity totaling $2.1 billion. Going forward, this strong financial position gives us tremendous flexibility and positions us to take advantage of growth opportunities, including infill, M&A, or larger opportunities should they arise. Going forward, The outlook for 2021 contemplates continuing uncertainty in the near-term environment, and in particular, a challenging first half. We anticipate continued stability and growth in PMFM and some level of recovery in year-over-year brokerage revenue, particularly in the second half of the year. We remain very focused on operational excellence and plan to deliver additional permanent cost reductions in 2021, building on our strong execution in 2020. These permanent cost reductions will largely replace many of the temporary cost reductions we realized in 2020 and should, in the long term, enable a return to 2019 margins even before the recovery in brokerage revenue is complete. As we said on the third quarter call, we do expect an increase in operating costs in the first half of 2021 driven by a return to a more normal year of bonus compensation for non-fee earner staff. Despite the ongoing near-term challenges faced in the industry, we believe the consolidation of share to firms like Cushman and Wakefield that have the capability, resources, and scale to solve the challenges our clients face each day will likely continue to increase. In summary, I continue to be very proud of our team and our execution throughout this past challenging year. Cushman & Wakefield's holistic expertise, global market intelligence, and thought leadership have never been more important to our clients. With that, I'd like to turn the call to Kevin to provide a few comments on the recovery and more, specifically office. Kevin?

Thank you, Brett, and hello, everyone. If you could please turn to slide six. From a market-wide perspective, if I had to sum up the impact that the pandemic is having on property in one word, that word would be uneven. Depending on the property sector, the geography, the virus's trajectory, the policy response, we continue to observe a mix of strong performance in certain sectors, weak performance in others, and varying degrees in between. Clearly, the situation remains fluid. The trajectory of the virus, the rollout of the vaccines, confidence, all of these are still moving targets. So admittedly, the outlook remains clouded, and we're making predictions during a period of exceptional uncertainty. But we also learned a lot last year, which will help inform the future. As we look ahead, most economists are cautiously optimistic that the worst of the pandemic's impact on the economy is largely behind us. By extension, the worst of the impact on the property markets is also largely behind us. The path of the virus is central to the recovery, so let me start there. As you know, it was a difficult start to 2021. The spread of the virus was intensifying into the new year, and new variants introduced new downside risks to the economic outlook. More recently, however, some encouraging trends are forming. We note that as of mid-February, over 18% of the U.S. adult population had received at least one dose of the vaccine. We also note that the seven-day moving average of vaccines being administered was trending up and that the number of vaccinations was easily outpacing the number of new confirmed daily infections. Most baseline forecasts assume the vaccines will be widely distributed by mid-2021 in most advanced countries and in some emerging markets. In the U.S., it is currently assumed full herd immunity will be reached in or around September of this year and possibly as soon as this summer. Economic outlooks have been revised upwards. The general consensus now assumes U.S. real GDP will grow in the 4% to 5% range in 2021, with more recent forecasts on the higher end of that range. Globally, real GDP is now projected to grow by 5.5% this year, according to the IMF. The upward revisions largely reflect expectations of a successful rollout of the vaccines in combination with additional policy support. Because of the upward revisions, U.S. real GDP is now expected to return to pre-crisis levels by the second half of this year, which is six to nine months faster than what was originally assumed in most baseline forecasts. Employment forecasts have also been revised upwards. Next, please turn to slide seven. So the stronger economic backdrop also puts the property markets on a faster road to recovery, though again, I would emphasize the path forward will be uneven. As we observed last year, the pandemic accelerated a few trends that were already in the making, and because of that, certain property sectors have recovered more swiftly. The industrial sector, for example, benefited greatly from the accelerated shift to online shopping. In the U.S., industrial space absorption registered at 268 million square feet in 2020, which was higher than the levels observed in 2019, and industrial occupancy is currently hovering at near record highs. Data centers, life sciences, self-storage, or other sectors that are benefiting from secular shifts and accelerating trends, and we do expect these strong trends to continue in 2021. The apartment sector was another bright spot, particularly in the capital markets last year. The apartment sector was the leading property sector for investment in the U.S. in 2020, and it also gained share in Europe and Asia Pacific as a percentage of total sales volume. In terms of the office sector, as we concluded in our impact study last year, office occupancy, meaning the total amount of occupied office stock and rental rates, will fully return to pre-pandemic levels. But the exact timing depends on many factors, many of which at this stage are unknowable. Like other sectors that rely on bringing people together, much of the recovery ties directly to the path of the virus itself and the rollout of vaccines. But here's what we know. We know that the pandemic had a significant impact on office leasing fundamentals last year. In the U.S., we observed 104 million square feet of negative absorption in 2020. with vacancy rising from 12.9% pre-pandemic to 15.5% by year-end. And we know that the work-from-home dynamic still needs to filter through. We also know that, according to multiple studies and surveys conducted both by the commercial real estate industry and outside of the industry, most companies do plan on returning to the office when it is safe to do so. From various focus groups and studies, very few businesses are indicating that they plan to move to a 100% remote working model. In fact, according to a recent survey conducted by PricewaterhouseCoopers, 87% of executives believe the office is critical for collaborating with team members and building relationships, while the remaining 13% are considering a more virtual remote working model. Although there is no consensus on the optimal balance of remote versus in the office, it will undoubtedly vary greatly based on many factors such as the business itself, the industry, the job function, personnel, and other factors. Most surveys show that the majority of employees and employers expect to spend two to four days in the office post-COVID. It's this fact in combination with the fact the economy will continue to produce knowledge-based workers and Positions that typically drive demand for office space indicates that the office sector will continue to play an important role in organization strategy and structure. We also note that in certain parts of the world where the virus has been more contained, the office sector has already started to rebound. In the Asia Pacific region, for example, Office space absorption region-wide turned positive in the second half of 2020, and office sales volume increased by 9% in the fourth quarter compared to a year ago. Although every region of the world is different, if the trajectory in Asia Pacific is a useful guide, when the virus becomes less threatening, the office sector will begin to recover. In terms of office leasing in the U.S., we also note that last year we observed an abnormally high percentage of short-term renewals. Not only did renewals account for an unusually high percentage of leasing activity, but nearly one-third of those renewals were for one year or less, which is nearly double the norm. These short-term renewals could translate into an increase in leasing volume activity in late 2021 and 2022 as there is a broader return to the office. Lastly, on slide eight, and importantly, we know that the capital markets entered 2021 with momentum. According to data from Real Capital Analytics, global sales volume plunged in the second quarter of last year, which was the nadir of the recession. But since then, volumes have generally been trending upwards. In December, US sales volume for all product types registered at nearly 71 billion, which is on par with some of the strongest months of activity on record. The drivers of demand do appear to be gaining momentum due to the following factors, the low interest rate environment, the attractive yield gap, which is the cap rate spread over long-term sovereign bonds, pent-up demand for real estate assets, and pent-up demand from cross-border capital. Again, there is still a great deal of uncertainty, and there are many alternative scenarios to the ones I've described. But if the virus and the economy follow the most probable script, then there are also strong reasons to be cautiously optimistic. And with that, I'd like to turn the call over to Duncan. Duncan?

Thanks, Kevin, and good afternoon, everyone. Before covering our fourth quarter results, I wanted to build on a couple of items Brett mentioned earlier. As we've said on past calls, we've been active in managing our cost in 2020. As a result, we achieved over $300 million in savings, consistent with what we said during the year. These actions include the permanent cost initiatives announced in March, which contributed 125 million of savings in the year. All of these actions have been completed. In addition, we achieved over $175 million in temporary savings during the year. These savings included reductions in travel, entertainment, and events, reduced spend on third-party suppliers, staff furloughs, and part-time work schedules in impacted businesses. Government subsidies and support comprised $37 million of these savings. Also included, the total annual bonus compensation for non-fee earners in 2020 was significantly below target. Above and beyond the cost reductions, variable costs in 2020 declined as a result of lower revenue across different service lines and geographies. These reductions included broker commissions, fee and a profit share, direct client labor and materials, and third-party subcontractor costs. In addition, our financial position is strong. We ended the fourth quarter with $2.1 billion of liquidity consisting of cash on hand of $1.1 billion and a revolving credit facility availability of $1 billion. we had no outstanding borrowings on our revolver at any point in 2020. We have managed our liquidity to bolster our financial position and flexibility. As we have mentioned, we are actively looking for opportunities to acquire through infill M&A. We are well positioned should opportunities arise. With that backdrop on page 10, we summarize our key financial data for the fourth quarter and full year. For the fourth quarter, fee revenue of $1.6 billion was down 15% and adjusted EBITDA of $198 million was down 34% as compared to 2019. The ongoing stability of our PMFM service lines partially offset the impact of declines in our brokerage and valuation in other service lines. On balance, fee revenue trends for the fourth quarter were ahead of expectations, particularly in brokerage. For the full year 2020, fee revenue was $5.5 billion, down 14%, and adjusted EBITDA of $504 million was down 31% versus 2019. Decremental margins were 24% for the full year, which was in line with our projections. Moving on to pages 11 and 12, where we show fee revenue by segment and by service line. For the fourth quarter, leasing and capital markets revenue declines of 37% and 14% respectively were better than our expectations, particularly in capital markets. As Brett mentioned, there has been significant capital invested in commercial property in an environment where we have seen narrowing of the spread between price expectations and return requirements. Additionally, we also believe that some U.S. deals, which were delayed throughout 2020, were pushed through to closing at year end in anticipation of potential tax rate changes. While encouraging, we are cautious with regard to our expectations in this service line as we look at the first quarter of 2021. Helping to partially offset these brokerage trends was the stability we experienced in our PMFM service lines, which was up 1% in the fourth quarter and for the full year. Excluding the impact of the deconsolidation of the revenue associated with China JV executed with Wonka earlier this year, our PMFM service line was up 6% for the quarter and full year. This mid-single digits growth has been typical of what we have seen in prior years. Within PMFM, facility services represents just under half of the fee revenue. In facility services, we typically self-perform or subcontract a variety of services through our operations in both the Americas and APAC. This business generates solid cash flow on a stable revenue stream and on an annualized basis typically has low single-digit growth. In 2020, facility services in the Americas was up 7% compared to 2019, reflecting strong demand for our services during the COVID period. With that, we will start a more detailed review of our segments, starting with the Americas on page 13. Fee revenue in our Americas segment was down 12% for the quarter. Leasing and capital markets were down 40% and 3% respectively. These trends were partially offset by PMFM, which was up 7% for the quarter. Within our Americas PMFM service line, our facilities services operations represent a little over half of our fee revenue, and we're up 7% for the quarter as well. We saw a very strong finish to the year in capital markets, and we will be monitoring this encouraging trend closely in 2021. Leasing trends in the fourth quarter were broadly in line with our expectations in the Americas. America's adjusted EBITDA of $127 million was down year over year, primarily due to the impact of lower brokerage revenue. This impact was partially mitigated by the permanent and temporary cost actions in this region. Moving on to EMEA on page 14. In EMEA, fee revenue declined 16% for the quarter. For the quarter, leasing, capital markets, and valuation and other were down 28%, 35%, and 18%, respectively. These declines were partially offset by growth in our PMFM service line, which was up 14% for the quarter. Fourth quarter adjusted EBITDA of $43 million was down $22 million, or 38%, versus the prior year, primarily due to the impact of lower brokerage revenue. This impact was partially offset by cost-saving initiatives and growth in our PMFM service line. Now for our Asia-Pacific segment on page 15. Fee revenue was down 24% for the fourth quarter. The deconsolidation of the PMFM revenue associated with the joint venture in China with Bonca Services accounted for nearly half of this decline. Our PMFM service line represents roughly two-thirds of the fee revenue for the segment. Leasing and capital markets were down by 27% and 44%, respectively. Capital markets was down primarily due to a continued slowdown in activity in Hong Kong, which is largely unrelated to COVID. Fourth quarter adjusted EBITDA of $27 million was down $19 million, or 44%, driven by lower brokerage revenue, partially offset by our cost savings initiatives. Turning now to page 16. The near-term business outlook environment remains highly uncertain and we continue to have a limited line of sight to revenue trends in our brokerage service lines. While we believe there will be a full recovery in brokerage revenue over time, the shape and speed of this recovery continues to be difficult to predict. We are hoping to see continued improvement in brokerage in 2021 as the economy continues to heal. although we do expect the first quarter of the year to show a material decline year over year. In 2020, the impact of the COVID pandemic on our business began in March. Responding to this uncertain outlook, we've identified specific actions within our operating budgets that will drive more permanent cost reductions impacting 2021 and beyond. Actions include converting some of the temporary savings from 2020 into permanent savings, as well as implementing a portfolio of projects across our segments and back office functions to improve efficiency and enhance our operating model. The impact of these cost savings actions will ramp up during the year and continue to have impact into 2022. We are not providing guidance for the year at this time. However, I would like to provide some remarks to help investors model our business where we do have reasonable line of sight. 2020 permanent cost savings contributed about $125 million in year, and temporary cost savings, including a lower bonus expense, contributed over $175 million, again, in year, giving a total of over $300 million in savings. In 2021, we expect the additional permanent cost savings, which I have referenced, to contribute significantly. and to offset much of the unwind in temporary cost savings that will inevitably occur throughout 2021. Net-net, at the end of 2021, as we enter 2022, and compared to 2019, we will have executed a significant reduction in permanent cost over the two years, even as most, if not all, of the 2020 temporary cost actions were unwound by then. However, in the year 2021 itself, the impact of permanent cost reductions will not be sufficient to cover the return to a more normal staff bonus expense, which we project will be a drag in 2021 of about $50 million, mainly impacting the first half of the year. We expect growth of low to mid-single digits in PMFM in 2021. In brokerage, we expect to see a decline in revenue in the first quarter and some recovery in the remainder of the year. especially if we continue to see economic recovery in the second half of the year. We do not expect brokerage to recover to 2019 levels in any quarter of 2021, but to be clear, we do expect brokerage revenue for 2021 to be up versus 2020 for the full year. As a result of the cost track and the shape of the brokerage revenue during 2021, we expect that our EBITDA will be more heavily weighted to the second half of the year than we would see in a typical year, such as 2019. We anticipate having a better view on the brokerage recovery in the second half of 2021 and will provide an update on our expectations as visibility improves. As Brett said, you can be confident that whatever the COVID pandemic outcome and economic impact, we will continue to focus on the welfare of our employees, supporting our clients, the financial strength of our company, and our profitability in 2021 and for the long term. So in closing, this is my last earnings call with Cushman & Wakefield. When I joined the company in 2014, my objective was to support and lead our business through a period of rapid growth and transformation. I'm very proud of what we have accomplished, particularly taking the company public in 2018. Today, Cushman & Wakefield holds a robust financial position among major firms in our industry and is poised for continued sustainable growth and success. I am very grateful for the partnership that I've enjoyed with Brett, my Cushman and Wakefield colleagues, and my finance team, and with many of you listening to this call. I congratulate Neil on his appointment as CFO, and I wish him all the best. I look forward to watching the firm continue to grow and wish everyone continued success. With that, I'll turn the call back to the operator for the Q&A portion of today's call.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.

Thank you.

Our first question is from Anthony Paulone with JP Morgan. Please proceed with your question.

Okay, thanks. And thanks, Duncan, for all your help over the last few years. Best of luck. My first question is with regards to thinking about margins, given your commentary. If we think about the $50 million, which seems to be the year-over-year drag that you won't be able to offset, that would seem to imply that margins start you know, I don't know, 80, 90, 100 basis points down. And then how should we think about the incremental margin that would help move that back up as we think about growth in PMFM and brokerage in 2021?

Duncan, why don't you take that? Yeah, can you hear me?

Yes. Yes. Good. Okay, good. So, yeah, it's a good question. You've got the drivers there as the mix of those three. So you're right. We're saying there's going to be a drag from bonus We won't be able to offset with permanent costs, about $50 million in the first half mainly. And then we're saying, yeah, the things that will obviously give us higher margins will be the organic growth. PMFM is typically a little bit less margin-rich than brokerage. And so we expect the sort of low to mid growth in PMFM. That will obviously help on the margin side. But then the big question will be how much brokerage growth we actually get, which will be really driven by the second half of the year. So tough to say exactly yet exactly how much that will be, but it will be obviously the highest incremental margins of those two areas. So, you know, you've got a pretty good idea, I think, of what the incremental – the decremental margins were last year purely on brokerage. So I think it's really just a question of, you know, mapping out the blend of those three, giving the assumptions you want to make about brokerage recovery in the back half of the year. And we're not guiding to that. I don't think we have a crystal ball. So, you know, those will be the drivers. You've got those right.

Do you think the incremental, though, should be better than that 24% decremental you had? Oh, right, yeah.

So, sorry, yeah. So just thanks for clarifying that. Yeah, it will be because the decremental was after cost savings, right? So if you thought about really what happened last year, just to kind of help you with the mapping out here, right, we did 24% decrementals, mid-20s. That's kind of what we said we would do. But that was after all those cost savings we did, right? So the decremental before all the cost savings was obviously quite a bit higher than that. And so we'd be hoping in brokerage to get incrementals that were quite a bit higher than that this year. It all depends on how much brokerage revenue we actually get.

Okay. Got it. And then just my second question maybe for Brett, can you just give us an update as to how you're thinking about investing and acquisition opportunities? You mentioned the liquidity position and the ability to do infill deals, but just wonder if you could size up the landscape and how you're thinking broadly there.

Sure, happy to. So you're right. We're sitting at the moment in a very, very liquid position, a lot of capacity on the balance sheet. I think given where we sit today and our outlook on the back half of this year and then 22 and 23, which is getting a bit bullish, our appetite for infill M&A, our appetite for strategic recruiting is is quite high. And we never truly turned off our search for good opportunities during 2020, but we certainly kept some on the back burner. And I think we're now at a place where, while we certainly don't have 100% certainty about our outlook for the year, we sure feel a lot better about the near-term and mid-term future than we did 11 months ago. We are hoping we'll see lots of opportunity in the infill M&A market, lots of opportunity in strategic recruiting market. We have some particular areas we're focused on, both geographically and by service line, and we're leaning into those with real vigor right now.

Yes, Duncan. If I could just come back in on the margin point we made before, just as a point I forgot to make, which I think is probably pretty important. Tony, you probably appreciate this. But as I said in the remarks, and Brett made exactly the same statement in his remarks, the real net-net of all the costs we're doing is that by the time the temporary cost is sort of unwound, we will have saved a lot of permanent cost here. And what that really means is that our ability to get back to 2019 margins, which were just a bit north of 11%, our ability to get back to those you know, we'll be able to get back to those at a lower level of brokerage activity than we had in 2019. So it basically means that we'll be able to sort of improve our overall margin structure with all the permanent costs we're taking out. So obviously the timing is uncertain of that, but the nature of that strong permanent cost out is that we will be able to get back to 19 margins at a lower level of brokerage activity than we saw in 2019, still as brokerage is recovering.

Okay. I think I understand that. Thanks. Thank you.

Our next question comes from Stephen Sheldon with William Blair. Please proceed with your question.

Hi, thanks. I appreciate the high-level expectations for 2021. I wanted to ask about the expectations for PMFM to grow low to mid-single digits. It seems to assume that the business growth is pretty consistent in 2021, as you saw the past few quarters. Is there anything notable that you're assuming that would keep that from accelerating more including your ability to implement new mandates, and have there been any notable changes that you've seen in the competitive environment as you pursued new contracts there?

Sure. This is Brett. Well, first, as it pertains to acceleration or deceleration of the growth of PMFM, I would say that the structural trends in that business are playing out as we would expect they would, which is to say that this is a mid-single-digit, and in good years, perhaps a high single-digit growth, top-line growth business when you combine our PMF and businesses, which includes a very large self-performance business. The trends in the industry right now are favorable for us and favorable for our two large peers, and nothing there has really changed. On the competitive landscape, no. This is really a three-firm business. And I think clients are quite comfortable and settled with that, that they have choices and good choices in the industry for PMFM services and self-performance services. There's a, you know, I wouldn't say it's an even distribution of the work, and we're fighting to get our fair share, having come from a much smaller place four or five years ago. But we like the trends we're seeing. I can tell you that we are seeing in 2021 some mandates of a size and a quality that we have not seen. been invited to pitch before, again, indicative of an ever-improving platform and a better competitive position for CNW. But the PMFM business and self-performance business for us remains very, very important to the long-term value thesis for the firm. It is a growth business, was last year, will be this year, and I would say that the competitive dynamics continue to favor Cushman and Wakefield and its two larger peers.

Got it. That's good to hear. Thanks for that. I wanted to ask about what you're seeing on the office property sales side. How have activity levels there looked? And for deals that are happening, what have the buyers been willing to assume in terms of office leasing to get deals closed? And I guess maybe more specifically, do office property buyers appear to be willing to assume that office dynamics in terms of space, utilize the lease price, and et cetera, will more or less fully recover?

I think it's a mixed bag. In 2020, we certainly saw fewer of the marquee, very large class A office trades as compared to the prior few years. And that's not surprising given the turmoil in the marketplace. And I think that there's a real bifurcation in the market among geography and among quality and size of assets. So there are markets where I believe we are seeing buyers relatively comfortable around the underlying fundamental dynamics in the market and the occupancy rates and let's call it midterm rental rates for the buildings. But if you look at the data or the forecasts that are out there and just consider these for a moment. At the moment, we're forecasting that vacancies peak in 2022, that we start to see rent growth begin to move positive in late 22, and absorption moving strongly positive in 22. So if a buyer is looking at a building with not a lot of rollover in the next couple of years, high credit tenant, high quality building, they're probably a bit more sanguine about their midterm, long-term underwriting than, say, a building with a lot of vacancy in it right now. But I would say this is, you know, it's a really interesting question. It's one that's not completely answered yet. I do believe that the first nine months of this year are going to give us a lot better signaling around how the investment community is going to look at high-quality Class A office assets midterm, long-term. But at the moment, I would say that the general investor market is pretty much aligned with what Kevin said, which is rough times for sure right now, like there aren't any recession, but the long-term prospects for high-quality Class A office space, and even Class B in good locations, is fundamentally sound generally in the long term. So you saw last year, we saw a number of trades in the office sector, people investing real capital in the office sector. We expect to see the same happening this year. But it's behaving not that much differently than any other fairly severe short-term recession. I think that people, you know, the questions that are really unanswered right now are around, you know, same store, office occupier footprint today versus what someone might renew or lease two or three years from now. I think that it's, you know, I think it would be fair to say that most large office occupiers, as they think about their footprint today, would say that if they were renewing today or signing new lease today, they'd try and get a bit less square footage. But as Kevin said, that dynamic and the work from home dynamic over the next three years, maybe a bit longer, maybe a bit shorter, is mitigated by the growth in office employment. And so as we look at the office sector and we look at the office sector as an investment and an investable class, asset class, The midterm and long-term prospects for it we believe are positive, although it's going to be rocky for the next couple of years.

Got it.

Really helpful. Last one for me. On the first quarter brokerage guidance for it to be down, and I think, Duncan, you said materially, can you frame at a high level any differences you expect to see between the leasing brokerage side and capital markets?

I would just say this. Go ahead, Duncan. Go ahead. You got it.

Well, I was just going to say that the math is just simply that, I mean, really COVID only kicked in sort of halfway through March last year. And so we'd expect, you know, year over year to sort of see some decline driven by that, right? So I don't really have a specific point of view as to the mix of that between leasing and capital markets. I think what we did see, and maybe Brett will add to this in a minute, but the Q4 thing that we saw in capital markets, which was, you know, unusually strong versus what we'd expected, Yeah, we don't expect that to be a sort of necessarily a general trend all the way through 2021. I do think for the reasons that Brett alluded to that we think of that as something that happened in Q4. So, but I think it's, you know, I don't think we have a specific sort of view that the particular trend we're talking about in Q1 will be that much different between leasing and capital markets. What do you think, Brett?

Yeah, I think it's, you know, again, it's a bit of a mixed story. So right now, in this environment, very low interest rates. awash with liquidity, hard assets like commercial real estate are attractive. That, of course, is balanced by concerns around the office market and what it means when everyone goes back to work and how much space is going to be ultimately released into the market or not. And by the way, a lot of space has already been released in the market. 100 million square feet of negative net absorption in 2020 is already in the system. We expect a bit more in 2021, but less than we saw in 2020. Capital markets, clearly, through this last recession and now the early days of recovery, capital markets is leading that recovery, which is not what happened in the GFC, but it's a different environment. GFC, we had a crisis of liquidity. Today, we are awash in liquidity dealing with other issues. So capital markets is in probably, I think it's fair to say, in better shape today than we would have expected. The leasing markets, as Kevin said, You had an awful lot of commercial real estate occupiers kick the can for a year or 18 months down the road last year if they had a lease coming up for renewal and they needed to do something with their lease. You can't do that forever. And as Kevin said, that augurs for perhaps a bit stronger recovery in leasing as we get to the back end of this year and early next year. But again, that also partially mitigated by folks looking at their square footage and wondering if they can live with a bit less rather than a bit more, as they would typically do. So all of that to say, you know, we're in early, early days of recovery here. A lot of things have to fall in the right place for this to be a strong back end of the year. At the moment, we see some positive signals. Capital markets, certainly in the fourth quarter, was a very pleasant surprise. Capital markets in general are active, and that's a good thing. And I do believe, as Duncan referenced in his comments and Kevin did in his, that as we get to herd immunity, as we get to a post-COVID environment, there's going to be a pent-up demand of leasing activity that has been curtailed during the shutdown that is going to need to get dealt with in probably a positive way.

Great. Thank you.

Thank you. Our next question comes from Vikram Malhotra with Morgan Stanley. Please proceed with your question.

Thanks. You know, you've seen several sort of recessions in the brokerage industry wearing different hats, and I know every recession is different, but I'm wondering sort of given what we know today, how is the visibility? I'm not talking about the pace of recovery because that's difficult to predict, but just the visibility from leading indicators. today versus sort of, say, prior recessions? Is the visibility better, similar, worse? Is there anything that you feel is different?

That's a good question. Well, first of all, in terms of visibility, every year we move forward, visibility for all the firms in this industry gets better because we're using technology better. We're just getting better. at examining, measuring, and forecasting from pipeline activity and client data, I would say that as we look forward from today and our visibility into how 2021 might behave and how 22 and 23 might behave, I would say that certainly the data we have today, the forecasts and research we have today, feel to us to be certainly a bit more concrete, maybe better and higher quality than they were in the last recession for a lot of reasons. And when you think about the midterm here and the long term here, as we've been repeating in the Q&A, there are a number of data points that are positive. And we're watching those carefully, but it has to do with the pace of immunization. It has to do with the number of leases last year that We're renewed for a year instead of seven or eight or ten years. It has to do with what we think GDP will look like this year and how that will translate into potentially job growth and occupancy of commercial real estate. Those are all very positive. The negatives are what we've talked about. The negatives are what is the long-term complexion, nature, and function of office space. And as we've said, we think that that's long-term in good shape. short-term under some pressure. But I would say that we're being very careful in providing forecasting data to you right now. We're not providing guidance, and that's for a reason, and that is there are so many variables out there right now that could move. But I would say, and you've heard it in our tone, we feel a lot better about what the back end of 21, 22, and 23 are going to look like than we did six, seven months ago. But that's about as far as I'll take it, because in this environment, that could change, and it could change quickly. But at the moment, our visibility is decent. Pipeline data is good, and we're watching it carefully. And I'd say that the comments that Kevin made, comments that Duncan made about the year and the shape of the year, we feel pretty good about at the moment. Duncan, anything you want to add to that?

Yeah, so I was agreeing with you, Brett. I mean, the thing is, obviously, the recessionary event, this time around, because of it being essentially a natural disaster, you've got this sort of second quarter, 20 was very much a trough. And so really now we're just sort of dealing with the aftermath of that event and sort of recovery from it, as opposed to waiting to find bottom. We kind of know where bottom was. Now we're just talking about speed of the recovery, nature of the recovery, patchiness of the recovery by sector. tough to predict, but we're no longer trying to find bottom, right? So it's more of a sort of judging the recovery. And the other thing is obviously very different this time around is capital markets. It looks like a much stronger leader than it was when it was lagging in the GFC. Yeah. That's interesting.

The thing about this, Vikram, as you ask the question, I'm thinking about this. So if you're shaping a model and you think about how do you model the 21, 22, 23 compared to coming out of the GFC. And there's a couple variables that are different. One is, in this situation, capital markets are much healthier right now than they were one year from the trough of the GFC, just much healthier. The second is the question around office space in general. And so that is a potential negative variable. The rest of it is pretty traditional recessionary modeling, right? pace of recovery, the type of recovery, the way it should work, probably isn't going to be wildly different than the last couple of recessions that the U.S. economy and other economies have been through. The variables that are different here is a healthier capital markets environment, a lot of liquidity, and then the question mark around utilization and demand for office. Those are the two, I think, just generally speaking, fairly unique variables here.

That's fair. That's really interesting and good color. Just building on that office comment, maybe for you, Brett or Kevin, I know there are shorter-term renewals last year, but as you look to this year and beyond, especially for many of the larger leases, tend to start negotiations a year, two years prior to expiration. So your comment on many tenants may, if they look to renew, I think if I'm paraphrasing, they look to renew in the next two years, they would potentially seek or think that they can get slightly less space. Is that based on just high-level conversations or what you're hearing? Are there any differences between large or small tenants or by sector? Just want to get a bit more color on that comment you made.

Unfortunately, and I don't know if Kevin, first of all, is Kevin still on the line?

Yeah, I'm happy to take a swing.

Yeah, Kevin, why don't you hit this ball first, and I'll just add any color when you're done.

Sure. So I think the way to think about it is, and I'll use some numbers. So in a, in a typical year in this, in this idea of there's pent up demand that's likely to be executed on in the future, whether that's second half of this year or into 2022, here's, I think the way to think about it in a typical year, there's about 400 million square feet of office leasing that occurs in the U S right. So that's based on 87 markets that we track. And so that's all leases, right? That's new leases, which means businesses coming to the market to lease space. It includes renewals, so businesses just renewing their lease. So that's all in about 400 million square feet. Last year, there was only about 250 million square feet of leasing that was completed market-wide, right? So significant drop. So the inference there is companies didn't know what to do, right? And so businesses that were in the market looking for space, many of them stopped. And some businesses that had leases expire, some of them said, let's let that expire. Let's go home for a year. We'll figure this out once we have more certainty. And many just said, let's do a short-term renewal, and we'll figure it out next year. And our tracking of renewals shows that a number of renewals was double the norm. And so that was the environment. Now fast forward to this year, and what do we have? Well, there's likely this pent-up demand dynamic where the businesses that stopped looking for space They start up again and they look for space, they find space, they lease. Businesses who renewed last year for three to 12 months, which was very high, will now say, well, the pandemic is showing signs that it's behind us. Let's go forward and sign a longer term lease. And businesses who said, let's just go home for a year, some will say, well, that was okay for some of the team, but it wasn't okay for everyone. We need to get back and have some space to be productive again. They'll sign a lease. And so I think that's sort of maybe the way to think about it and modeling it going forward is, will that pent-up demand activity, when will that get captured? Maybe 2021, probably a good portion of it will. And then again, I think maybe even stronger in 2022. So that's sort of my read on it, Brett.

Yeah, and the only way I'd add to this, it's well said, Kevin, by the way, I would add to this is, like the early days of the pandemic when people were talking about There were a lot of rash rhetoric in the market about we'll never use Office again, or we're going to cut our footprint by 50%. And really, so far at least, none of that happened. I can find as many CEOs right now. We'll give a specific example. One of our competitors, I was in a conversation with them not long ago, and they told me they had just renewed their HQ location. This would have been late summer. of last year and he told me that they renewed it almost exactly the same square footage that they had. And he said we could have changed buildings, we could have cut back, we could have added, we ended up getting about what we had before. And for a lot of reasons, they had redone the space, they were using the space differently, but they weren't able to get any less space. I can find a lot of CEOs that would tell you that they're gonna try really hard to take less space in the near term. And as I mentioned, others that will say they're going to take the same or might take more because they have a growing business. So I think, you know, unfortunately, this is a very fluid situation. I think Kevin, you know, his considered view with the data that he's saying is probably the best place to land on this, though. And, you know, again, for us, there's a lot of rhetoric in the market pointing a lot of different directions, but rhetoric does not necessarily mean that is the way actions will ultimately be taken.

Fair enough. Just last one on the PMSM business, just post-pandemic and just given kind of the increasing focus on ESG climate change, can you talk, are two specific drivers meaningful changes to the revenue line? One in terms of just cleaning and security post-pandemic across the board, and then just anything climate change related, does that eventually add to the business for PMFM?

I would say that all the work around ESG, in particular carbon, is certainly a revenue line for the services industry. And whether that will be a material revenue line for Cushman & Wakefield or our peer group or for others, I think is an open question. Certainly all of us are quite focused at the moment on the potential business opportunities around building retrofit, building analysis and data gathering and so forth. So certainly, you know, it's a bit like a Y2K event. Building owners and likely building tenants are going to be paying a lot of money in the future around this issue and people, you know, service providers will be will be receiving some of that revenue from consulting work or retrofit work that they're doing. It remains to be seen whether it's a needle mover for us or other firms like us in the PMFM space, but there's a lot of energy and work right now in our space and in adjacent verticals, such as big engineering firms and design firms, all in this area. So I think it's most fairly and best described as an emerging and likely material opportunity for the industry.

Great, thanks so much.

Thank you.

Our next question comes from Mike Funk with Bank of America. Please proceed with your question.

Yeah, thank you very much for the question, and Duncan, best of luck to you, and thank you again for the help. You know, a few if I could, so you prepared remarks, you talked about some of the funnel in property sales being pulled forward into 4Q just due to you know, thoughts about, you know, potential changes in tax rates with the new administration. Can you quantify how much of the funnel you expected to close in 21 got pulled into the fourth quarter of 20?

I know I can't. Yeah, we really don't know. But Kevin, why don't you take a shot at this at least anecdotally? Yeah.

And it's true that it's, I think, impossible to sort of parse that out. So there was that spike in Q4 really in December in sales volume. My impression is that that was a combination of factors. I think mostly you have pent-up deal demand with a larger number of deals having been put off in preceding quarters, largely due to the pandemic and lack of activity. And then that what was helped along was we saw more liquidity in the debt markets and then vaccine optimism really started in the fourth quarter. And so I also think there was some incentive from the fear of, you know, tax policy changes, you know, 1031 is getting eliminated, something like that. But again, I think the strong sort of December was a combination of factors. And then I'm a go forward. I think, you know, we sort of, you have to see how tax policy changes and go from there. Will it change? Um, you know, tax policy changes tend to be phased in. And so if there is a change, it's likely to be a phase in over years. And we sort of, when you study the capital markets and just property throughout history, as long as there's time for the market to adjust, it adjusts to changes in policy. And there's all the other factors that are every bit as important to the economy and interest rates and geopolitical dynamics and so forth, I think are just as important in sort of gauging the future trajectory there.

Yeah, thank you for that. Maybe one for Brett and Kevin, if I could. So I appreciate the slide where you try to show expected recovery in different property types. And it seems like the office piece correlates with consensus around around reopening right kind of September, um, you know, back half the year repopulation of offices. So, you know, is your expectation that that office leasing picks up after the repopulation? So, you know, when, when you're talking with clients, are they saying they want to actually get people back into the office, um, you know, analyze and, you know, evaluate how they're using the space. And then after they do that, recalibrate the space they need. Or is it different? Do they try to do that before the repopulation of offices? Do they already have plans, you know, in place in terms of space needs?

Yeah, it's a great question. And the answer is yes, yes, and yes. So it's just every company is different. I think, look, if I'm going to generalize, I think that many, many companies are on a wait and see. And when no one's showing up in the offices and everyone's working from home, there's a lot of thinking going on. But until we get, you know, when we think that that marker is probably around Labor Day, but we get past that marker and we start to see a more aggressive repopulation of offices, I think my guess is that is when lots of companies will really begin to consider what their midterm and long-term plans are for their footprint. Certainly there are companies, a lot of them, that have been doing that for the past year. And if you talk to the folks at Gensler or other firms like that, they're doing a lot of work as we are with customers on rethinking the footprint. But again, and I'm horribly generalizing, but to generalize, I think that these types of decisions are likely to be made post-occupancy rather than the next few months. That's anecdotal. Now, Kevin's got better data on this than I do. Kevin, anything you want to either dispute on that or add to it?

No, I agree. I think it's very difficult to predict the return, you know, full-fledged return to office with any precision, a lot of moving pieces. If you look at it as of today, it's roughly 25% of employees are going into the office, and that's based on CASLA access data. And there doesn't appear to be a rush, certainly not in the next, you know, let's say two to three months, a rush to get people back. As the vaccine gets administered to more people, we will gradually see more people return to the office and more occupiers encouraging employees to, or CEOs encouraging employees to return to the office. And from there, I do think that's where you see more of a significant pickup. in activity in general. But I agree with your assessment there, Brett. My best guess and what we're really hearing from a good majority of our clients is that sort of the return to full force, you know, there will be a gradual return, but full force return likely to be probably more in the September of this year timeframe.

Yeah, that's great. And on your question about, so how do companies make decisions about the long-term for office space? If you think about the statistics that Kevin gave, the vast majority of office workers are going to be in the office the majority of the time. It may not be five days a week. It might be three days a week or four days a week. It's not that easy for a company to rework their footprint down because people aren't going to be in the office a day or two. Certainly, everyone's going to try, but this is, I think, going to be somewhat of an incremental process, and we're not going to really know how this plays out in the marketplace. I don't think for, for some quarters ahead of us.

Yeah. What, one of your peers said 85%, right. You know, if with a hundred before it'd be 85 in the future, it doesn't sound like you're willing or able to.

That's Kevin's, Kevin's projections are almost, Kevin, what you can say for yourself, almost exactly that.

Sure. Yeah. So I, what's interesting about that is, so I think there's just a ton of conjecture on that topic and we've, you know, we've modeled it or made our assumptions and, Surveys generally show that businesses will not require somewhere between 10% and 30% less space, somewhere in that range. But what I think really interesting is so far, just so far what's really happened is the total amount of occupied space in the United States has declined by less than 3%. And that's not saying that's not insignificant. As Brett said, there's 100 million square feet of negative absorption. So space that was leased pre-pandemic is now empty. So it's not insignificant, but 2.7% is very far from 15%. It feels very, very far from 30%. And so I do think we're just going to learn a lot more this year.

If I could, one more quick one for Duncan, just being aware of time. Duncan, in PMFM, any potential impact from wage inflation on margin there, either through minimum wage hike or otherwise? What are your thoughts on that?

Generally speaking, not, right, because most of our contracts, you know, we're able to, you know, recover that. So I don't think it'll be a particularly material impact on us either way.

Okay, great. Hey, thank you all for your time.

Thank you. Our next question comes from Rick Skidmore with Goldman Sachs. Please proceed with your questions.

Good afternoon. Just a follow-up question. As you look at Asia Pacific, and my assumption is that Asia Pacific is a few quarters ahead of the U.S. in terms of returning to the office and vaccinations and the virus. Is there anything to learn from what they've done, and specifically around office leasing that might translate into the U.S. market? And then maybe a follow-up on that would be, as you look at your Asian business, would have expected maybe Asia Pacific to be a little bit better year over year? Can you just maybe elaborate on what you're seeing in the Asia Pacific market? Thank you.

Sure. Well, let me just start with generally speaking. So generally speaking, you're right. Asia Pacific, for different reasons in geography, we look at as a leader coming out of the pandemic and the recession as it pertains to our asset class commercial real estate. I think these early days, as was mentioned, I believe, Kevin, in your comments, we're seeing a return to leasing activity, a return to support in the leasing markets in Asia Pacific as a leader because they are coming out in many jurisdictions before we are here. As it pertains to our own business in Asia Pacific, it's a very large business. It's a very diversified business. There are positives and negatives in Asia right now. Hong Kong is still very, very locked down. They disimposed a 21-day quarantine for anyone that wants to come in to Hong Kong. Basically, what they're saying is we don't want anyone here. And that has flowed through that market, property markets, that lockdown in a very severe way. On the other hand, Our Banky JV in mainland China for PMFM did quite well in 20, and we think we'll do the same in 21. So I would say that just generally speaking, Asia Pacific as a leading indicator for Western Europe and the U.S. would be a positive. We would take positive takeaways from that. But that's, you know, again, very early days and a bit of a mixed bag over there. Kevin, I know that, you know, specifically spent a lot of time in Asia Pacific. Any comments you want to add to that?

No, I think that pretty much covers it. It is a positive story. There's increasing number of examples where businesses in that region of the world are actually absorbing space. They're actually expanding and taking more space. In mainland China is an absolute example. In fact, that region region of the world absorbed 23 million square feet of office space in the second half of last year. It was actually double what they absorbed in the second half of 2019. Beijing, Shenzhen, Shanghai, all positive. And it's not just in mainland China. You're seeing it in some of the Indian markets in Seoul, Korea. And so I think it's important to point out the work from home dynamic is less accepted across that region of the world for a number of reasons, cultural reasons and other factors. So I don't think we can say that what we're observing there, that same pattern will be followed in other parts of the world. But equally, I don't think you can dismiss the fact that the one region of the world where the virus is more contained is seeing more of a snapback in demand for office space.

Yeah, and I would just add to that, I just received a text from our company president who's in London staying up very late this evening saying, But John Forrester pointed out that what he's seen, at least in the early days, is that it's not necessarily a direct correlation between 10% or 8% or 15% less people in the office and 8%, 10% or 15% less need for space. So in layman's terms, and I use this example with our competitors at their headquarters, You may leave 8% or 10% of your office staff at home permanently. You may very well use that space differently going forward and not be able to have less space. People are definitely going to rework the way they lay out space going forward. There's a lot of energy around that right now. It doesn't necessarily mean, though, that if you cut how many people are in the office on any given day by 15% or 20%, you can just cut your square footage by 15% or 20%. And John just mentioned to me by text here that that's what he's seeing, at least in these early days in the marketplace. I think it's a very good point.

Great. Thank you for the color. Thank you.

Our last question comes from Patrick O'Shaughnessy with Raymond James. Please proceed with your question.

Hey, good evening. In the interest of time, I'll just keep it to one question. So multifamily and industrial logistics are obviously pretty hot areas right now. How comfortable are you with your company's capabilities and those property types, and what are your aspirations to potentially build further in those areas?

Yeah, it's a great question. We love those two verticals, both multifamily and industrial logistics. They're right in Cushman and Wakefield's sweet spot. We have a very, very deep capability, particularly in the U.S. and parts of Asia Pacific in industrial logistics. We would like to upweight industrial logistics in Western Europe, and that is one of the initiatives that we're quite focused on this year. We identified multifamily some time ago as a very attractive vertical for us. Five years ago, we made quite a significant acquisition for the firm in the U.S. on multifamily capital markets. You may recall that, gosh, going on almost two years ago now, we purchased Pinnacle, which is a leading multifamily property management business Here in the U.S., actually domiciled here where I am in Dallas, we've been bullish on both those verticals. The industrial logistics business in the U.S. has always been one of the core strengths of Cushman and Wakefield. So for us, the good news is we don't have to recognize now that these are great places to do business and start up businesses there. We can now leverage into what is already there. compelling platform in both those verticals, recognizing that we have geographies, as I mentioned, such as Western Europe, where we think there's some tremendous white space to grow our industrial logistics business, and we intend to do that quickly.

Thank you. You bet.

Thank you. There are no further questions at this time. I would like to turn the floor back to management for any closing comments.

Sure. Well, we appreciate all the questions this evening. You can tell when you're in a very fluid economic situation that everyone is very curious about everyone's views about what the future looks like, and we hope that tonight's call gave you some clarity on our views of the future. We look forward to talking to you all in another quarter. Be well and be safe.

Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful evening.