Cushman & Wakefield PLC

NYSE:CWK

Earnings Call Transcript 2022-Q1

[Operator]

Welcome to Cushman & Wakefield's First Quarter 2022 Earnings Conference Call. [Operator Instructions]

It's now my pleasure to introduce Len Texter, Head of Investor Relations, Global Controller and Chief Accounting Officer for Cushman & Wakefield. Mr. Texter, you may begin the conference.

[Len Texter]

Thank you, and welcome to Cushman & Wakefield's first quarter 2022 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 Cautionary Note On Forward-Looking Statements.

Today's presentation contains forward-looking statements based on current forecasts and estimates of future events. These statements should be considered estimates only, and actual results may differ materially. During today's call, we'll refer to non-GAAP financial measures as outlined by SEC guidelines. Reconciliations of GAAP to non-GAAP financial measures, definitions of non-GAAP financial measures and other related information are found within our 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 2021 and are in local currency, unless otherwise stated. For those of you following along with our presentation, we will begin on Page 4.

And with that, I'd like to turn the call over to Brett White, our Executive Chairman. Brett?

[Brett White, Executive Chairman]

Thank you, Len, and thank you to everyone joining us again today. Joining me this afternoon is John Forrester, our CEO, who will give us an update on our operations and the broader market; and Neil Johnston, our CFO, who will review our financial results for the quarter.

Before we begin, I want to recognize our local leaders and colleagues in Central and Eastern Europe who have been doing everything they can to alleviate the human impact of the crisis in Ukraine. I'm incredibly proud of our employees who have been supporting their colleagues throughout this region.

Turning to our results. I'm pleased to report another strong quarter of earnings. In the first quarter, we reported fee revenue of $1.7 billion, up 29% over last year and adjusted EBITDA of $214 million, up 118% over last year, both of which represent first quarter records for the company.

Our brokerage business continues to perform exceptionally well as investors seek attractive returns and yield, and commercial real estate's national inflation hedge is increasingly attractive in today's market. Additionally, our leasing activity continues to strengthen as the return to the office gains momentum and demand for industrial assets remains robust.

Overall, we are optimistic about our business outlook for 2022. We are an industry leader with a comprehensive service offering that positions us well to capitalize on strong industry fundamentals and secular trends around the world, while delivering value to our shareholders.

And with that, I'll turn the call over to our CEO, John Forrester. John?

[John Forrester, CEO]

Thank you, Brett.

We're certainly off to a very pleasing start in 2022, a record first quarter marked by strong top line growth across all segments and service lines. Our brokerage revenues were well above prior year, which was impacted by the pandemic, but more significantly, first quarter revenues were 32% higher than for the first quarter 2019. Similarly, our PM/FM business continued to demonstrate strength, growing double digits versus prior year as we continue to win mandates of increasing scale.

These results highlight the real progress we are making on our multiyear strategy of focusing and investing in the fastest-growing sectors in our industry, which in turn is driving a diversification and, therefore, resilience in our earnings profile as well as our continuing profile of material margin expansion.

On our last earnings call, I touched on some of the secular trends that are powering the largest full-service providers in our industry. On this call, I'll go a little deeper and provide some additional comments on how Cushman & Wakefield continues to benefit and capitalize on these trends in four of the industry's largest sectors and service lines, namely multifamily, logistics, office and corporate outsourcing.

Against rising forecasts for the cost of debt, capital inflows to the commercial real estate sector continue to rise as investors seek assets that deliver competitive and attractive returns. The U.S. multifamily space accounted for nearly $63 billion of transaction volume or 37% of total market volume in the quarter, which is an increase of 56% versus prior year. This is a sector where through both acquisition and organic investment, we have built the U.S.'s first large-scale full-service platform.

As evidenced in the first quarter, according to Real Capital Analytics, overall U.S. transaction volumes remain elevated with $171 billion of volume transacted, up 56% versus last year. And as Brett noted, commercial real estate's ability to reprice rents and grow yield to offset inflation is a significant driver of these inflows.

In the ongoing performance of the logistics sector, there is no evidence of stalling momentum. Quarter 1 was the strongest first quarter on record in terms of absorption with U.S. occupancy at an all-time high of 96.7% and rental growth of 15.3% year-over-year, nearly double the current rate of inflation.

Whilst there may be some supply constraints in the near future, this is a long-term global growth sector. In Asia-Pacific, as an example, there is tremendous potential that this region gets wealthier and climbs the online learning curve with some 4.6 billion of potential customers versus 331 million in total in the U.S.

Turning now to the office sector. We continue to see positive data points around office leasing fundamentals, signaling a return to higher volume activity in the space. Firstly, global cities are leading the jobs recovery, and they're also leading the office recovery. In addition, a growing number of global cities are absorbing office space again with preliminary data showing that 45% of office markets globally registered positive demand for office space in the first quarter.

We're also seeing this reflected in total global office leasing activity, where preliminary data shows an increase of 19.1% in the first quarter versus prior year. And this is in line with the 90 U.S. markets that Cushman & Wakefield tracks, where total leasing activity was up 19% in the first quarter compared to prior year, and on a trailing 12-month basis was up 41% from the same period a year ago.

Class A activity accelerated at an even greater pace of 47% against prior year as occupiers continue to seek out high-quality buildings to improve their employee experience. And as you may have seen from the Kastle Systems data, this indicates a return to office across the U.S. metropolitan districts that has more than doubled from December '21 compared to present.

Given the complete cross-section of return to office dynamics that we're seeing globally, it is worth noting that our brokerage operations benefit from activity, not just the amount of space occupied, as occupiers and investors reconsider their portfolios, what is clear is that changes are given.

And in this change, whether to align space with changing occupancy demands or to meet sustainability objectives, each movers provides a revenue opportunity, not only for our brokers, but also for our project and development service teams.

As a final service line example of our increasingly diversified platform, we are continuing to see momentum in corporate outsourcing with major occupiers in all sectors within key supplier relationships on a global scale. On earlier earnings calls, we have highlighted our multiyear focus on building a world-class occupier outsourcing business to serve the largest global and multinational clients, ultimately taking advantage of this highly attractive and very large market.

Our continuing revenue growth and earnings expansion in this area reflects our fast maturing capabilities, and I'm excited to share with you today that in the first quarter, we were awarded one of the industry's largest contracts by a major global financial institution based in the U.S. for a 17 million square foot portfolio across all service lines in the United States. This win represents another major milestone in our strategy to create value for large corporate clients, seeking to outsource across multiple service lines and geographies.

Our diverse talent and platform expertise, integrated technology capabilities and solution-oriented commercial model were all differentiating factors. As we have previously discussed and made clear by our word and action, ESG is an important pillar for how we operate and work with our clients. In addition to being a driver for how owners and occupiers seek our expertise, ESG is a core focus internally at Cushman & Wakefield.

As an example of how intentional we have become in this area, we recently amended our revolving credit facility and, in doing so, added incentives linked to sustainability features based on our greenhouse gas emissions targets. This is a true testament to Cushman & Wakefield's commitment to its ESG initiatives.

Before turning the call over to Neil, I'd like to make some remarks on the humanitarian crisis in Ukraine. In March, we announced our decision to divest our business in Russia to a local operator. We believe this transition of business will allow the new owners to best support employees and maintain continuity of essential services to clients.

I'd like to thank our colleagues for their hard work and dedication, while recognizing the extraordinary circumstances and uncertainty those colleagues are experiencing. We are continuing to support our Ukrainian colleagues, including direct financial support through our Global Employee Assistance Fund and to our employees in neighboring countries who are responding to the humanitarian crisis in a variety of ways. Cushman & Wakefield stands firmly with the global community in the hope for peace.

Overall, we remain optimistic and confident about the performance of our business in 2022. Despite the geopolitical and monetary policy environment and lingering uncertainty of the COVID-19 pandemic, we remain confident in our strategy for three fundamental reasons:

Firstly, Cushman & Wakefield is one of the top or leading firms in the industry benefits as one of the few globally diversified and comprehensive commercial real estate providers. Our leading cost management, disciplined capital deployment and strong balance sheet, all position the company for success.

Second, we believe our investment in markets with secular demand drivers will differentiate Cushman & Wakefield, especially through periods of market volatility. For instance, our investment in Greystone is expected to benefit from the chronic undersupply of U.S. housing in a wide range of economic growth or interest rate environments. Similarly, the continued shift to e-commerce has a long runway and will drive warehouse logistics demand for years to come.

And lastly, because of our people. Everything we do at Cushman & Wakefield is empowered and enhanced by the great talent, focus and dedication of our people and teams around the world.

With that, I'd like to turn the call over to Neil to discuss our financial performance. Neil?

[Neil Johnston, CFO]

Thank you, John, and good afternoon, everyone.

Overall, we are encouraged by the strong start to 2022. For the first quarter, fee revenue of $1.7 billion and adjusted EBITDA of $214 million resulted in adjusted EBITDA margins of 12.6%, an increase of 512 basis points compared to the prior year, driven primarily by brokerage revenue. Adjusted earnings per share for the quarter was $0.48, an increase of $0.37 over prior year.

Taking a look at our fee revenue by service line. In the first quarter, leasing and capital markets revenue increased 58% and 76% respectively, versus an easier prior year comparison as a result of the impact of COVID in the first quarter of 2021. This equates to brokerage growth of 64% in the first quarter, which is a similar growth rate to what we experienced in the second half of 2021, which grew at 67% versus the comparable period.

Leasing fee revenue in the first quarter also exceeded pre-pandemic levels, increasing 22% over the first quarter of 2019. Leasing activity was driven by improvements in the Americas office sector, in addition to ongoing strength in the industrial logistics sector where demand continues to outpace supply.

In capital markets, investment appetite remained strong with fee revenue growth of 51% compared to pre-pandemic levels in the first quarter of 2019, driven largely by the Americas segment, where nearly all property sectors showed growth. The environment for capital investments continues to be favorable, even with the upward pressure on interest rates.

PM/FM and valuation and other service lines were up 11% and 10% respectively for the quarter. The performance across our entire PM/FM service offering was strong, particularly our facilities management business, which John mentioned earlier, highlighting a large contract win with a global financial institution client. Additionally, we go off to a strong start in our project management business as client activity has picked up across the board.

Turning to our financial results for the quarter by segment. Americas fee revenue was up 34% year-over-year, driven by the strong performance in brokerage. Leasing and Capital Markets revenue improved 68% and 81% respectively year-over-year, which equates to 39% brokerage growth versus 2019 pre-pandemic levels.

Adjusted EBITDA of $176 million improved $98 million versus prior year. Also, these results in our Americas segment include the performance of our joint venture with Greystone, which performed in line with our expectations for the first quarter.

In EMEA and APAC, we generated adjusted EBITDA of 17 and $22 million respectively, which represents an improvement of 14 and $2 million respectively versus the first quarter of 2021. This performance reflects strong revenue growth of 19% and 17% respectively, led by brokerage activity where fee revenue improved 28% in EMEA and 43% in APAC for the quarter. Both EMEA and APAC brokerage were above 2019 pre-pandemic levels, up 5% and 9% respectively.

Our financial position remains strong. We ended the first quarter with $1.6 billion of liquidity, consisting of cash on hand of $612 million and availability on our revolving credit facility of $1 billion. We had no outstanding borrowings on our revolver. Net leverage was 2.6x at the end of the first quarter, down from 2.8x we reported at the end of 2021.

Also, as you heard from John earlier, subsequent to the first quarter, we amended our revolving credit facility, increasing availability from $1 billion to $1.1 billion and extending the maturity date out to 2027. We are well positioned to continue to fund operations and invest in future accretive infill M&A and broker onboarding opportunities, while maintaining optionality within our capital allocation framework. We have an active pipeline, which we are constantly evaluating to determine the best return for our shareholders.

In summary, we are delighted with the performance of our entire portfolio to start the year, including both the continuing strength of our brokerage business as well as the stable growth of recurring revenue in our PM/FM business. We anticipate our brokerage businesses to continue to perform at record levels for 2022.

On balance, we believe the global economy continues to be conducive for growth in our business this year. While it is our practice not to update guidance at this time of the year, we remain optimistic given the momentum in our business and look forward to revisiting this at the end of the third quarter.

With that, I'll turn the call back to the operator for the Q&A portion of today's call. Thank you.

[Operator]

[Operator Instructions] Our first question is from Anthony Paolone with JPMorgan. Please go ahead.

[Anthony Paolone, JPMorgan]

Great. I guess, Neil, just to understand on the guidance, I know you're not updating it, but how should we think about some of the brackets that you put around the different businesses last quarter and kind of what you think could play out as you kind of look at the world today?

[Neil Johnston, CFO]

Yes. Sure, Tony. We feel really good about the start of the business. You can see the first quarter exceeded even our expectations. So, as we look to the rest of the year, there is really nothing that suggests that the business is slowing down as we look at the first quarter and even as we look at April and the pipeline. So we see strength throughout the year. We see strength both in brokerage. Office for us was up in the first quarter over 2019 levels.

And then, our recurring revenue businesses, our PM/FM, also had very nice growth above our expectations. So, we see nothing on the horizon that suggests that the business is slowing down at this point. At the same time, it's too early in the year to update guidance. It's our policy not to update right now. We'll revisit that as we finish up the second quarter and we have a better view to the full year.

[Anthony Paolone, JPMorgan]

Okay. And then, second question on the Greystone joint venture. I think it was $16 million of equity income. I'm guessing the bulk of that was Greystone. You said it was kind of performing in line. Can you make any comments on like how to think about that just seasonally as we look ahead and just any other further details in terms of how it's going so far?

[Neil Johnston, CFO]

Yes. The business is doing well. It's right in line with expectations. Not significant seasonality, you're right. The majority of that $16 million relates to Greystone. We guided to around $70 million of EBITDA for the full year, and we expect to be right in line with that as we finish up the year.

[Anthony Paolone, JPMorgan]

Okay. Got it. And then, last question on PM/FM, you talked about the outsourcing business generally a bit. If I think about it, the historical play was, you get these deals and you also give you the opportunity to cross-sell into like things like leasing and sales. What's the opportunity today? Is it still selling into those high-margin business lines? Or are there other things that you're doing with clients?

[Brett White, Executive Chairman]

John, why don't you take this please?

[John Forrester, CEO]

Yes. So, Tony, this is John. Our thesis on the outsourced market and these very large and very sticky contracts remains. The announcement we made about the very large contract win in Q1 is a full service contract where we will provide all services from one extreme to the other from transaction management and transaction delivery all the way through to FM and integrated FM. So, that is entirely with this, we are building our outsourced model on.

And ultimately, there are only now three companies in our entire industry. You have the skills, the capability, the infrastructure, the stretch and geography to undertake contracts at that scale. And that outsourced market itself is a secular growing trend, more clients outsourcing more of their operations in more geographies all of the time. So, we're building a real battleship outsourcing business for the future. We feel very good about the growth profile.

[Operator]

Our next question is from Chandni Luthra with Goldman Sachs. Please go ahead.

[Chandni Luthra, Goldman Sachs]

Could you guys perhaps give some color on geographies outside the U.S., your APAC business obviously grew very nicely in the quarter. How do you think about business exposure across different markets there? And how should we think about performance of your JV with Vanke in mainland China? And on similar lines, could you perhaps talk about what you're seeing in Europe, given obviously the humanitarian crisis that you talked about, but just broader concerns and any malaise that's spreading because of it with investors looking to pause activity or something on those lines?

[Brett White, Executive Chairman]

John, do you want to take that?

[John Forrester, CEO]

Happy to. I'll try and unpack the -- I think there's three questions in there, all around geography and our operations. I'd leave by reinforcing what we said in the prepared statements, which is across all geographies and all service lines, we've seen increased high levels of performance year-over-year.

And that reflects every single part of our global platform. So, we're quite happy with our overall balance of business, which varies slightly year-by-year, but on the whole is 70% Americas, around about 15% each to EMEA and APAC. We'd like them all to be bigger, and we have the momentum within the organization that you can see from our numbers that, that growth is coming through everywhere.

On the Vanke joint venture, again, reiterating our prepared statements in terms of the performance of the overall business, but the performance of that is seen right on top of where we expected it to. First quarter is a slightly unusual quarter in China, of course, because quite a lot of the trading period covers the very quiet period of Chinese New Year, and we had a lockdown. But actually, the first quarter came in exactly where we thought it would, and we're pleased with that. And overall, we've seen a lift, in particular, a very strong lift in our brokerage business across the APAC, referenced in excess of 40% growth in brokerage in APAC year-over-year.

Turning now to EMEA. We had a stellar performance in EMEA in the first quarter, very substantial EBITDA contribution from our EMEA business, which, typical to our sector, is normally pretty quiet in terms of profit contribution in Q1, given the seasonality of not only the business, but also the payments of bonuses and the like.

And that record first quarter in EMEA, of course, shows no reflection of any -- either pending or known impact of -- on the overall business of what we're seeing in Eastern Europe in the Ukraine. Europe has this innate capability of providing investors in particular, with alternative markets and market profiles.

So what we're seeing is actually a reallocation of capital through different sectors and different geographies in Europe, all adding up to record volumes in quarter 1. So, as you get no direct contagion of the issues, but we keep a very, very careful eye on it daily.

Does that cover all the questions, Chandni?

[Chandni Luthra, Goldman Sachs]

Yes. Just one quick one. Any update on your partnership with WeWork?

[Brett White, Executive Chairman]

Go ahead, John.

[John Forrester, CEO]

I'll keep going. Yes. So we're going live at this very moment on the transition of the FM contract of WeWork into our global occupier services business, which is another example of a major contract win. And again, mentioning -- going back to the source, the big one we had in Q1 in that outsourced business. Our full service offering, including Flex, including that relationship with WeWork was a fundamental part in the reason why we won that bid.

So, our thesis of showing up and able to deliver to clients a full end-to-end service of how an occupier can utilize space can experience space is again proving to be a very good part of our armory and weaponry as we go to market. I would also -- so that we're excited by WeWorks performance -- sorry, WeWorks' investments and relationship building with Yardi. And that is going to enhance the capabilities both at WeWork and our partnership to deliver even better quality services and technologies to our clients.

[Operator]

Our next question is from Rich Hill with Morgan Stanley. Please go ahead.

[Richard Hill, Morgan Stanley]

First and foremost, congrats on a really impressive quarter. I just have two questions. First, maybe we can talk about capital deployment. You still have a fair amount of cash on balance sheet. It looks like that's growing given the strong performance. Have your views on how to deploy that cash changed given the macro backdrop over the past, call it, four to five months?

[Neil Johnston, CFO]

They haven't, Rich. If anything, I think we see opportunity to grow the platform. We do have cash. We'll be looking at ways in which to grow the business, both organically and using some of that cash. But we constantly evaluate the best use for it. We also consider whether we should pay down debt. Our leverage is right where we wanted at 2.5x.

But certainly, we could use cash to reduce our interest cost as we look forward at rising interest rates and then also look at other ways to return capital to shareholders. But at this stage, we still believe, especially with prices moving where they are, that there are opportunities for us to grow the business.

[Richard Hill, Morgan Stanley]

And maybe a bigger picture question on transaction volumes. You noted your brokerage business being quite strong. We track the RCA data very closely as well. And I do think there's a lot of handwringing right now about backup in interest rates and what that will do to transaction volumes. So maybe you could just comment a little bit on what you're hearing from your clients, why do investors in commercial real estate still find the asset class compelling? Is it because the unlevered returns are actually still pretty compelling for many investors here and they're less insulated from a rising interest rate environment? So, really it's just sort of a boots on the ground question. What are you seeing? What do you think is still driving these very robust transaction volumes in 1Q?

[Brett White, Executive Chairman]

Go ahead, John.

[John Forrester, CEO]

Rich, this is -- yes, it's John. I think, in a way, you did answer your own question in part there. And I think it's probably a better answer than I could give. It is an attractive sector because so much of the characteristics of an income stream in many sectors provides a real hedge against inflation with rent profiles rising through the term of the lease, the ability for clients to asset manage their relationship with tenants to increase income streams, and really improve buildings and asset value as they go.

So, one thing I would comment on is, of course, the reality of rising debt costs has been in the system now for a number of months. So what the Fed has done very recently is, it's not a shock to the market. It's been pricing this in for a number of months. And therefore, the record volumes we saw in Q1, I think, speaks to the fact that the market is, at this point, so ready to transact on attractive assets. And there are attractive assets to be bought in the market. Ultimately, it's the liquidity of the market that's important to our revenues, not necessarily the specific price of any asset.

[Richard Hill, Morgan Stanley]

Got it. And maybe just one follow-up question to that. Do you think your clients have sort of prefunded acquisitions? So do they have an opportunity to lock in cheap debt in advance of a rising interest rate environment and therefore they can be a little bit more acquisitive?

[John Forrester, CEO]

I would be overly general to say yes on all transactions, but certainly the vast majority of -- we specialize in very large-scale transactions, high-value transactions. That's a sophisticated market that is invariably in place even before the bids are made, let alone deal closes. So, there is already a very structured capital proposition in place prior to any transaction being attempted. And that's part of the sale process, making sure that all buyers are well funded. And the market certainly shows continual appetite and a lot of available equity and debt.

[Operator]

Our next question is from Michael Griffin with Citi. Please go ahead.

[Michael Griffin, Citi]

I appreciate you taking the time and glad to join the call this quarter. Given that there has been more talk of recent potential recession on the medium term, just curious how that's factoring into your thinking across the different business lines, particularly segments that might be more volatile and susceptive to a downturn.

[John Forrester, CEO]

Yes. Michael, there really isn't anything we see right now. Interest rates are rising, but in terms of that -- and the combination of that and inflation doesn't really impact our PM/FM business because most of those contracts are fixed. So feel good about that. We see capital markets as strong as ever with a lot of capital coming in.

Multifamily was also strong, and there's just so much demand there. We've seen strength there. So, as we look to the year, we still feel very positive about the full year. And there really is nothing that's showing up certainly in the very near-term.

[Michael Griffin, Citi]

Yes. Great.

[John Forrester, CEO]

I would just add -- sorry, Michael. I was just going to add one point there, and this is something that Brett has, as mentioned on a number of these calls, ultimately looking out over the coming quarters. Actually, the health of our industry is largely based around positive GDP as opposed to directly in relation to any single factor of value, the cost of debt or inflation. So that's really the strength of the economy as a whole is what we're keeping a very close eye on.

[Michael Griffin, Citi]

Yes. I got you. And then, just touching on the PM/FM side of the business, you mentioned a big new client acquisition this quarter. I'm curious, how is your strategy? Has it changed at all for kind of winning new clients and getting into that kind of cross-selling feature that you mentioned?

[John Forrester, CEO]

We're seeing the fruition of a multiyear strategy of building out through any gaps we might have had historically in the capabilities of onboarding some of these extremely large and complex contracts. You're not even invited to bid on contracts like this unless the clients and their advisers are 100% sure that you can deliver all of the services to a very high standard over multiple years. And that's sort of -- you get to that point, these bids sometimes take 18 months to 24 months just to pursue to land. So, as I said in prepared remarks, multiyear strategy to build a really strong outsourcing business in a secular growth area.

[Michael Griffin, Citi]

Got it. Well, I appreciate the color, and great quarter.

[Operator]

Our next question is from Stephen Sheldon with William Blair. Please go ahead.

[Matt Filek, William Blair]

This is Matt Filek on for Stephen. First off, I was wondering if you could provide some additional commentary on leasing. For instance, what are you seeing in terms of lease durations versus historical averages? And then, what portion of your leasing revenue is derived from office space?

[Brett White, Executive Chairman]

John?

[John Forrester, CEO]

Okay. I presume when we're talking about lease duration, you're primarily focusing on office there, not because, of course, there's growth in logistics, for instance, to longer lease terms over the last 15 to 20 years. So, let me be specific around the office lease term question. We are seeing very significant lease term acquisitions in the tenant market, approaching the stabilized lease terms that we saw pre-pandemic.

And a lot of this business is being driven by occupiers seeking to benefit from the incentives that can be achieved by taking long leases. That's always been part of the makeup of the market. But I think it does point to the fact that the office remains a fundamental part of the operational structure of companies and how they think about their workforce going forward. So we are seeing very good trend data on lease terms, particularly in the U.S.

Was there another part to that question?

[Matt Filek, William Blair]

Yes. Just the last part was, what portion of leasing revenue was derived from office space, if you can remind me?

[John Forrester, CEO]

Okay. So we've mentioned this on prior calls. Historically, that's going back again, pre-pandemic office leasing laid up, but getting on towards 60% of our leasing total. We expect that to come back when offices are fully in full volume again, and we do feel we're getting towards our projected '23-'24 full weight again in offices. We think it will come back to around about 50%. And if you look at our overall leasing growth, where we have a material leasing growth over 2019, those, of course, come from growth in other sectors.

And in past, I would mention something that hasn't been spoken about for a little while now, but we've seen some very significant upticks in retail leasing, for instance, in 2021, where we've seen the largest amount of net absorption in the U.S. market since 2017. So it isn't just always that play off in leasing between logistics and office. We have secular growth markets elsewhere in large asset classes elsewhere to consider to focus on as a multidisciplinary company.

[Matt Filek, William Blair]

Great. That's very helpful. One more question for me. Can you also talk about your ability to source labor and meet future demand, particularly within the PM/FM segment with the tight labor market in mind?

[Brett White, Executive Chairman]

Go ahead, John.

[John Forrester, CEO]

So we have the ability -- and I'll cover the question directly, but also talk to inflation and how that shows up in the business. We provide -- when we provide labor to clients or resources of skilled technicians, ultimately our clients need that resource to show up to do the work. And primarily in our FM and facility services business, we pass on the cost of that labor directly to the client.

So, ultimately, the client wants the labor to show up, the client is prepared to pay, not whatever it takes, but within reason to pay inflated labor costs taken directly by the client for the resource to show up and undertake the work. So whilst it is a relatively tight labor market, of course, particularly in certain skill sets in the U.S. at this point, we're not seeing any particular issue around availability of labor or it impacts of inflation on our margin.

[Matt Filek, William Blair]

That's great to hear. That's it for me.

[Operator]

Our next question is from Doug Harter with Credit Suisse. Please go ahead.

[Doug Harter, Credit Suisse]

Can you talk about the pace at which FM or that the contracts are coming up for bidding now, meaning how do you view your opportunity to kind of continue to win new clients today versus kind of pre-COVID?

[Brett White, Executive Chairman]

Go ahead, John.

[John Forrester, CEO]

So, our ability to grow RF business is made up both of new wins, but also retention. And of course, our existing contracts come up from time to time. They tend to be long and they tend to be very sticky. So our win rate is very high. And growth comes from basically winning more of our fair share in pursuits, but also that market is growing itself in terms of, as I discussed earlier, in the outsourcing. So, the pipeline at the moment, as we see the outsourced market for occupier services, is growing.

And whilst we mentioned one contract, actually two now with WeWork on this call, we are onboarding a number of very significant wins right across our facilities business, both services and facilities management. And the pipeline looking forward is also very positive. So, it isn't just the revenues, of course, where we're seeing very healthy growth.

It's actually the throw off of those revenues into our transactional business and into our project management business that is so attractive. Again, it plays back to building out customer wait for globally to be able to take advantage of the secular trends that we're seeing in expanding client spend landscape.

[Brett White, Executive Chairman]

I think the way to think about FM is, it doesn't really -- don't think about it as a sign wave of velocity of bids going out to market. There's just always been and always will be a regular and steady flow of contracts coming back to market. What's different, and John talked about it, is our ability to compete and win those contracts. It's improving every month, every quarter, every year.

John talked about and we've mentioned in the release our [indiscernible] premier financial services, global outsourcing contract and a big piece of that contract. That's evidence of our moving up the food chain, ability to win more. So it's really -- it's not that there's more contracts or less contracts coming to market. What's different for us is every day, we're more competitive in that market as evidenced by this most recent win.

[Operator]

That concludes today's question-and-answer session. I will now turn the call back over to Brett White for concluding remarks.

[Brett White, Executive Chairman]

Great. Well, thank you, everyone, for dialing in. We look forward to talking to you at the end of the second quarter.

[Operator]

Thank you. This concludes today's conference. You may disconnect at this time. Thank you for your participation.