Colliers International Group Inc. Stock

Welcome to the Colliers International Second Quarter Investors Conference Call. Today's call is being recorded. Legal counsel requires us to advise that the discussion scheduled to take place today may contain forward-looking statements that involve known and unknown risks and uncertainties. Actual results may be materially different from any future results, performance or achievements contemplated in the forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the company's annual information form as filed with the Canadian Securities Administrators and in the company's annual report on Form 40-F as filed with the U.S. Securities and Exchange Commission.

As a reminder, today's call is being recorded. Today is Thursday, July 30, 2026. And at this time, for opening remarks and introductions, I would like to turn the call over to the Global Chairman and Chief Executive Officer, Mr. Jay Hennick. Please go ahead, sir.

Thank you, operator, and good morning. I'm Jay Hennick, Global Chairman and Chief Executive Officer of Colliers. Joining me today is Christian Mayer, our Chief Financial Officer and Chief Executive of Colliers Commercial Real Estate. Today's website and presentation materials are available on the Investor Relations section of our website.

Colliers delivered another strong quarter with double-digit revenue growth across all 3 platforms, healthy internal growth and continued improvement in earnings quality. In commercial real estate, we are seeing a broader recovery across our markets. Capital Markets and Leasing revenues each increased by more than 20%, supported by improving transaction activity, better financing conditions and market share gains in most of our major markets.

Engineering continues to be an important strategic differentiator for Colliers. Revenue increased 30%, driven by strong demand across critical infrastructure, transportation, water, property and buildings. The acquisition of Ayesa expanded our global capabilities and strengthened our position across Europe, Latin America, the Middle East and Australia. Engineering gives Colliers recurring revenue, stronger visibility and new ways to grow our enterprise.

Harrison Street continued to add strength and differentiation as well with assets under management reaching $110 billion and revenues increasing by 17%. Having built 2 large global platforms at Colliers in commercial real estate and in engineering, we are now building our third. We are bringing our investment management capabilities together across real estate, credit, infrastructure and private wealth. We are creating more investment opportunities for our clients and greater long-term value for our shareholders. Together, the recovery in commercial real estate the growth of engineering and the expansion of our Harrison Street business are changing the quality and composition of our earnings.

Today, approximately 70% of our earnings come from resilient recurring revenue streams, giving Colliers greater flexibility, greater stability, stronger cash flow and perhaps most importantly, more ways to grow our business. What further differentiates Colliers is how our platforms are working together. Commercial real estate gives our market -- gives us market intelligence and deep client relationships. Engineering adds technical expertise and execution capability. Harrison Street brings capital formation, investment discipline and ownership expertise.

Together, they create a much more integrated Colliers, one that can engage clients earlier, serve more of the value chain and replicate that model across high-growth ecosystems. Data centers is just one example. We can help clients identify and acquire sites, provide engineering and technical services to design, build and operate these facilities and deploy capital through Harrison Street, which over the past 6 years has invested more than $6 billion in digital infrastructure and data centers already.

And after the fact, we can deliver leasing, sales, facility management and other advisory services as those facilities come on stream. That same opportunity exists across many other ecosystems within our business. By combining client relationships with specialized platform capabilities, we can create additional avenues for growth beyond the stand-alone opportunities inherent in each of our businesses.

So in summary, our second quarter results reinforce the confidence that we have in our future. Step by step, we are building Colliers into a stronger global company with broader capabilities, more resilience in our performance and better positioned to create lasting value for our clients, our professionals and our shareholders.

Now let me turn things over to Christian to review our financial results in more detail. Christian?

Thank you, Jay, and good morning, everyone. Please note that the non-GAAP measures discussed in this call are defined in our press release and quarterly presentation. Unless otherwise noted, all revenue growth figures are presented in local currency.

Our second quarter consolidated revenues were $1.6 billion, up 16% and net revenues also increased 16% to $1.4 billion. Adjusted EBITDA was $205 million, up 14%. Adjusted EPS increased 6% to $1.83 and was tempered by higher interest expense. These results met our expectations and our momentum gives us confidence as we enter the second half of the year. Commercial Real Estate segment net revenue for the quarter was up 12%. Capital Markets rose 23% with growth across all geographies, led by the Americas and Asia Pacific. Activity in industrial property sales was up notably in all geographies. Leasing revenues were also up 23%, led by U.S. industrial with all global regions contributing to growth. The segment net margin was 11.9%, up slightly over the prior year.

Engineering second quarter net revenue was up 27% from a mix of recent acquisitions, including a partial quarter of Ayesa and solid 5% internal growth. Our net margin was 14.5%, up slightly over last year. Our engineering backlog stood at 12 months as of June 30, indicating strong momentum for the back half of the year. Investment Management net revenues increased 15%, driven by our recent acquisition and internal growth from new capital. The net margin was 36.5% as expected, given ongoing planned global platform building under the Harrison Street Asset Management brand. These costs will continue to impact margins for the second half of the year, and we expect margins to stabilize in the low 40% range for 2027.

During the quarter, asset realizations generated strong gains and resulted in the return of $1.9 billion of capital to our limited partners and $3 billion year-to-date. Our demonstrated ability to monetize high-quality portfolios at attractive prices and make meaningful distributions to investors has always been a key differentiator for us. We raised $2.2 billion in new capital commitments in the second quarter and just under $3 billion for the 6-month period. Year-to-date fundraising is on plan, and we expect an acceleration in the second half. Our annual fundraising target for 2026 remains unchanged at $6 billion to $9 billion.

Turning to our balance sheet. We completed the Ayesa acquisition late in the quarter and despite significant capital deployment for this strategic platform, we finished the second quarter with leverage of 2.8x. We expect to delever significantly in the second half of the year as the majority of our seasonal cash flows come in as we finished the year in the 2.3x range. Given this leverage profile and given the current undervaluation of our shares, we may choose to deploy capital on a stock buyback and as we progress through the second half of the year.

We are reaffirming our 6 -- our full year 2026 outlook. The key forward-looking indicators across our business segments being transaction pipelines, engineering backlogs and fundraising pipelines are up nicely over the prior year. Geopolitical risk and macroeconomic volatility continue to be elevated as we all know. However, we believe that these risks should not materially impact our overall results. That concludes my prepared remarks.

Operator, can you please open the line for questions.

[Operator Instructions] Your first question is from the line of Himanshu Gupta with Scotiabank.

So first on commercial real estate. It looks like industrial was strong for leasing. Industrial was strong for capital markets as well in Q2. So just wondering what led to the strength? And how do you see momentum in Q3?

Yes. Thanks, Himanshu. So industrial is one of our key historical strength areas, and it continues to be the case. And in the quarter, we saw strong demand in the Americas, in the U.S. in particular. And that was, I think, partially a reflection of some uncertainty that happened last year post Liberation Day, which was in the second quarter last year. So bit of an easier comp, led to some stronger growth in that area. As we look ahead, momentum is strong, but we do have some tougher comps ahead in the third quarter.

Okay. And overall, how do you see leasing revenue or capital markets in Q3?

Yes. We expect leasing revenues to be up in the mid-single-digit range in capital markets to be, again, strong, 15% or thereabouts year-over-year growth.

Got it. Okay. And then just moving to investment management, especially the margins. Is the -- I mean, the recovery pickup in margins getting pushed to the next year and not likely to be in Q4. So maybe anything on the margin side.

Yes. Himanshu, as Jay mentioned, we're building a global investment management platform with Harrison Street. And we have taken additional integration steps this year, including Round Shield rebranding and integrating with our Harrison Street Europe business, which announced just a few weeks ago. So taking our time to integrate this business and build it for the future. And that will impact the margins here. for the remainder of the year. And we expect the margin to a profile to increase in 2027, as I mentioned in my prepared remarks, to the low 40s range.

And maybe just a last question. I think over $2 billion was raised during the quarter. Has this capital been deployed? I'm just trying to see that when will this raise will lead to EBITDA pickup in numbers?

Yes. So we did raise $2.2 billion of new capital in the second quarter. That capital comes from in a mix of fund types. Some of the closed-end funds that capital becomes fee-bearing immediately. And in other fund types, it will take some time to deploy that capital and then that capital at that point, become fee-bearing. So this is a normal part of the fundraising process. Some capital, as I mentioned, becomes fee-bearing immediately. Some takes time to be deployed and then become fee-bearing but that's reflected in our expectations for the year.

Your next question comes from the line of Stephen Sheldon with William Blair.

I wanted to start on the engineering side. I'm just curious if you can talk a little bit more about how internal organic growth there has been trending in the first half of the year. And -- and then how you're thinking about it in the back half and potentially in the early next year. And then, also I really appreciate the color, Jay, on how engineering ties into the rest of Colliers businesses. And I think that's been an area of focus for the buy side, how much cross-selling opportunities there are between engineering and kind of the core CRE business.

So just curious, yes, do you think it will take some time for some of the cross-selling opportunities to be realized? Or are you already starting to see some of those come in? So would you have just a lot more color on engineering.

Great. Good question. I'll take the margin question. Our year-to-date -- sorry, our internal growth question on engineering. Year-to-date internal growth in engineering is 5%, and we expect that to continue for the remainder of the year. Then I'll pass the question on the cross-sell opportunity in engineering to Jay.

Steve, it's frustrating for me because we have not been able to articulate the full power of the differentiation that we're trying to create Colliers. The engineering platform is not good. It's awesome. And if you think about it, and I tried to give you an example in my prepared remarks, if you think about it, all the work done in much of -- and it's not just data centers, it's in all ecosystems, whether you're building a building, you're building infrastructure, you're building -- you're building any asset, we're designing, we're building, we're project managing all through our engineering business.

So the connectivity between the different platforms, which for almost since inception, I don't think people really understood because they saw commercial real estate as a stand-alone platform, engineering and Harrison Street all is 3 stand-alone platforms when they're actually working together more and more clients, the same clients are retaining us to do more and more along the whole value chain. And now with Ayesa and opening up markets where we didn't really -- we had huge presence in commercial real estate across Europe, the Middle East and Australia, but we didn't have -- truly have any engineering presence.

Now with Ayesa, which already is doing business with our -- both our commercial real estate and our investment management business, they're pitching business together sort of a complete end-to-end solution. So we think that over the next couple of years, being able to handle the entire life cycle of assets will create a differentiator for Colliers that none of the other peers have. Some of them have bits and pieces of it. But we think that we have a truly strategic differentiated plan that is bearing fruit. And it's -- these are global -- these are global platforms. and their global platforms run by people who have a vested interest, equity stakes in our businesses through our partnership philosophy, and that creates huge glue and huge collaboration desire from each of the partners to work with the others. So it's a bit of a frustration for me because we have not been able to articulate the power of the 3 different platforms working together, and we're going to dial up our efforts to do that over the next number of quarters until that finally hits home.

That's great to hear. Very, very helpful commentary, Jay. And then just as a follow-up, I guess, 2 questions in Investment Management. One, it seems like management fees as a percentage of AUM sets up nicely this quarter. So just curious what drove that and whether that's something structural and maybe that can keep moving higher from here?

And then two, am I right to think that it could get easier for fundraising activity. I know it's been a challenging couple of years, but capital market activity picks up and as institutional LPs start to see more capital distribution, does that make it easier to go back and raise more money?

Yes. I mean one of the key -- again, we are building a global platform with Harrison Street, that means bringing together all of our unique strategies that we had around the world, as you know, Steve, you've been following us for a long time. We built this platform 1 step at a time since 2018, and we built it through 4 acquisitions of very good operators that had a vested interest in their strategies. And now we're bringing together that we're bringing them all under the Harrison Street banner on a global basis. We're taking distribution that it was previously done across the different platforms. We're standardizing them.

There's so many aspects that we're doing, and that's putting us in a different category in terms of fundraising. So all of our 45 people that are in capital distribution, are in front of clients, and the clients are making the decision on which strategies are more interesting to them. And so in the case of -- in the case of our proven funds, Harrison Street 10 is in the market right now, in the market right now. There's a variety of strategies that have stood the test of time over a long period of time, but there's also new strategies that have been introduced that our investors are saying, "Tell me more about that."

And if you don't do that in a streamlined way, you're missing a great opportunity to leverage relationships that the Harrison Street core business would have with some LPs and now can leverage those strong relationships and introduce them to mid-market infrastructure deals that they're also interested in. So building a platform takes time. It takes expense, it takes bringing together teams, but we're very, very, very pleased with the results all of the partners, and again, I emphasize, as you know, our philosophy has always been around perpetual partnerships. All of our partners in each of the strategies had the choice of staying by themselves or rolling up into Harrison Street Asset Management and to a professional, they all rolled up. And together, they own circa 25% of the equity of this very valuable platform and doing what we're doing is only making it much more value.

Your next question comes from the line of Erin Kyle with CIBC Capital Markets.

Maybe going back to the engineering segment on the margins. So the prior 2 quarters had seen some margin contraction on lower utilization that you had called out in the past. And then we saw net margins expand year-over-year this quarter. So the question is, is utilization back up where you expect it to be? And are there any other productivity metrics or anything you can point to in the engineering segment?

Yes, Erin, the margin in our engineering business will vary on a quarterly basis because there is seasonality in our business. And as you're aware, we operate in Canada and the northern parts of the U.S. where winter is a significant factor driving revenue levels as well as utilization levels. In the past, few quarters, we have called out some utilization areas in certain end markets, and that's always going to be a factor in our business. And for that reason, we have a multidisciplined diversified business with multiple end markets and multiple client types, and also a diversity of clients between public and private sector.

So nothing really major to call out this quarter. The Ayesa acquisition, as you know, has higher margins. So that is going to impact the margin profile a little bit in the back half of the year as we bring that business on stream. And the only thing I would add to that, Christian, is Ayesa also softens the creates more geographic diversification into different markets that have different climate issues. Yes, yes, right. The seasonality of Ayesa is almost nonexistent. It generates 24% to 26% of its revenues and EBITDA in any given quarter, given the markets that it operates in and without the weather-related seasonality.

Okay. So that's helpful. On a go-forward basis, maybe in 2027, we see a little bit less of that quarter-to-quarter variability there, maybe which gears to the commercial real estate segment, growth has been quite strong for the past 2 quarters in capital markets and leasing this quarter as well. And that's kind of in despite of an interest rate environment that hasn't necessarily been as constructive as everyone was expecting maybe heading into the year. So would you say that's mainly a function of like pent-up demand in the market? Or is Colliers winning share here as I know you've been recruiting for new team members across the CRE segment as well.

Erin, we certainly believe all that is the case. We have been winning share of market. And in particular, in terms of our recruiting efforts, I think we've been very disciplined, but yet aggressive on recruiting. And we've added more producers than others. I think relative to our publicly traded peers in the U.S., at least, we've added more producers on a percentage basis than they have, and I think that's starting to show in our numbers, and it has been a modest drag on our margins over the last few quarters as we ramp these folks up.

So we're feeling very good about our business and in both the trajectory -- the rate environment, of course, is 1 that is top of mind for real estate investors. And I think it's in a range, activity levels will continue. And that -- those ranges are fairly wide. And as long as [indiscernible] events continue to be under a reasonable level, we should see strong activity through the balance of the year.

Your next question comes from the line of Jimmy Shan with RBC Capital Markets.

Mentioned share buyback. So I guess with the stock trading where it is, how are you prioritizing between share buyback versus the tuck-in M&A that you'd be doing, especially as leverage comes down? And then at what leverage level do you feel comfortable accelerating either?

SWell, obviously, stock buybacks has been presence of mind for us. As you know, some of the senior executives here have been buying significant amounts of stock in the company, but we did not believe that it would be prudent for us to be using our normal course issuer bid to be buying back stock in light of the significant Ayesa transaction, which is now completed. As Christian mentioned, the margin -- the leverage of we expected something around 3 at the time we contracted for that transaction. It's come in at 2.8, which is positive. And you can see our cash flow conversion is very significant.

So as we approach the balance of the year, we expect our leverage to fall and that will open up. And let me finish the point, it will open up, and we'll be able to consider using our issuer bid to acquire additional shares, particularly where they're currently trading.

The other thing is that acquisitions continue to be abundant for us. And there's lots of opportunity, not just with Ayesa, which opens up all kinds of new markets, all kinds of adjacencies different additional qualifications that help not only the Ayesa business but can be transferred to our other businesses. So we don't want to slow down our acquisition activity at the same time.

So we always -- even if there's a difference, a current difference -- and where Colliers is trading versus buying an exceptional business that will pay dividends over a long period of time, we will always default to a great acquisition. It's something that we'll add to us as we've done for 30 years. So I hope that gives you a little bit more color around our thinking on the issuer bid.

Yes.And that's helpful. Maybe just as a follow-up. You've still been acquiring, obviously, the last few acquisitions have been on the engineering side. I guess with the uncertainty with respect to how AI can potentially impact the business, at least from a public market perspective, I wondered if there was -- if there's been any change in the multiples that you've observed that people are paying for engineering firms? Or how would you underwrite, if at all, any AI risk when you underwrite those businesses?

Well, I can give you my professional response or I can tell you the way it is based on my experience. And so I'm just going to do what I always do and tell you the way it is. Look, technology and AI are always -- they're always an important element, but everybody woke up last week and all of a sudden AI is a fancy word for years, we've been using technology to automate workflows and get productivity gains and take our specialized data and create special insights and unique insights for our clients.

And one of the things that we've done in light of the -- in light of the additional focus on AI is we tasked our people to create a shopping list of ideas and opportunities that can improve our business further using AI, and there were several interesting ones, and we've increased our technology spend against the highest prime and unlock some embedded data sets that we might have. But really, at the end of the day, it's not about all of that. It's about professional judgment, specialized expertise and trusted relationships which don't change.

So when I think about both commercial real estate and I think about engineering, I think that they are going to only get better, more efficient. And -- but the most important thing, which you alluded to in your first sentence is, yes, we are adjusting down the purchase prices, arguing that AI is going to have a major impact on some of these businesses, which it will not. And I say will not, it will not to the big players because we're in the game, and we're doing what we need to do. The small guys don't have the depth and capital to capitalize on these things. But the bigger guys do, and I think AI will only help us make our business better, but the smaller guys don't have those advantages. And as a result, we could be buying and are buying exceptional businesses, albeit smaller, at better valuations this year than last year, for example, for that reason.

[Operator Instructions] Your next question comes from the line of Daryl Young with Stifel. .

First question is just around the real estate services and outsourcing activity. Given the strength in transaction activity, I might have expected to see a little bit stronger performance in averaging advisory. Is there something specific you can speak to on the Europe and Asia weakness you highlighted?

Yes. I mean the only real challenge we have in our outsourcing business right now is the local project management in those 2 markets, and there's some timing of projects, which I think we'll start to see those come through in the fourth quarter of this year. The other parts of the business, property management, valuation, loan servicing, all up nicely in the second quarter, and we continue that to -- we expect that to continue through the balance of the year.

Got it. And then just quickly on the data center theme, one of your peers provided an outlook for some pretty exceptional long-term growth and revenue targets. And I know you've referenced data centers in the past is just another asset class that you're capable of servicing, but there does seem to be some pretty significant early mover wins in that sector. So is there a more formalized strategy that you're taking or that's evolving in the background around data centers for Colliers?

The short answer is that we -- in each of our businesses are focusing very closely on the growth in data centers that we believe we're getting strong share, whether it's in engineering. Obviously, Harrison Street owns $6 billion worth of these centers, which gives us natural connectivity to be doing business there. We have not developed as you're suggesting, a uniform strategy across all platforms yet. I presume we will over time. What's happening is that there's lots of growth -- and so for example, if we're doing gas center work for a client in engineering, and that client goes and does a separate data center, we generally get the first call.

So there's a great opportunity for us to take more share from that particular client in a different geographic region. -- and we're seeing quite a bit of that, which is exciting to see. But I would say, if I'm being candid, we are very busy with data centers right now. And so it's difficult to get everybody together and say, let's create a uniform strategy when they're just trying to you can see the internal growth in engineering is quite strong. And we expect it to get a little stronger, and one of those areas is data centers.

Got it. Okay. And just 1 last one. On the NCIB, did you say you'd be willing to take the leverage back to 3x in the back half of the year to get aggressive on the NCIB? Or did I mishear that?

Daryl, to be very clear, we did not say that. In my view, 2.8 is the high watermark. We're going to delever through the balance of the year. And we may, at these prevailing prices, spend, call it, just for argument's -- discussions sake here, $100 million would buy back 2%, 1% of our float. So it could be nicely accretive without being meaningfully impactful on our leverage. And certainly, we don't expect to have a material increase to our leverage as a result of stock buyback action.

It really depends on the M&A opportunities as well because we do have quite a pipeline of deals. And we'll have to see how the balance of the year shakes out before we execute on that.

Your next question comes from the line of Mitch Germain with Citizens Bank.

Jay, while I recognize engineering and investment management are very nuanced and differentiated. Is there a thought around having Ayesa, Englobe and other of your key executives coming up with maybe maintaining their existing brands for coming up with some sort of unified strategy around that business line?

Around which business line? Engineering?

Engineering.

I don't really understand your question.

You want to give it to me again.

Well, I mean you've got -- I understand that the individual brands have a lot of value. But obviously, you have certain potential cost savings initiatives that you can deliver if you kind of unify some maybe back office or other sort of functionality and maybe best-in-class practices that they can be sharing in their individual competencies. So is there any thought around kind of making sure that you can leverage that knowledge and capability and be able to spread it on a global basis?

Well, they're doing that today. I mean, remember, our all technology is run centrally. Each of the divisions have their own technology infrastructure, but it's all within the overall Colliers structure, the same thing with a number of other shared services. But on the business front, what we're finding is that the engineering businesses in the different geographic regions are working closely with the primarily commercial real estate and investment management or the investment professionals within the investment management business to see about bringing together a complete solution for clients.

And they're doing that naturally right now. I would say it's still early days to have a much more formalized approach. But anything internally around how do we rationalize, simplify, is there a way to create additional efficiencies, bring down data costs across the organization. That's all been something that we've been doing for years across Colliers. So that's happening. But the new business connectivity is becoming more interesting because, as I said earlier, the client relationships if you've got a strong relationship with Costco in one part of the U.S. and they're building data center or a building, and it applies not just to data centers, but all kinds of other ecosystems, they're building something else in other parts of the country. It brings the 2 opportunities together very nicely, and it's spreading business around.

So I would say nothing is formalized yet. I think we need another 1 year or 2 of really capitalizing on some of the business opportunities we're getting and see how everybody naturally comes together but we are capitalizing on, I would say, the easier things, which is the internal cost structures and ways in which we can become more efficient.

Got you. That's super helpful. And then remind me what you guys are viewing as more of a long-term leverage target I think you were back in 2024, you're around 2x. It's come up with a bunch of acquisitions. I know that your forecasting it to come down a bit by year-end. But kind of longer term, is there some sort of range that you consider to be kind of what you're striving to target?

Yes, Mitch. Our target leverage range is 1.5x to 2x with a bump out for significant acquisition activity, which I Ayesa certainly falls in that category, or unusually low share value where we can capitalize.

Your next question comes from the line of Frederic Bastien with Raymond James.

It's still early days for Ayesa under the Colliers platform, but are there any early surprises, positive or negative that you can share?

It's been a very positive experience so far. We found the team very excited about becoming partners finally in the business. They are now real equity partners in the business. So they had not had that opportunity under the prior ownership structure. They are very engaged internally in their growth as well as with our commercial real estate folks and our other engineering folks around the world to explore opportunities to work together and to build the business. So a very positive first couple of months, and we look forward to building our relationship more deeply with that team.

And Brad, you know on -- just sorry, Fred, as you know, these deals generally take 1 year or 1.5 years to come to fruition. So we've had a long time to work with the team and better understand what their motivations are and where their opportunities are that they couldn't pursue under the previous ownership structure. So that's been quite exciting. They're exceptional operators. But I think I could be wrong, but I think in -- since 1964 when the company was found that they made one acquisition in Australia. So -- and that 1 acquisition was a company that our team looked at also in Australia, and it was relatively recent.

So there's an opportunity to bring those 2 together. But the bigger point is there's lots of opportunity within their existing markets with relationships that they've had for years and years and years that we think that we can capitalize on with this great team over the coming years.

Great. And just building on that, are there any specific areas of expertise or capabilities within the business within Ayesa that you're particularly excited about to potentially cross-sell across the broader Colliers platform.

Yes. I mean they have a very strong expertise in desalinization. I think they run -- I don't know the number it's something between 6 and 10 large -- they design them, they built them. They operate them in the Middle East. Using technology, I believe that they were able to gain from Israel. And that's an interesting area for them. And they have some marine engineering expertise, which -- and water, which we think that we can transfer to other markets.

So each engineering platform in other companies, as you know better than most, have lots of different expertise. But I think Ayesa brings 2 or 3 more that we can transfer hopefully easily to our other businesses.

Your next question comes from the line of Stephen MacLeod with BMO Capital Markets.

And lots of great color so far on the call. So thank you specifically around some of the cross-selling opportunities. Nice to hear about the long-term opportunities. I just wanted to focus in just a little bit -- you talked in your prepared remarks about having very strong back half visibility into all 3 segments. And I'm just curious sort of what the foundation of that is? I mean maybe starting with CRE, what are your customers saying about rates, the rates environment? And then in engineering, you talked about having a 12-month backlog. And I'm just curious how that's trended relative to prior quarters.

So we track our pipeline in commercial real estate in a very disciplined manner. We've been doing this for a long time, and it's something that is a key part of what we do every day and how we manage the business every day. We certainly look at the treasury as the bellwether for the U.S., in particular, at 4.7. It's kind of on the high end, but it moves around, as you know. So in our -- with the information we have and with our -- our best judgment, we see a strong list of transactions that will happen over the next year, and we have more visibility into the more near-term transactions, being the ones in the next quarter or the next 6 months. And as a result, that gives us the confidence we're looking for.

In terms of our backlogs in engineering, we have really 4 engineering businesses that operate around the world, Ayesa being the newest. Each one has a wide variety of clients and end markets. And each one tracks its revenue backlogs. Our goal always is to have a 12-month backlog of work under contract and that is where we currently sit. So that can vary a little bit seasonally. And -- but certainly, right now, where we sit is very comfortable, and we have the visibility we need from that backlog to give you the outlook that we delivered.

That's great. And then I know we're talking a little bit about sort of leverage and the balance between that and buybacks. -- but you're very long-term thinker. So when we get to 2027, when you think about the acquisition opportunities beginning to -- or the opportunity for you to be able to deploy capital for acquisitions in a more meaningful way. Can you just give a bit of color around sort of what you see as your next top priorities?

Yes. I mean, our nearest term top priority is to complete the build-out of Harrison Street Asset Management as a global player. Anyone that follows the asset management business, we'll see that Harrison Street is among one of the bigger players in the sort of the next tier below the obvious big guys. There's lots of opportunity for us to continue to consolidate that business. There's a lot of opportunity to raise additional capital. The early talk for '27 and beyond is higher than what we're talking about today, primarily because there's more strategies, more opportunity. So in a short -- and just to summarize, I think our nearest term focus is to finish the job at Harrison Street, bring it all together in a streamlined way. We actually, as Christian alluded to, we actually accelerated a few steps in the integration process over the past quarter because we thought there was a great opportunity to do it in Europe.

The round one was to bring it all together in the U.S., which is largely done. Round 2 is Europe. And Round 3 is an expansion into Australia and New Zealand, which we're already on the ground and looking for opportunity down there as well. And then where do we go from here? Base business is strong. We're focused in the right areas. Some of our peers are in traditional real estate assets. We have a very small component of our business in traditional real estate. We're focused on alternate real estate, infrastructure, debt things like that. So we like the categories that we're in, but there's lots of opportunity for us to consolidate, bring other exceptional strategies into the fold. So I would say there is that Engineering continues to be a growth engine. And even in commercial real estate, there are some interesting opportunities to strengthen our debt origination business create opportunities to enhance our access to capital flows to fund some of our professionals origination.

So there's just a lot happening and that's one of the great things of having a global platform now in 3 different areas. We can grow globally, we can grow by service line, we have a much more resilient revenue stream than any of the others do for -- by quite a bit. And so we're really building a highly diversified resilient business the way that we've done it for so many years to create long-term value for our shareholders, the largest of which are the people that run the business day to day.

We have reached the end of our Q&A session. I will now pass the call back to Mr. Jay Hennick for some closing remarks.

Thank you, everyone, for participating, and we look forward to speaking again at the end of the third quarter. So thank you.

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

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

Thank you for joining us. With me today is Christian Mayer, our Global Chief Financial Officer and also Chief Executive Officer of our Commercial Real Estate division. This call, as always, is being webcast and the presentation materials are available on our website.

Colliers delivered strong results for 2026 for the first quarter, underscoring the durability of our company. We have made solid progress in a still uneven market, supported by continued strength in our resilient businesses and improving activity in commercial real estate. Colliers is built to compound shareholder value through 3 growth engines across the built environment, commercial real estate, engineering and project management and investment management.

From an earnings perspective, more than 70% of our earnings come from resilient businesses, engineering, project management, investment management, property management and mortgage servicing. This mix gives Colliers greater stability through market cycles and more growth opportunity than others. These attributes, together with our enterprising culture and meaningful inside ownership have supported a 31-year record of delivering 17% compound annual growth in per share value.

Importantly, we achieved these performance numbers at a time when our shares are trading well below their intrinsic value, creating significant upside potential for shareholders. During the quarter, we strengthened our leadership team to better capture growth opportunities in engineering, appointing Elias Mulamoottil as the CEO; and Christian as the CEO of our Commercial Real Estate business.

We also increased our financial flexibility through a $400 million long-term debt financing and an extension of our revolving credit facility supporting the acquisition of Ayesa Engineering, which we expect to close later this quarter. In Commercial Real Estate, the recovery continues to gain momentum. Transaction services, including both capital markets and leasing were up an industry-leading 25%, reflecting market share gains across the globe for Colliers and improved investor sentiment industry-wide.

Engineering also delivered strong performance, providing highly technical support across attractive end markets like infrastructure, transportation, property and buildings, water and environmental. This work also has strong visibility and consistent margins while creating meaningful opportunities for growth and for collaboration across our other businesses.

The acquisition of Ayesa will accelerate our momentum in engineering even further by expanding our geographic reach, adding in-demand capabilities and extending our growth runway into new markets. In Investment Management, assets under management increased 9% year-over-year to almost [$1.9 billion]. At Harrison Street, we invest capital along institutional and high net worth individuals across high-growth infrastructure-related assets, including data centers as well as demographic driven defensive sectors such as senior housing, student housing, medical office and health care delivery.

Over more than 2 decades, our differentiated investment strategies have delivered strong returns for investors and are supported by powerful secular and demographic tailwinds that continue to support our growth. We are very excited about Harrison Street's prospects as we continue to scale the business and capitalize on the many opportunities ahead. We believe we are well positioned to continue to generate attractive growth opportunities for our investors and for our shareholders. With that, I'll turn things over to Christian, after which we'll open the line for questions. Christian?

Good morning, everyone. Following up on Jay's overview of our strategic progress this quarter, I will now dive into the financial details that support our strong start to 2026. Please note that the non-GAAP measures discussed are defined in our press release and quarterly presentation. Unless otherwise noted, all revenue growth figures are presented in local currency. We have realigned our Engineering and Commercial Real Estate segments. This realignment resulted in a modest increase in CRE segment revenue with an offsetting decrease in the Engineering segment. Prior periods have been recast and a historical comparative Excel file is available on our Investor Relations site.

Our first quarter consolidated revenues were up 12% and net revenues also increased 12% to $1.15 billion. Adjusted EBITDA was $125 million, up 8%. Adjusted EPS increased 5% to $0.91 and was tempered by a higher-than-expected tax rate related to certain European operations. We expect our tax rate to moderate in the coming quarters. The solid performance met our expectations and reflects effective execution across our business.

First quarter Commercial Real Estate segment net revenue was up 13%. Capital markets revenues increased 43% (sic) [ 47% ], led by market share gains in the U.S. and in parts of Europe, both in sales and debt finance. We reported sales growth in all property types, but most notably data center development land and office. The U.K., Germany and Japan also posted strong year-over-year gains in office and industrial sales.

Leasing revenues were up 9% with U.S. industrial property leading the growth. Segment net margin was 6.3%, up 20 basis points over the prior year first quarter with operating leverage from higher transactional revenues, partially offset by investment in recruiting across the segment. First quarter Engineering segment net revenue was up 13% from a mix of recent acquisitions and solid internal growth. End market demand continues to be strong, especially in infrastructure and related areas.

Net margin was 9.5%, slightly lower than last year, reflecting lower workforce utilization in residential development and telecommunications, both of which we expect will improve as we progress through the year. Our overall engineering backlog continues to be robust. Investment Management net revenues increased 8%, driven by a recent acquisition and internal growth from new capital deployed. Net margin declined to 37.4% as expected as a result of planned investments to integrate and streamline under the Harrison Street Asset Management brand. These costs will continue to impact margins for the next couple of quarters, after which we expect to return to a low 40s net margin profile.

The IM segment raised just under $1 billion in new capital commitments during the first quarter, and we expect increasing momentum as the year progresses. Our fundraising target for 2026 remains unchanged at $6 billion to $9 billion. Our balance sheet is strong with leverage at 2.3x, reflecting seasonal working capital usage and with $1.5 billion in total credit availability as of March 31. We expect to complete the acquisition of Ayesa Engineering in the coming weeks, funded from available credit.

We are maintaining our full year 2026 outlook for mid-teens revenue, EBITDA and EPS growth. Our solid Q1 performance, which met our expectations, is the foundation for this outlook. Our continued confidence stems from robust pipelines in commercial real estate transactions and sustained momentum in our resilient businesses. While we acknowledge the recent increases in geopolitical risk and macroeconomic volatility, these risks are not expected to materially impact our 2026 results at this point, reflecting the inherent geographic service line and client diversification of our platform.

That concludes my remarks. Operator, can you please open the line for questions?

[Operator Instructions] Our first question is from Anthony Paolone from JPMorgan.

My first question relates to, I think, in engineering, some of the utilization being down a little bit. And I think you mentioned it was related to residential. Can you just talk a bit more as to whether you see that as temporary and how you manage margin in instances where some of these end markets may ebb and flow? And just maybe give us a little bit more insight into how that business works in that manner.

Yes, it's a great question, Tony. We have a well-diversified engineering business that currently operates in 3 major markets: Canada, the U.S. and Australia. And in each country, we have a number of highly predictable and high-demand end markets, including infrastructure, transportation, property, buildings, resi development, telecommunications, program management, institutional project management. So a wide variety of end users. And that is intentional. We try to also have a well-balanced business between public and private sector clientele so that we can manage ebbs and flows like we are seeing today in residential development and in telecom. So we manage the business for consistency in margins from time to time. A couple of these areas will be stronger or weaker. And over time, we're able to generate a consistent margin. And we do expect that these 2 areas will rebound in the coming quarters.

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

Yes. Tony, there's really 2 areas, and you hit the nail on the head. It's people, first and foremost. We continue to recruit at an accelerating pace and bringing people into our cap markets and leasing business in major markets around the world. And so that's the primary focus.

Secondarily, and we've talked about this before, we are increasing the pace of our IT spending, both OpEx and CapEx. That is to enable AI and technology and efficiencies that are going to come from that as well as enhanced abilities for our producers to be of service to clients and hopefully more productive. So those are the areas that we're investing in.

And our next question is from Frederic Bastien from Raymond James.

So we had some pretty solid results from the CRE segment. However, outsourcing -- outsourcing growth was a bit on the soft side. Was there any tough comparables that you were lapping? Or I just want to get a bit more color on what transpired here.

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

Okay. Switching gears to Investment Management. We saw some pretty good growth. Obviously, some acquired growth in there as well. But as we look at the next couple of quarters, how do we -- how can we expect the pace of revenue to ramp, both on an organic basis, fundraising, acquisition and the like?

So IM is very interesting because, as you know, we have spent the last couple of quarters, and it's going to continue for a while, bringing together our 4 platforms under the Harrison Street brand. Needless to say, that has a lot to do with bringing people together, rebranding funds, streamlining accounting systems across the board. IT and a variety of other areas. So we're very excited about that particular platform. It's got some great momentum in terms of -- first of all, it's got unique and strong differentiated strategies, as I talked about in my comments. But fundraising, in particular, is gaining momentum. As you -- as Christian mentioned, we're holding our forecast at $6-plus billion of new capital. We've also returned a lot of capital this past quarter to our investors in terms of property sales versus new assets acquired. So there's a lot going on in that segment. We're building what we think is a very strong Harrison Street Asset Management that's a truly global business with a streamlined and one management team. These things take time and building companies like this is something that we've done many times over the years. So we feel like we're on pace or ahead. We feel like we're walking into a fundraising environment that -- that should be more buoyant going forward. And the teams are excited, and we have several new strategies all around infrastructure and deep relationships that we've built with leading academic institutions, hospitals, all of which we have been serving for over 2 decades. But now new opportunities in 3P partnerships and a variety of other things are materializing, which are creating unique investment opportunities for our investors. So a lot there to unpack, but suffice it to say, we're very excited about where IM will be in the next several quarters.

Great. Last one, maybe a follow-up. With respect to the pace of fundraising, do you expect it to be even over the next quarters or just more ramp up more into the back half of the year?

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

Yes. With respect to the pace of fundraising, do you expect that to come evenly over the next quarter or will be more back-end loaded towards the back...

It never comes evenly. It is quite unpredictable. We have bigger pipelines in terms of fundraising than we've ever had before. We've had good first closes or we're in the process of having first closes in the Basalt fund in the Harrison Street closed-end fund, all of which there's only a limited amount of capital we can take. So it's a function of when the final decisions are made and when that comes in. So we're expecting both of those to be substantially completed before the end of the year. But when the exact commitments are made is still up in the air a bit -- and will be. You can't really predict it.

Our next question is from Erin Kyle from CIBC Capital Markets.

Maybe just a follow-up to that last one on the fundraising environment. Jay, I appreciate your comments around the unpredictability of the fundraising quarter-to-quarter. But maybe on that note, what gives you confidence on the trajectory towards that $6 billion to $9 billion in 2026? Maybe you have an idea of how much advanced fundraising is already soft circled or in discussions and how that compares right now versus to where it did last year?

Well, for sure, it's way ahead of last year. And the confidence that we have is that we have new strategies in the marketplace this year, which we didn't have last year. We were completing our investment cycle in several of the funds last year. And this year, we're open with new funds and new investment opportunities. So there's a lot of investors looking at some of the unique Harrison Street products. Infrastructure is all the rage, as you know. Everybody is talking about data centers. That's a significant part of our business. I think we own 64. We've been in the data center business at Harrison Street for 6 years now. So this is a well-worn path for us. In fact, we're considering in a couple of cases, selling assets early because of the heat to buy data center assets. But our infrastructure doesn't end with data center. Data centers, there's all kinds of other infrastructure-related assets, long-term investment opportunities that are a part of our open-ended funds, new opportunities in our closed-ended funds.

There are some separate investments that our teams are making. And then, of course, let's go back to the demographically driven assets that we have in seniors, students, health care delivery, all of which have huge tailwinds. So one of the great things about this platform is that we have designed it to focus on a specific group of assets that have these tailwinds. And that's what's giving us the confidence that -- and our results have been very good over decades. So all of that gives us confidence that this will be a strong year for us fundraising-wise. And we hope that we'll raise more money than the range that we give you that we've given you, but we are optimistic.

That's a lot of helpful color there. Maybe I'll switch gears to the Commercial Real Estate business. The capital markets growth was exceptionally strong this quarter. You're lapping a weaker comparative period, but are you able to identify like how much of that growth reflects pent-up demand versus a sustained improvement in buyer confidence here?

So Erin, we watch our capital markets business very carefully. I believe this is our seventh quarter of capital markets growth on a quarter-over-quarter basis. So the conditions for transacting continue to improve, credit availability, bid-ask spreads, the desire of our clients and market participants to transact is improving because they see more transactions happening, which gives more confidence to investors as well as to sellers. So nothing really in particular to note this quarter, but it is a continuation of this multi-quarter recovery in capital markets activity that we think we're in the early to mid-innings of a recovery. We have a couple of years at least to go to recover to prior peak transaction levels. And I'd say we also have today a bigger, stronger, more productive producer workforce in our capital markets business than we ever have had in the past. So we're feeling really positive.

And I would underline a comment that I made, 45% in capital markets growth was significant. But when you take it together with our transactions, we were at 25% between leasing and capital markets, we were industry-leading. And that's very telling when you consider the other players in the industry on a global basis.

Our next question is from Nevan Yochim BMO Capital Markets.

Nevan on for Steve today. You provided a little bit of color so far on the Outsourcing segment. I was hoping you could just touch on your expectations for growth in capital markets as well as leasing for 2026 and how that's expected to trend through the year?

Sure, Nevan. Obviously, we talked about the strong growth in our transaction business in the first quarter. I would expect that to continue on a full year basis. Capital Markets growth on a full year basis is somewhere in the 25% range, leasing in the 8% range or so on a full year basis. And then rounding out our Commercial Real Estate business, outsourcing growing in the 5% range on a full year basis. So continuing to see strong growth, not necessarily at rates that we saw in the first quarter, which is the seasonal slow quarter. So growth there can lead to higher percentage numbers. But certainly on a full year basis, looking very solid right now.

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

Well, Nevan, I talked about we're probably a couple of years away from a full recovery. And as I mentioned, we have a bigger, better, stronger, more productive workforce today than we've ever had in the past. We've been investing heavily into our debt finance business, capital markets producers in various specialty asset classes, multifamily being a big area of focus for us, which is a huge market that we have significant opportunity in for growth of market share.

So we're -- we think we're going to have a nice long runway of recovery ahead here and looking to exceed prior high watermarks at some point in the next couple of years.

Our next question is from Julien Blouin from Goldman Sachs.

Just curious, are you seeing any signs of caution in EMEA or APAC, maybe that decision-making is slowing. One of your peers commented that they were seeing deals being canceled or delayed in Europe due to the geopolitical instability. So just wondering if you're seeing any of that? And then how is that sort of working its way into your thoughts about the back half of this year?

I think it's true that Europe and APAC, both are slowing. The strength of our results in the first quarter really came from North America. And the North American market continues to do well. We have some insight into the current quarter as well. But Europe is slowing, and we're watching it very carefully. And it's -- I think it's the geopolitical piece is part of it. There's other reasons as well. There's not as much access to financing in Europe, which is an opportunity we see long term.

Asia Pac is interesting because you've got some markets that are doing very well, and you've got other markets that used to do well last year, for example, and all of a sudden, they're just stalled. So the beauty of having a global business and strong positions in many markets is you're geographically diversified. Not too many people talk about geographic diversification. And that creates another sort of stable business for us because you'll have some markets that will exceed in some markets that will be soft. And it will happen within service lines as well.

I mean, there was an earlier question, and I'm expanding your question here a little. It was an earlier question about outsourcing. Well, what's happened in some markets in property management, for example, as developers are running into financial difficulty, they're deciding that they're going to take property management in-house. And in our view, it's -- we've seen it so many times over the years. They do it for a year or 2. They realize it's a very difficult business. It's a lot of employees to manage over wide geographies. And the better way is to have somebody that has a national platform like us to manage nationally and focus on the asset management side, but that doesn't stop some of those -- some of those property owners to in-source property management. So there's those kinds of things that are happening. But if you double-click and move back a little bit, the geographic diversification is what gives us confidence and strength in this wonderful platform we have called Colliers.

That's really helpful. Maybe latching on to that last point on seeing some in-sourcing from property owners. Do you think at all this is being impacted by AI that some of them are feeling maybe bolder or more capable with sort of advancements in AI to go ahead and in-source the property management functions?

There's no question that like we have a massive property management business on a global basis, and there's no question that AI over time will not only provide us with unique information that would hopefully differentiate us in this business, but also help to streamline back-office functions. But property management is a fair margin business. And so yes, there'll be pickup in margin. We'll be better at what we do. But I think you need a major player like us to be able to invest in the IT platforms necessary to bring better margins. And so when a small player is in-sourcing because he thinks AI is going to enhance his margin, I think, is a bit naive.

Our next question is from Himanshu Gupta from Scotiabank.

So first on Investment Management, IM. I mean it looks like $1 billion of fundraising in Q1. Was it in line with your expectations? And was there any fundraising done in Q2 so far?

Yes, Himanshu, we always want to raise more capital, of course. So our progress in Q1 was good. And I guess what gives us more confidence and as part of the second part of your question, we have had closes here through April. So off to a strong start. But look, we are continuing to focus on the full year fundraise with the products that we have in the market. And our visibility and confidence is high. We raised over $5 billion last year, and we're very confident we're going to raise more than that this year with the work we've done in terms of our products and our strategies as well as our fundraising capabilities, quite frankly.

Okay. And then within IM, how much private credit exposure do you have? And have you seen any impact so far in terms of redemptions or any read-through for your business?

Himanshu, I want to be very clear on this. We have no corporate credit exposure at all in our business. We provide certain real estate asset-backed credit strategies and products. They're tied to real estate directly. We're not, as I mentioned, not participating in any of this corporate type credit or these other troubled areas you may read about in the news.

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

It would be 8% or 10% of the AUM.

8% or 10% of the AUM.

It's backed by multifamily real estate, primarily very strong asset classes with strong underlying cash flows.

Got it. And no redemptions as such, I mean, regarding the exposure.

No, exactly.

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

Well, Himanshu, our forecast all assembles and fits together. So of course, we need -- we expect to raise $6 billion to $9 billion to expect to achieve the financial results that we've talked about for Investment Management, including that margin goal. A few things have to happen. Integration is progressing and will continue to progress towards year-end. And then, of course, fundraising will, by year-end, lead to higher quarterly revenues, which will give us the visibility going forward in terms of our margin profile.

Yes. And just to be clear, you raise capital and then you have to put it to work. So if we raise our range of capital during the year and we start to put it to work, it doesn't pay dividends until the following year. There'll be some modest pickup, but not material.

Yes. That's a good point. Okay. Maybe the last question here on CRE, Commercial Real Estate. Clearly, strong capital markets revenue, strong leasing revenues, as you mentioned. Maybe we did not see much operating leverage in Q1 in terms of incremental margins on incremental revenue. Is that correct?

Well, we did see some operating leverage Himanshu, in the quarter, as I mentioned earlier on the call, which was partially offset by our investments in recruiting and in IT infrastructure. So I'll just mention that, again, that Q1 is our seasonal slow quarter in the business. We achieved a good flow-through, and we have a couple of things I pointed out as well as some things like seasonality in our producer mix that impact the flow-through in the quarter. But we're confident that we'll have higher flow-through later in the year as we did last year. You saw our margins pick up significantly in the third and fourth quarters, and that will happen again this year.

Got it. Maybe my final, final question here. So the question is really on synergies, synergies between engineering and CRE, commercial real estate. Have you identified? Can you even quantify on how they realized -- will they realize over time? And that's my final question.

So Himanshu your question is about synergies between Commercial Real Estate in our engineering business. And I think we've talked about a couple of times over the last few quarters about how our engineers are working with our capital markets professionals to help identify opportunities to qualify land acquisition to help with design activities, environmental assessments, property condition assessments. So that work continues in our engineering business in consultation with our capital markets professionals, and it's something that is bearing fruit. I don't have the exact numbers for you at the moment in front of me, but it's an exciting additional avenue to differentiate ourselves and provide additional value to our clients, including some of our largest clients.

I mean let me just add some obvious ones. We've talked about it on previous calls. If a client wants to assemble land, whether they want to build a multifamily development, a data center, et cetera, et cetera, our CRE professionals know the land business, know where the opportunities are, they bring it forward.

We are co-selling to our clients, not only will we find the land, but we'll also entitle it, and that's where the engineers start getting involved, roads, power sources, water, a variety of other things. The client makes a decision, do you want to buy the land based on the engineering information. If they do buy the land, we then go into what can be built, we can project manage the construction of the project and deliver it at the end of the day. And frankly, our investment management team is also looking at opportunities to invest in some of those applications.

So more and more, our complementary services are working more closely together to either find finance, entitle, build, own all of these types of assets. And that's one of the unique features of what Colliers is trying to build as a provider of multiple services across the built environment. We believe all of these things are complementary. It's the same client base or similar client base. It's high-value, often very complicated services that need to be performed and having deep client relationships and knowledge of the market, both locally and internationally when it comes to financing these transactions gives our professionals huge advantage.

So there's many examples, but I hope that one gives you sort of a deep understanding of what we're seeing out in the marketplace, this merger of these various professional services.

Our next question is from Jimmy Shan from RBC Capital Markets.

Most of my questions have been answered. Just 2 quick ones for me. So first, just following up on capital markets. Are you seeing any impact from the recent rate volatility in decision-making even within North America, which has been strong? And then second, in terms of leverage, so on a pro forma basis, I think you'll be about 2.7x. And how should we think about the pace of M&A for the balance of the year?

So Jimmy, rate volatility that we've seen in North America has been a little bit higher. But at this point, not a major concern. Obviously, we'd like to see rates lower and more stable. But with these rate conditions, we're still seeing significant interest in capital markets activity. In terms of our leverage profile, you will see with the Ayesa acquisition closing in the next few weeks, you'll see our Q2 leverage at the 2.9 to 3x level based on the seasonality of the business in Q1 as our starting point. And we will see that leverage come down meaningfully in Q3 and Q4.

In the meantime, we're going to continue to be active looking at acquisitions of all kinds, but we're going to focus our efforts in the near term on tuck-in acquisitions that we can do at -- that are smaller, that we can do at reasonable prices and that make great strategic sense for us as we build out our platforms.

Christian makes a very good point. Acquisition pipelines are very interesting right now. And yes, on smaller transactions that expand capabilities, fill white space, et cetera. And let's not forget the Ayesa acquisition. One of the key strengths of that is it opens up 4 or 5 major markets for our engineering business. And since the transaction was announced and consistently since then, we've been approached both at Colliers head office, but also the Ayesa management team about potential additions, those that want to join as partners in the Ayesa business. So we're quite excited about what the future holds there. And it was one of the great strengths of that potential acquisition for us because it gave us a significant foothold in so many different markets, mostly infrastructure related, highly complex.

Ayesa's backlogs are stronger than ever and the excitement level to enter the next phase of their growth is palpable. So all of these -- all the reason I raise all of this is we've got a buoyant pipeline of acquisitions. And -- but we are cognizant of our leverage ratio. And that is -- that's something that we'll manage as we always have historically, but lots of stuff on the horizon.

Your next question is from Daryl Young from Stifel.

Just one quick one for me on the Canadian engineering and project management platform. Have you started to see any early signs of infrastructure spend or the defense industrial strategy working through into your pipelines? And do you anticipate that being an opportunity in the next couple of years?

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

Your next question is from Stephen Sheldon from William Blair.

Jay, Christian, you have Matt Filek on for Stephen Sheldon. On leasing, are you seeing any change in average lease duration on new lease signings? Just curious if the current macro environment has tenants maybe taking a more cautious approach when it comes to making longer-term lease commitments.

It's an interesting question because I think it's a bit of a bifurcated market. When you're -- when the leases are in AAA type properties, the duration seems to be longer. In suburban properties, it's about the same as it's always been. And that's primarily because people are returning to the office and -- number one. And number two, the lease rates in suburban office have fallen so much. It's very attractive for many to take on more space. Everybody is talking about increased spend around technology, and that's helping office occupancy as well. So yes, those are the kinds of things that we're seeing out there.

Okay. I appreciate that. And then I just had a quick one on data centers. I think you previously mentioned that roughly 10% of AUM and Investment Management is tied to data centers. And just curious how you see that mix evolving over time given the obvious tailwinds supporting that asset class? And related to that, if you could provide any additional color on how other parts of the business are benefiting from the data center theme, that would be great.

Well, I don't have the exact numbers, but I do know that we've been in the business for 6 years. This isn't a Johnny come late lease situation. And we're looking at a lot of opportunity right now, but we're also looking at the opportunity of selling some strategic assets that we've owned for a while because the prices are significant. And so all of those types of things are being factored in. I know everybody is reading about data centers and is there enough computing power and all of those kinds of things. But our teams at Harrison Street have been deep in this area for a long time, and they're looking at it as they would any other real estate investment. And they believe that if they can deliver some significant returns to their investors because of the market timing right now, it will just help them raise capital for the next fund. So that's some additional color for you.

Your next question is from Maxim Sytchev from National Bank Capital Markets.

Christian, I was wondering if you don't mind mentioning the organic growth in the engineering space because I guess we're lapping [ Global-Tek ] but I'm not sure if you have the number floating around somewhere.

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

Okay. And then do you mind maybe talking about potentially digital investments in the engineering business as obviously, some of the peers are sort of looking to ramp up the capability there. I was wondering what you guys are doing internally?

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

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

Well, as I mentioned in my comments, we've increased significantly our spend around IT. A significant portion of that is around AI. We think as we move down as we move down the decision -- and the other thing I should say is not only have we increased our expenditures, but we partnered with Google, and it's a very deep partnership. And Google brings with it leading cloud capabilities, world-class engineering talent and also additional databases, property databases that will help us differentiate ourselves in the marketplace, will help us streamline some of our back-office functions, many of which we've been working on for the past couple of years.

But the increased expenditure is in part because we believe that we have to take control of some of the delivery of technology for the first time perhaps in our history. And that's bearing some interesting fruit as we move through this. So that hopefully gives you a little bit of an overview.

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

Thank you, everyone, for joining us on the first quarter conference call. We look forward to speaking to you again at the end of the second.

Thank you.

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

Welcome to the Colliers International Fourth Quarter Year-end Investors Conference Call. Today's call is being recorded.

Legal counsel requires us to advise that the discussion scheduled to take place today may contain forward-looking statements that involve known and unknown risks and uncertainties. Actual results may be materially different from any future results, performance or achievements contemplated in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements in the company's annual information form as filed in the Canadian Securities Administrators and the company's annual report on Form 40-F as filed with the U.S. Securities and Exchange Commission.

As a reminder, today's call is being recorded. Today is February 13, 2026. And at this time, for opening remarks and introductions, I would like to turn the call over to the Global Chairman and Chief Executive Officer, Mr. Jay Hennick. Please go ahead, sir.

Thank you, operator, and good morning. I'm Jay Hennick, Chairman and Chief Executive Officer of Colliers. Joining me today is CFO, Christian Mayer. Our call is webcast and a call deck is available in the Investor Relations section of our website.

2025 is an exceptional year for Colliers, repeat, an exceptional year for Colliers, reflecting the strength of our diversified platform and our successful expansion into other high-quality recurring professional services. Today, more than 70% of our earnings come from these resilient businesses, approaching 75% once recent acquisitions are included. Our fourth quarter results were in line with expectation and were up nicely over last year, which itself was a very strong year-over-year performance.

Last week, we achieved another milestone, agreeing to acquire Ayesa Engineering, a world-class business and a rare opportunity at this scale. This acquisition meaningfully expands our avenues for growth, strengthens our ability to scale organically, pursue further acquisitions and cross-sell engineering capabilities across our global client base. Once closed, Colliers Engineering will rank among the top 30 global engineering firms with expanded presence in Europe, Latin America and the Middle East.

Operationally, in commercial real estate, we had another solid quarter. Capital markets continued its rebound, especially in the U.S. and leasing activity held steady with strength in both office and industrial. Demand for outsourcing solutions, including property management, valuation and other advisory also grew nicely as clients continue to look for trusted and experienced partners with global execution capabilities. Engineering delivered another strong year of growth with internal performance and meaningful contribution from acquisitions. Growth will accelerate even further once Ayesa joins the platform.

Investment Management ended the year with over $108 billion in assets under management, reflecting deep investor confidence in our investment strategies across the entire Harrison Street Asset Management platform. Throughout the year, we continued investing in leadership, talent and innovation across the board, reinforcing the entrepreneurial culture that defines Colliers. Our partnership model remains a key competitive advantage with meaningful inside ownership across the board, keeping leaders fully aligned with our clients, our investors and our shareholders.

We enter 2026 with strong momentum once again and a healthy pipeline. We expect another year of solid internal growth, ongoing contributions from recent acquisitions and a meaningful uplift once Ayesa closes. Over the past 5 years, despite challenging and often unpredictable conditions, Colliers doubled its size, delivering compound annual growth rates of more than 15%. And based on what we see today, we expect similar performance again in 2026. Our strategy is working. Our teams are performing, and we're extremely well positioned for future growth and value creation.

Before I turn things over to Christian, a brief comment on AI, which is all the rage. At Colliers, we see AI as a productivity and growth enabler. It is helping us automate routine work, improve efficiency, expand margins, allowing our professionals to focus on higher-value advisory services that are complex and rely on judgment, expertise and trusted relationships. AI also strengthens our data advantage, combining our proprietary information with advanced capabilities through our partnership with Google Cloud and other third-party providers to deliver better insights and better execution for clients.

Importantly, AI enhances rather than replaces our business across all 3 segments. judgment, accountability, qualifications and licensure as well as important client relationships remain central to how we operate. Put simply, it makes our professionals even better at what they do for our clients. While recent share price movements suggest AI near-term impact may be overhyped, we believe its long-term value is as an enabler and is truthfully meaningfully underappreciated as future potential for Colliers and its future.

Let me now turn things over to Christian. Christian?

Thank you, Jay, and good morning. Please note that the non-GAAP measures discussed on this call are defined in our press release and quarterly presentation. All revenue growth figures are presented in local currency terms.

For the fourth quarter, we generated revenues of $1.6 billion, up 5% year-over-year with growth across all segments. Overall internal growth for the quarter was essentially flat and was impacted by a strong prior year comparison. On a full year basis, internal revenue growth was up a solid 5%. Adjusted EBITDA was $245 million for the quarter, up 6% over last year, in line with revenue growth.

Fourth quarter Commercial Real Estate segment net revenue was up 7%. Capital Markets revenues increased 13%, led by strong activity and market share gains in the U.S., where we saw our investments in recruiting and multi-market connectivity driving continued market share growth in a recovering market, albeit slower than we all would like.

Growth in EMEA and Asia Pacific was modest against a strong prior year comparative. Leasing revenues were up 3%, also led by the U.S. in the office and industrial asset classes, again versus a strong prior year comparative. Outsourcing grew 8% in the fourth quarter with our valuation practice driving the growth. Segment net margin was 15.8%, up 50 basis points year-over-year on operating leverage from higher transactional revenues.

Our Engineering segment net revenue was up 8%, led by recent acquisitions. End market demand continues to be strong, especially in infrastructure, transportation and environmental consulting, offset by a temporary slowdown in certain project management operations in the quarter. The net margin was 12.4%, slightly lower than last year on lower overall productivity. Our revenue backlog is strong across the segment and provides excellent visibility for the year ahead.

Investment Management net revenues increased 6%, driven by a recent acquisition. The net margin declined slightly to 42.5% as we continue to integrate our operations under the Harrison Street Asset Management brand. These strategic investments are crucial for strengthening our capital formation capabilities and unifying nonclient-facing functions. We expect these costs will continue to impact our margins through the first half of 2026.

Our IM segment raised $2.1 billion in new capital commitments during the fourth quarter and $5.3 billion for the full year, in line with our expectations. Fundraising momentum was solid as we enter 2026 with several funds currently in the market, including our latest flagship infrastructure fund, which launched in December. Our fundraising target for 2026 is $6 billion to $9 billion as we accelerate the pace of attracting institutional and private wealth investors looking for differentiated alternative investment solutions.

Year-end AUM, as Jay mentioned, was $108 billion, flat relative to September 30, with new capital raised offset by asset sales in older vintage funds and accompanying returns of capital to our LPs. As in the past, we anticipate our LPs will reinvest a significant portion of the returned capital into our new funds.

Now turning to our balance sheet. Our leverage declined to 2x as of December 31, with the benefit of strong seasonal cash flows. The recently announced Ayesa acquisition will add approximately 0.7 turns of leverage on a pro forma basis. The USD 700 million equivalent purchase price will be funded from our revolving credit facility, which currently has over $1.1 billion of available capacity and will be euro-denominated, bearing interest at a very attractive rate of approximately 4%.

As Jay noted, we are entering 2026 with strong momentum. Across our company, there's a tangible sense of optimism about our strategy, the investments we are making, the increasingly resilient profile of our revenues and the avenues for growth in each of our diversified segments. In that spirit, we are introducing our outlook for 2026 as follows: in commercial real estate, we are expecting low teens top line growth and a modest increase in net margin, predicated on a continuing recovery in Capital Markets.

It's important to note that even with this growth, our capital markets activity will remain well below prior peaks. Our Engineering segment is expecting mid-single-digit internal growth and the impact of acquisitions, including Ayesa, resulting in total top line growth of over 25%. This growth is supported by a strong backlog and favorable trends in infrastructure, urbanization and energy transition, along with increasing data center demand.

Investment Management net revenue growth is expected to be in the low teens, with growth led by higher management fees as fundraising continues to accelerate. Putting it all together, we're expecting mid-teens growth in all 3 of our key operating metrics.

That concludes my prepared remarks. Operator, can you please open the line for questions?

[Operator Instructions] Your first question comes from the line of Tony Paolone from JPMorgan.

I would like to start with engineering and just a bit on the organic growth there. As you roll that up, if I think about that business, I think about it being like an hourly rate, number of professionals and the number of hours worked. Can you talk about just like what's happening with some of those trends organically and where you're finding success or not and sort of those revenue synergies as you roll this up?

Yes, Tony, I'll take that. As we mentioned, demand for our services is strong across all the end markets. In terms of the questions you're asking pricing and hours and things like that, we're seeing opportunities to increase pricing. There is strong demand for our services. We're getting nice increases from institutional, public sector and private sector clients. In terms of professionals, we're hiring. The market is still tight for qualified engineers, but we are growing our workforce to meet the demand.

Our backlogs are strong, as I mentioned in my prepared remarks, and that is driving our utilization. We have business in infrastructure, power, transportation, property and building work with programmatic clients and distribution and retail. These activities are all going strong and will drive our hourly work and our ability to increase the utilization of our staff and our margins.

Let me add, Tony, a couple of things that just maybe simplify some thoughts. Probably 60% of the Engineering business is what I would categorize as design which is design of all types of solutions, which is not hourly based, although we do manage our labor on an hourly basis, but it is not priced to clients on the basis of an hourly rate. The balance of the business is more, I would say, closer akin to project management. Once the design is complete and needs to be executed upon, it's closer to an hourly rate kind of structure.

So we love that business because the design aspect allows us to generate higher margins, yet the hourly rate portion or the project management portion is something that is certain. It is long term. For example, we have some clients where the execution of the project may be 10 or 12 years where we're allocating x number of people for a long period of time to oversee the completion of the work. So it's a very interesting business opportunity for us. It's a very good business.

And as Christian said, there's a shortage of engineers virtually everywhere in the world, which is driving up pricing. We'd like it to drive it up a little bit more, but it is driving up overall pricing because it's hard to get qualified engineers. So I thought I'd add that a little editorial.

No, that's really helpful because it kind of ties to the follow-up where I was going to go with just some of these concerns around AI and thinking about if the -- if everything gets more efficient and they could do more work quicker, does that have any implications on sort of the billable hours or just the TAM of revenue? Or are there just other ways to charge? I mean, just trying to think about how that could be disrupted by.

Well, for sure, on the design piece of the business, automation of all kinds, including AI helps drive our margins up because our professionals can do the mundane, the menial tasks faster and get to the real value-add stuff. So we see some real advantages from that aspect of our business.

Your next question comes from the line of Daryl Young from Stifel.

I wanted to start with a question just on capital allocation and specifically where the share price is today and your thoughts on buybacks or an SIB?

I'd love to buy back stock right now. But we have lots in the pipe, including Ayesa, as you know. And we believe more behind that. So we're watching our capital carefully. It's very easy to do an equity offering and dilute shareholders, but that's never been our MO. We're in the business of creating long-term shareholder value. So buying back stock is not really in the -- as a corporate matter is not really in the plan. But on a personal level, it might be in the plan.

Okay. And then switching to Investment Management. Some of the integration cost pressures have gone on a little longer than I think I originally had expected. Is the scope of what you're doing there changing and evolving? Or maybe just a little bit more color on the continuation of those pressures.

Well, we don't really see them as pressures, but it will continue again in '26. Christian will add a few little tidbits in a minute. But we're actually getting a little more ambitious on some of the initiatives as we bring everything together. And we're liking where we're coming out. So we're going to continue to do what we think is right in terms of creating a spectacular platform under a unified brand. Christian, do you want to add?

Daryl, I'd just add that we have been messaging for some time that we're going to be incurring additional costs to integrate and bring together this business. And as I mentioned in my prepared remarks, which is consistent with what I've been saying previously, we do expect this to continue through the first half of 2026 until we sort of complete the work and realize some of the benefits of the work we've been doing.

Your next question comes from the line of Erin Kyle from CIBC.

I wanted to start maybe on the macro here. And if you can just give us some more detail on what you're seeing from a macro perspective as it relates to the capital markets pipeline here? And then maybe just elaborate a little bit on what's baked into that 2026 guide and whether it depends on some additional rate cuts here.

Yes. Erin, we're not counting on rate cuts in terms of our outlook for capital markets. Capital markets is benefiting from a pent-up supply or pent-up demand and pent-up supply of transactions. As you know, transaction activity has been slow for a number of years, and there's a lot of people in the market that want and need to transact, and that's starting to turn into revenues for Colliers. So that's really what we're seeing.

We had strength in 2025 in capital markets, and we expect that to continue in 2026 with more transactions happening at all price points across all markets. '25 was led by the U.S. I think the U.S. will continue to be very strong. And hopefully, volumes will pick up in EMEA and Asia Pac, which have been a little bit slower.

Could you just remind us what the U.S. exposure is specifically in Capital Markets as maybe a percentage of that business?

About 50%.

Okay. That's helpful. And then I just wanted to clarify on the Engineering segment. What was the internal growth in the quarter and for the year? I don't think I saw it in the slides this quarter.

Yes. Engineering internal growth was roughly flat on the quarter and 5% on a full year basis.

Your next question comes from the line of Stephen MacLeod from BMO Capital Markets.

Lots of great color so far. I just wanted to ask just a little bit about the sort of AI trade we're seeing going on in the marketplace right now, the stock marketplace that is. Jay, you referenced some of it in your prepared remarks, but I was just curious if you could give maybe a few examples of how you intend to leverage AI in the future. Maybe you gave a little bit of color there. And then I guess, separately from that, where you might see some potential risks to the business, if any?

So let me just sort of start with -- we don't buy and sell commodity real estate or lease commodity real estate. I heard somebody musing yesterday about selling condos. That's very different than what we do. Our professionals are handling high-value complex transactions, multiple variables. They need their judgment, they need experience, they need relationships. So AI is not going to impact their business other than to make them better at what they do.

And as I said, we have -- there's sort of 3 buckets there that are interesting and valuable to our professionals. One is our own data sets, and we have significant data sets that we've accumulated over many, many years, market by market, category by category, real estate asset type by real estate asset type. And all of that is including valuation information, including real estate, property management data sets. All of those are valuable in our computer systems, et cetera.

We've also entered into this partnership with Google Cloud, who have the biggest real estate, it's an exclusive partnership. We're the only ones in the industry. And they have unique and probably the most real estate -- commercial real estate data out there. And so we're leveraging that as well as their capability at doing what they do, which I think is sort of top drawer. And our existing software suppliers are also moving in the way of AI in a rapid format.

So when you bring all of those things together and you integrate that -- and by the way, this is going to be a long-term process. This is not going to be turned on this year and you're in business. This is going to be a 2-, 3-year process to maximize the value. We -- we're trying to be very pragmatic about it. We're focusing on higher-value output first. But there's all of that data that we will be able to arm our professionals with that we will be able to allow them to advise clients better as they make decisions.

The second piece, as I talked about, is how do we get rid of the redundancy, increase the efficiency. There's so much that has over the past. And this is not this year, and it's not because of the fancy phrase called AI. We've been automating processes for years now and in areas like valuation and other areas where there's just a lot of mundane tasks. What AI is allowing us to do is accelerate that process. And we think that we'll become way more efficient. We'll be able to reduce our costs, not just our IT costs, but also labor across the world, and that's going to only drive increased margins.

So we're quite excited about both of them. Our CapEx this year around IT is bigger than it's ever been before in terms of our history by a meaningful amount. Our teams are centralized and excited about the possibilities. And what we have to do as good stewards of capital is make sure that they're staying focused on the biggest opportunities for us rather than shotgun approach. So we're quite excited about all of this.

But let's just put it into the -- this is just what we do for a living. This is what we do to enhance our business. And there are so many other areas we're going to continue to grow our business. This is just going to make us better. It's going to increase our moat even more. It's going to create more value for our professionals. And all of that just leads to a better, stronger long-term business called Colliers.

Yes. That's great color, Jay. And it sounds like it's going to be a net benefit, absolutely. I just appreciate the color just given the backdrop. So that's why I asked. Just maybe one more question, more surgical, I suppose. But just on the Investment Management business, just as you work through the investments you're making this year and coming at the other end, better positioned to capital formation and things like that. Christian, could you just talk a little bit about sort of where you see margins going once the investment into the unified platform has been made?

Yes. You're going to see margins decline in 2026 to the high 30s net margin area. And then in 2027, we're expecting to return to our historical average margin in the mid-40s. So that's essentially with fundraising, as we outlined, starting to accelerate and with these integration efforts behind us.

Your next question comes from the line of Julien Blouin from Goldman Sachs.

So Jay, it sounds like we should be thinking of the Ayesa acquisition kind of similarly to Englobe and that it sort of gives you this foothold in Europe and elsewhere from which you can grow and sort of roll up other businesses. I guess as you think about identifying those next sort of tuck-in targets, is it primarily on the basis of the geographies you want to be in? Or is it the additional capabilities that you're most interested in adding to the platform?

Well, the simple answer is both, obviously. But we have capability across the platforms everywhere, stronger in some places and weaker in others. But let me zero in on Ayesa for a second. The beauty of that deal for us, when you cut through it all is they were founded in '64 by the same family. The management team there is absolutely spectacular. They have spent since 1964, building sizable platforms in Spain, Mexico, Europe, the Middle East, markets where we did not have a presence in.

And so yes, looking at it like Englobe is a great example, except in the case of Englobe, as we consolidate the industry, we're doing it only in Canada. Now we have the opportunity to do the same thing in multiple markets. And so our M&A teams here and at Ayesa are very excited about what they can do with their existing platforms, which themselves are extremely profitable with strong management teams already in place. So we see lots of future growth coming there. And as we look -- as we continue to look at that business, we see other areas where we can do similar things.

And again, I want to emphasize, which didn't come out in my initial comments. Our partnership philosophy is making a huge difference. We're a permanent capital source. We're partners with the operators that run these businesses every day. Yes, we have significant equity stakes in the business. Yes, we have -- we drive all of their growth initiatives, but they finally have a partner that can help them execute on plans, help them integrate acquisitions, sort of follow some of the things that we've done for the past 30 years. And there are other potential targets out there that could continue to accelerate our growth in engineering.

So it's not over now, but it's an area that we alluded to on previous conference calls over the past 12 or 18 months, but I think there's more opportunity to be pursued. And there's similar opportunities in our other segments as well. So our philosophy of 3 segments, each of them high-value, recurring professional services, high cash flow generation is working and has worked for 30 years.

So we have a way of operating, which we think is unique. We think our -- we differentiate ourselves in the marketplace when it comes to being an ideal partner for some of these great businesses. And our job, I think, in many ways is to just find that great business with the great management teams that are hungry to take the business to the next level. And that's what we focus on so much when it comes to M&A.

That's really helpful, really helpful context. And then, Christian, I think you referenced a temporary slowdown in certain project management operations in the quarter and lower overall productivity is, I think, how you stated it. Can you maybe elaborate on what drove that? And sort of what gives you confidence that these pressures won't recur as we move into 2026?

Yes. We had lower activity levels in project management operations in our legacy local project management business in EMEA and Asia Pac, and we think that was a temporary onetime thing. So comfortable that is going to be behind us. And then as it relates to margin, the Engineering business does have a lot of hourly labor attached to it. Utilization is extremely important. And when you're in the holiday season, that sort of thing, it does impact the utilization and productivity of staff. So it's -- I mean, it's really a very minor change in margin, not something to be concerned about as we look ahead.

Your next question comes from the line of Himanshu Gupta from Scotiabank.

So on Commercial Real Estate, I mean, you have low teens growth expectation in 2026. Can you break it down between Capital Markets and Leasing businesses?

Sure. So the segment, as you said, is low teens revenue expectation for growth. In terms of Capital Markets, we would be looking at high teens, which is a slight acceleration from what we had in 2025, but we have a lot of visibility and confidence in the sort of return of transaction velocity there. Leasing would be something in the mid- to high single-digit area in terms of growth year-over-year. So really, the growth you're seeing in Commercial Real Estate is focused around Capital Markets.

Got it. And then on leasing specifically, can you comment on industrial and office leasing expectation? I mean, is there any outlier within like regional breakdown or within asset class for leasing?

You hit the nail on the head there, Himanshu. Office and industrial were strong in the fourth quarter in the U.S. in particular. I think those classes are going to continue to be relevant in terms of they are our largest asset class that we provide service in. So those 2 asset classes will continue to drive growth as well as others like data center, in particular, would stand out there. So it's going to be based on those areas.

Got it. And then switching gears, fundraising target of, I think, $6 billion to $9 billion this year. What platforms are you expecting this level of fundraising? I mean, can you unpack this? Like how big is the infrastructure fund? What other funds will contribute to that level of fundraising?

Well, as I mentioned, we had the first close on our new vintage infrastructure fund in December of 2025. So that is a big driver of fundraising. The alternative fund at Harrison Street Fund X had its first close last year. earlier in the year. So additional activity on that fundraise. And then we've got a number of products in the market, existing open-ended vehicles and as well as new products that we're introducing to the market. So a lot of different areas of focus and credit as well is another vertical. So it's going to be broad-based.

Got it. Very helpful. And my last question is, can you speak to the performance of funds within your IM segment here last year? Was the performance of these funds in line with your expectations and how they are helping you to do more fundraising?

Fund performance has been strong, Himanshu. So we continuously rank in the top quartile for fund performance across the alts, credit and infrastructure space. In fact, our flagship open-ended vehicle, the Harris Street Core Fund exceeded the ODCE Index by 100 basis points in 2025, which the team is very proud of. So doing well.

Your next question comes from the line of Jimmy Shan from RBC Capital Markets.

So Christian, just on the leverage, you're going to be on a pro forma basis at 2.7x. Is it your plan to get back to the 2x leverage where you've historically been? And how do you plan to do so?

Yes. Jimmy, that's the plan. That's always the plan when we lever up for a larger acquisition. We've done so in the past with Harrison Street, with Englobe and now with Ayesa. So the plan is to generate strong operating cash flow again in '26 like we did in 2025 to grow our EBITDA organically. The combination of organic EBITDA growth and cash flow generation is a powerful delevering effect, and that's what we expect to happen here as we progress toward the end of the year.

And then my second question, I'm sorry to go back to this AI, Jay, but it seems, I guess, that your view is that not only do you not think AI will be a disruptor and it's actually going to be a margin enhancer. Is that a fair interpretation? Or am I going too far, is number one? And then do you see at all any possibility across the various services that you provide that you can actually see some fee pressure as a result of AI?

So I don't see any fee pressure at all. I see the exact opposite than that. I think it's a disruptor, not to our business, but to our mindset. It is -- the great thing about this is it has opened up everybody's eyes to accelerate automation and integration across the organization faster than we otherwise would have, I think. The -- internally, and we're a very low CapEx business. We generate huge cash flows in our business. We're allocating a lot more capital to IT because of all this all this new focus on AI. And as we get deeper and deeper into this, we realize more potential opportunities for the way we do business and the information we can provide to our professionals.

So I'd say we're quite excited about it. But I think it's only additive to our business long term. I can't see any area where it's not. If you were selling commodities, cookies, something like that, yes, okay, great, you can use AI. But these are complex transactions. They need licenses in many cases across the board. You need personal relationships. You need all the things I've talked about. And if we can make our professionals better and have more information at their fingertips, they're going to be able to execute transactions faster with more information to the buyers and sellers and leasing, which is a big component of our business is even more complicated in many respects given the types of leasing that we're now doing, data centers and other very complex transactions. So I see it as a benefit, an enabler is probably the best word I could use.

I have one more quick one on Ayesa. The EBITDA for 2026 is around $63 million, $64 million. Is that what's embedded in your '26 guidance?

7 months of that, yes.

7 months of the 2026 EBITDA.

Yes.

Your next question comes from the line of Stephen Sheldon from William Blair.

You have Matt Filek on for Stephen Sheldon. I wanted to start with one on Ayesa. It looks like that business has historically grown faster and operated at higher margins than your broader engineering platform. So I was just wondering if you can give us a rough sense of your growth expectations for that looking ahead and talk about what drives that stronger margin profile.

Well, the growth in that business, we referenced a 13% CAGR over the last 10 years. Obviously, the business now is at a scale where it becomes more difficult to grow organically at those kinds of rates. Certainly, we expect that high single digits are achievable organically going forward. And that's what we're focused on. In terms of its margin profile, it provides high-value services, design, site supervision, project management consulting on very sophisticated products and projects in high-demand end markets. And these are public sector, public transit, water, energy, energy transition end markets that can command higher margins.

The team at Ayesa have said, for example, they're big in desalinization in the Middle East. And obviously, that's a very profitable component of their business. They've got expertise in water, in Spain, in Mexico, and they've capitalized on it in the Middle East. And I think the team has extremely disciplined pricing and disciplined execution on their projects. And they've demonstrated that over the last decade as well and being able to consistently deliver superior margins on their business.

Got it. I appreciate that additional detail. And then I just had one on producer headcount in capital markets and leasing. In the event transactional volumes were to have a more meaningful recovery in 2026 than you've assumed in your guidance, do you feel appropriately staffed to capture that upside? Or should we expect some incremental hiring?

Well, we're very active in recruiting across the board and have been over the past number of years. So we feel like we have what we need, but we're quite active in specific areas or specific specialties, white space where we can capitalize even more.

And I think the productivity of our existing producers is not at peak levels today. So they have capacity to generate more revenues with the same professional headcount.

Your next question comes from the line of Frederic Bastien from Raymond James.

Just want to go back to Ayesa. I hope I said it correctly. But obviously, limited very, I guess, no overlap whatsoever from a geographical standpoint with the business and it sounds like they have niche expertise that you can probably leverage to your other operations, specifically in water. Was that kind of behind the underwriting assumptions like that over -- beyond the 12 months of the first -- the acquisition period, you're going to be able to cross-sell a lot of the Ayesa services to your other regions?

Yes. Frederic, the transferability of skills is something that we do look at whenever we make an acquisition. And in the case of Englobe, they happen to have water expertise in terms of irrigation, drinking water, sanitation in Canada. And those skills are transferable and being transferred to our U.S. business to help grow that part of their operations. So certainly, with Ayesa's capabilities in desalinization and other areas in the water space, that will be something we'll look at.

Okay. Cool. That's great to hear. And then I don't know if you mentioned it, Christian, but did you mention how much you ended up fundraising in 2025?

Yes, it was in my prepared remarks, let me turn back $5.3 billion on the full year, I believe.

Our last question comes from the line of Maxim Sytchev from National Bank Financial.

Christian, I was wondering if it's possible to get a clarification on organic growth for engineering. Was it a gross or net basis, number one? And then I guess if you can provide any color in terms of how the year started to trend, I presume we should be anticipating a recovery there.

The first part of your question, the internal growth was on a net basis, net revenue basis.

And I think your second part of your question was about growth trajectory into '26.

Yes.

Yes. I mean, as I said in my prepared remarks, we have strong backlogs supporting our revenue outlook for the year. And we have mid-single-digit internal growth as a result as our expectation. We also have the impact of 3 tuck-in acquisitions that we did just in the last couple of months as well as the annualization of a few acquisitions last year. So that, together with the Ayesa transaction, which we expect will close in Q2, brings us to the overall revenue growth outlook of 25-plus percent.

Okay. Makes sense. And then just one quick clarification around Harrison Street. So the dip in the margin to kind of high 30s. So what's driving that exactly? Is it sort of system integration, personnel? Can you maybe just explain a little bit from an operational perspective and how that will -- that trajectory will rebound on a prospective basis?

Yes. We're conducting a lot of work on our IT systems integration, bringing the platform together. So a number of different systems projects underway to make that happen, a number of headcount additions, which have occurred over the last 6 months and will occur going forward and then also some planned efficiencies that we are working through today, which will yield cost savings -- run rate cost savings once we hit the latter part of the year.

There are no further questions at this time. I will now turn the call over back to Mr. Jay Hennick. Please continue.

Thank you, everyone, for participating in our fourth quarter and full year conference call, and we look forward to the next one. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and have a nice day.

Welcome to the Colliers International third quarter investors conference call. Today's call is being recorded.

Legal counsel requires us to advise that the discussion scheduled to take place today may contain forward-looking statements that involve known and unknown risks and uncertainties. Actual results may be materially different from any future results, performance, or achievements contemplated in the forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the company's annual information form as filed with the Canadian Securities Administrators and in the company's annual report on Form 40-F as filed with the U.S. Securities and Exchange Commission.

As a reminder, today's call is being recorded. Today is Tuesday, November 4, 2025. And at this time, for opening remarks and introduction, I would like to turn the call over to the Global Chairman and Chief Executive Officer, Mr. Jay Hennick. Please go ahead, sir.

Thank you, operator. Good morning, and thank you for joining us for the third quarter conference call. As the operator mentioned, I'm Jay Hennick, Chairman and CEO of Colliers. And with me today is Christian Mayer, CFO. This call is webcast and available in the Investor Relations section of our website, along with the presentation slide deck.

Colliers delivered excellent third quarter results, highlighting our momentum across all segments of our business. In Engineering, which includes project management and program management, we achieved impressive growth this quarter. This was driven by both strategic acquisitions, 7 completed so far this year, as well as robust organic performance. With a strong pipeline ahead, we are well positioned for continued expansion.

In just 5 years since entering the Engineering sector, we have established a significant multidisciplined global platform. This business now generates over $1.7 billion in annualized revenue and employs more than 10,000 professionals. Our unique partnership philosophy and decentralized operating model sets us apart and enables us to continue to capitalize on compelling growth opportunities in this rapidly expanding industry.

Real Estate Services also delivered excellent results, marked by a surge in leasing and capital markets transactions. While capital markets recovery has been gradual, we anticipate an increase in business activity as interest rates stabilize and investor confidence builds. This brings positive tailwinds to our business.

We're excited about unifying our operations under the Harrison Street Asset Management brand. And while meaningful change takes time, our plan will strengthen our business and deliver meaningful value to our shareholders.

Operationally, our Investment Management business is highly resilient. Over 85% of our funds are held in long-dated or perpetual investment vehicles, generating long-term and predictable earnings for our shareholders and top-tier investment returns for our investors.

Assets under management finished the quarter at $108 billion, a 10% increase from last year, reflecting the success of our acquisition strategy and solid fundraising momentum to date. Harrison Street has multiple products in the market with new vintages of our flagship funds launching later this quarter and into 2026. These initiatives are expected to drive ongoing revenue growth through next year and beyond. With $9 billion in dry powder across the organization, we are well positioned to deploy significant capital on behalf of our investors.

Colliers with 30 years of visionary leadership and 3 powerful growth engines has become a resilient and highly differentiated professional services and asset management company, a company that is well positioned to continue to seize opportunities and deliver lasting value for our shareholders.

Now let me turn things over to Christian for his financial report, and then we'll open things up to questions. Christian?

Thank you, Jay, and good morning, everyone. As a reminder, all non-GAAP measures referenced today are defined in the materials accompanying this call. Revenue growth figures are presented in local currency terms.

Our third quarter revenues were $1.46 billion, up 23% year-over-year. Our Engineering and Real Estate Services segments led the increase from a combination of internal growth and recent acquisitions. Overall, internal growth for the quarter was 13%.

Adjusted EBITDA was $191 million for the quarter, a 24% increase from last year. Real Estate Services segment revenues increased 13% overall. Capital markets were up 21%, reflecting sales growth in all geographies and in all asset classes with particular strength in the U.K., Japan, and Canada.

Debt finance activity was also strong, particularly U.S. multifamily originations. Leasing revenues were up 14%, also led by the U.S. and driven by industrial and office as well as data centers.

Outsourcing revenues increased 8% for the quarter with our valuation and advisory practice leading the growth. Segment net margin was 11.3%, up 180 basis points year-over-year on solid operating leverage from higher transactional revenues, partly offset by continued investments to strengthen our geographic and asset class capabilities.

Engineering net revenue was up 36%, fueled by acquisitions and internal growth of 6%. The infrastructure and transportation end markets delivered notable revenue gains in the quarter. The net margin was 15.2%, slightly lower than last year, mainly due to service mix. Our backlogs continue to be solid across our geographic markets, giving us visibility and confidence as we look ahead to 2026.

Our Investment Management net revenues increased 5% due to the favorable impact of the RoundShield acquisition and higher fee-paying assets under management. However, the net margin declined slightly to 42.3%, primarily due to additional costs incurred as we integrate operations under the Harrison Street Asset Management brand. We expect these costs will continue for the next 2 to 3 quarters and will modestly impact our margins as a result.

In the third quarter, we raised $1 billion in new capital commitments. Since quarter end, we have raised an additional $1.2 billion, bringing total year-to-date fundraising to $4.4 billion. As Jay mentioned, we have several funds currently in the market, including one significant new vintage launching in the coming weeks. For the full year, we expect to come in near the midpoint of our $5 billion to $8 billion fundraising target.

Assets under management totaled $108.3 billion as of September 30, up 5% from June 30, driven by the recent acquisition and new capital raised, partially offset by asset sales in older vintage funds.

Turning to our balance sheet. Our leverage ratio was 2.3x as of September 30 and includes the impact of several acquisitions completed during the third quarter. We continue to expect our leverage to decline to just under 2x by year-end. This assumes no significant additional acquisitions.

We are maintaining our full year consolidated outlook. In our Real Estate Services and Engineering segments, we may exceed our previous full year guidance, while in Investment Management, we expect to be off slightly given the timing of fundraising and costs associated with unifying our operations under the HSAM brand. Putting it all together, on a consolidated basis, we remain confident we will meet our full year outlook.

That concludes my prepared remarks. Operator, can you please open the line for questions?

[Operator instructions] Your first question comes from the line of Stephen MacLeod from BMO.

Just wanted to circle in on a couple of things. Just with respect to the Engineering margins in the quarter, you noted some service mix headwind. And I'm just curious if you could give a little bit of color around sort of what you saw in the quarter and how that weighed on your numbers or weighed on the margin, I suppose?

Well, Steve, you got to look at this on a net revenue basis. We have a lot of pass-through costs in Engineering, and those are at low or very low margins. So on a net basis, our margin was down very slightly. We're talking 20 to 30 basis points. And it really just is some service mix across our geographic markets.

And then just on the Investment Management business, obviously, strong fundraising on a year-to-date basis, and you guided to sort of being in the midpoint for your target for 2025, which is great. Just as we think about the additional costs, again, sort of weighing on the net margin this quarter. Can you talk a little bit about sort of how you see that evolving as you get into 2026? Or is it maybe too soon to talk about 2026 margins at this point?

Well, look, Steve, we don't want to talk about 2026 until year-end. We'll give a full outlook for 2026 at that point. But as it relates to Investment Management, in my prepared remarks, I did reference that we will have 2 or 3 quarters of headwinds from cost to unify the segment. So that will be a modest impact on the margin.

And let me add something to that, Steve. We are a public company. We have, over the years, brought together some pretty exceptional Investment Management platforms. And now we're taking steps to bring some of them together to really create a powerhouse under the Harrison Street brand. That takes costs, that takes time, that takes effort, and it will definitely translate into shareholder value over time. And other people just leave things alone. You've seen us do this before. And so we're doing some pretty interesting things to really solidify that business for the long term. And you'll see fundraising growth, which is wonderful. But that comes on new programs, new strategies, and a lot of that has to do with unifying the teams and sharing the best of the best across the board.

So if we were a private company, you would never see this. But in a public company situation, which we've done before, there's some modest impact on margin here or there as we invest in our business, and we're going to continue to do that because for Colliers, it's about creating long-term value for shareholders.

Our next question is from Tony Paolone from JPMorgan.

Just on Engineering, can you talk about what you think organic growth has looked like? It's a little hard to see just given all the acquisitions and such in there. And along the same lines, like when you do underwrite on these acquisitions, how do you think about what you expect from, say, the producers that you're bringing on in terms of growth in the top line there?

Tony, our year-to-date organic growth in Engineering is around 8%. And I think for the year, we guided to sort of mid-high single-digit area. So we're fully on track with our organic growth ambitions for the year, and we expect that to continue. We play in rapidly growing markets, infrastructure-oriented markets, transportation, energy, communications, public sector investments that are being made by governments, frankly, around the world. So when we look for acquisitions, we look for businesses that are playing in these sectors and where there are long-term tailwinds for growth in this highly fragmented industry. So that's the way we think about it.

And then just a follow-up on that as it relates to the investment pipeline. Can you talk about just how that looks, sizes of the deals, like any larger type of transactions? And is it still skewed towards Engineering? Or are there other areas that you're seeing activity in?

Well, so far this year, we've made acquisitions in each one of our segments. But Engineering by far has been in terms of number of transactions, not necessarily size, but in terms of number of transactions. And Christian made a point, this is a massive, massive industry that's highly fragmented, multiple areas of specialty. And even our most mature businesses, we have white space -- we might have white space in one part of the country and strong expertise in that same area in a different part of the country. All of those create opportunity for acquisition. So for a company like Colliers that has been in the internal growth and acquisition or consolidation business for 30 years successfully, this is exactly what we look for in terms of a segment that we can grow.

And so our philosophy, as you've seen and others have seen over the past 5 years has been to enter a market in a dominant way as one of the top players and then to fill out and strengthen that platform as we've done in Canada, as we've done in the U.S., and as we've done and continuing to do in Australia. So there's a whole big world out there in the Engineering space that creates just staggering amounts of opportunity in that area. And I'm hopeful over the next few years that we can double this business again in terms of both revenue and profitability. And our -- and I'm going on too long, but our unique way of operating with our partnership philosophy and decentralized operations, which we apply across the board and have forever, is really a difference maker for the targets. So we're excited about this space. And we think it will provide us with a huge growth opportunity in the years to come.

Our next question is from Himanshu Gupta from Scotiabank.

So just on IM fundraising, I mean, you have done almost $4.4 billion this year. What is the mix of that, like open-ended versus close-ended? And is that also impacting the margins apart from the integration cost?

Hello, Himanshu, that's a good question. And you're talking about fundraising and the mix of open-ended funds versus close-end funds. And then we also have now credit, which is a much bigger part of our business. And when you raise close-end capital, the fees turn on immediately and typically at a higher fee rate than an open-ended fund or a credit vehicle would. So that type of fundraising has more immediate impact on our revenues, and we are seeing that a little bit in 2025 as we have been very successful raising open-ended fund capital this year. We've also raised some pretty significant credit capital. And that open-ended and credit capital does not start generating fees until such time as we deploy that capital, which can take 3 to 6 months. Day referenced, we have $9 billion of dry powder, and that is capital that's ready and waiting to be deployed. So our teams are focused on that. And once that capital is deployed, it will start to earn fees.

And the next question is you're working on the integration of IM under this Harrison Street platform. Have you received any initial client feedback so far? I mean, as you integrate Rockford versus the Harrison Street? And I know it's early days, but still wondering if any client feedback on this process.

Yes. The client feedback has been terrific. In fact, that's been a major part of the efforts in bringing these operations together. What it really means is we can now use our debt capacity in areas that we have expertise in seniors and students and so on to -- so there's a lot of opportunity to do more with the same investments. So client reaction has been great. Also what the clients like is a more streamlined fundraising capability. They want to understand what are the investment opportunities for them. They'll choose which ones they have interest in, and then we can bring in the expertise to help satisfy their investment desire.

So feedback has been very good to date, and our investors are responding by increasing the amount of capital they're allocating to us. It's never enough, as always, but it's a lot better than it has been in past years.

And clearly, it's in the right direction. And then just switching gears, on the leasing side. I mean, it looks like industrial leasing was strong. Any particular geography which is impacting that? And how much is tariff discussion now compared to first half of the year?

Well, Himanshu, leasing was led by the U.S. in the third quarter. Industrial and office, particularly strong. And if you recall, in the first half of the year, leasing was challenged. We had some tariff and trade impacts in the second quarter, which caused clients to pause, particularly on the industrial side of things. So we're feeling good about our leasing trajectory, and we expect leasing to be up nicely year-over-year as we finish the year in Q4 here.

Our next question is from Julien Blouin from Goldman Sachs.

I just wanted to go back to Investment Management. I mean, you touched on all the work you're doing to integrate the back office and the market-facing brands within Investment Management. I guess beyond the 2 to 3 quarters of margin pressure ahead from the integration costs, do you still feel like you can get to that 45% to 50% margin that we've talked about in the past? And will you wait until you get to those margin levels before considering any of the strategic options you've talked about in the past for realizing the value of that segment?

Well, to be honest, for us, what's more important is growing out this platform and making it as strong as possible. So we -- over the next couple of quarters, we sort of have a clear view of where our margin may go to. But we're going to continue to invest in our platform to make it as strong as possible. We are open -- we continue to be open for acquisition opportunities in this segment. There's tons of white space, and there's tons of opportunity right now, as you probably know, with lots of players in this particular segment talking to each other about potential hookups in one form or another.

So we're active all over the place, and we'll have to see how the next few quarters roll out. But from my perspective, we're building this business for the long term. And if we have to give up a few points of margin to continue to build our business and generate 20% plus growth internally, we're going to do it. It's just that simple. So I don't know if that answers your question, but that's sort of the way in which we would be looking at that business going forward.

And then maybe digging into capital market, can you give us a sense of how October and the fourth quarter is shaping up and maybe where pipelines of activity stand versus this time last year?

Yes. Good question, Julien. We had last year a very strong quarter in capital markets. And this year, the pipelines are looking solid, and we feel confident at this point in our prospects for the fourth quarter, and we should be able to exceed our performance of last year, which, as I said, will be a relatively tough comp compared to the comps we've seen so far year-to-date.

And when you say exceed your performance from last year, you mean just that it should grow year-over-year?

Absolutely.

Our next question is from Erin Kyle from CIBC.

I just wanted to tag on to that last question there and see if you can maybe elaborate a bit more on the pace and breadth of the capital market recovery. And if there's any particular regions, I know you called out the U.S., or asset classes that are leading the improvement?

Yes. I think the capital markets recovery is broad-based. And we highlighted a few asset classes where sales brokerage has been strong, or sorry, a few geographic markets where capital markets growth has been strong. But Erin, I really would make the comment that this is a multiyear recovery. It is really a global recovery. If you recall, 2023 was a very challenging year in Europe, in particular. Our European business is really well positioned to capture the rebound in activity, and that's been evident in the numbers year-to-date, and that's going to continue as we look ahead to Q4 and into 2026. So I think it's really, as I said, broad-based across all geographies.

But I would also say, Christian, if I could add something there. Capital markets isn't back yet anywhere. There's strength, as Christian said, in the U.S. But I would say, in Europe and Asia and even to some degree in Canada, there's more transactions happening, but it's taking time. I don't think there's the stability yet around interest rates, debt costs, et cetera. And investor confidence is not where it needs to be. All of that is, to my way of thinking, tailwinds because even in our own fund business, Christian made a point of saying that we've sold a whole bunch of assets, which is a normal -- it's normal course in the fund business. You redeploy assets and to investors on an ongoing basis when it's opportune to do it. So there's a lot of pent-up demand around capital markets, but we haven't seen it yet. We've seen some of it. It has not come back to where it used to be. And that to us is just upside for our -- for the future.

And then you started answering my second question there, but I just -- in Investment Management, could you remind us how many funds are going through the disposition phase? And then what percentage of those funds are typically recycled?

Well, most funds are always looking at disposing of assets at opportune times. Usually, you'll see the older funds, the older close-end vehicles selling out their assets faster. But it's a function of what they can generate in terms of returns. If a particular asset is not yet fully developed, not yet fully leased, upside still to be gained, you won't see our asset managers wanting to sell those assets because they know there's inherent value in them. So it's really part of the art of managing and delivering top-tier returns to investors.

When is the opportune time to sell? Which assets within the portfolio do you want to sell? Do you want to put together 2 or 3 assets so that you're actually selling a portfolio so that a larger player can buy it and get -- and hopefully pay a higher price? Of course, netting our funds and investors more in returns. So it's really the art of the asset managers, and we have -- one of the unique advantages we have, and it really applies across our business is that our key players own an equity stake in the business. So not only are they incentivized to deliver great returns for their investors, they also are incentivized to deliver great returns for shareholders. So that's how I would answer your question.

Our next question is from Mitchell Germain from Citizens Bank.

Jay, I'm curious, you've done some M&A across the services platform. I think Greystone and Triovest were a couple of deals that you've announced in the last couple of months. How do you kind of -- how does that fit in the puzzle when you consider hiring as well? I'm curious about the pace of hiring that you're doing? Or is it really just more on the M&A side that you're investing there?

Well, each of our businesses are active recruiters of top talent. And I know on these calls, we talk about M&A. But in our numbers, and you probably know this, and I'm sure you've discussed it with Christian over the years, we have significant expenditures around recruiting top talent to fill white space in different geographic regions, which has an impact, a negative impact on our margins.

And so I would say -- and we have specific goals. We have a large group of -- a large department within each of our regions that are, we think, very good at what they do. And so recruiting and retention, especially in areas of white space is a key part of what we do and gets lost somewhat in the discussion around internal growth. So internal growth, for example, in the residential business this quarter was 8%, I think. 13%. So it was actually much higher than that, but we would have borne some of the cost of recruiting in that 13%.

No, that was the revenue number. So -- but I would add that in terms of our margin, it does impact our margin, Mitch, on an ongoing basis. And we've seen that year-to-date. In the third quarter, we had tremendous operating leverage from higher revenues. But notwithstanding that, we still have a margin pressure from recruiting, and that's a cost we're prepared to bear because we're recruiting top professionals and adding new capabilities in asset classes and in geographies, and that's something we're going to continue to do.

Yes. I was thinking margin. I'm sorry, Mitch. I was thinking about margin and the impact on the margin. So thanks, Christian, for clarifying that.

Yes. And Jay, I understood where you were headed there. A lot of your peers, Jay, talking about capturing this enormous data center opportunity. You cited it in your earnings release. I'm curious if -- say it differently, I'm curious how you're positioning Colliers to potentially benefit down the road from this growing sector?

Well, that's a great question, and I'm glad you asked it because I've been listening to some of the other players in the real estate services space who've been very vocal about data centers, portraying them as some sort of new major growth engine. And for most of these players, data centers is just another asset class. They help clients buy, sell, lease, finance data centers when they're able to do that.

At Colliers, we do much more than that. In addition to those services, which are significant for us, Colliers also designs. We entitle land for development. We do project management and program management on both construction and maintenance through our Engineering group. And through our Investment Management segment, we also invest in data centers, creating really a full cycle capability. And so while data centers are getting a lot of attention these days, and they're strategically important to us at Colliers because for us, it's not just the Real Estate Services piece of it, it includes so much more.

And as I listen to some of our other peers, I smile because they're really just providing traditional Real Estate Services around another asset class that happens to be hot right now. There are only a few, Colliers included, that are actively involved in the entire life cycle of data centers and so much more than just data centers. So a big part of our business, it's strategically important. It will continue to grow. It's probably our rapidly growing -- our fastest-growing segment across the board, although still not material to us from a percentage of revenue point of view. I hope that sort of puts it into perspective for you, but that's how we see it.

Our next question is from Daryl Young with Stifel.

Just one question for me related to commercial real estate services. I wanted to get a sense of whether you're seeing any green shoots on construction activity or we're still early in the cycle. And I guess, just the magnitude of what you would see as upside from that over the next couple of years?

Well, it depends on what construction activity you're talking about and in what markets. So I would say that the construction of condominiums in Canada and the U.S. is soft. You're seeing some construction in multifamily or build-to-rent. There's obviously lots of activity around data centers and related infrastructure assets. And it's a little bit the same in Europe, although it's smaller numbers. So new construction is really at a pause from our perspective right now, which is creating a lot of pressure for companies that were traditionally focused on this type of construction from the ground up.

Our next question is from Jimmy Shan from RBC Capital Markets.

Just a couple of questions on the operating leverage within real estate services. So this quarter we did see roughly $100 million of year-over-year revenue growth, and then we saw EBITDA grow by $23 million. So I think that's the leverage math that you've spoken about before. Is that how we should be thinking about the leverage as we look out to '26, I guess, #1?

And then secondly, maybe if you could speak generally about sort of the excess capacity that you see within the organization. If volume continues to come back the way it has been, how well staffed are you today?

Well, Jimmy, the operating leverage math that you quoted there is absolutely correct. So we had about 22% operating leverage on an incremental revenue dollar in Q3, and that's in line with what was telegraphed over the last several quarters in terms of what our expectations are. And as revenues continue to grind higher here, and this is a gradual recovery in capital markets and leasing is also on a growth trajectory. As those revenues increase, we should hopefully continue to see that 20-plus percent operating leverage through 2026.

So in general, would you say there's a lot of excess capacity still?

Yes. I mean we have a tremendous amount of productive workforce on the ground, 4,500 productive brokers around the world. And we continue to invest and add new brokers and new geographies and new asset classes. So these folks are primed and ready and highly, highly motivated to generate additional commissions for themselves and for the firm. So we expect that these folks will contribute more and become more productive as the market improves.

And as I said earlier, I mean, the market hasn't even returned to where it used to be. And the number of brokers that we have in the organization is up probably 15% from our high capital markets production number globally, I'm talking about. So I think as capital markets continues to gain strength, we'll be able to do substantially more revenue at high margins with a workforce that's larger today than it was at the high.

Right. And then just on that topic in terms of kind of future tailwind, with respect to office leasing and capital markets, the recovery so far, it seems to have been a little bit more weighted towards the major markets in the U.S. And I could be wrong here, but I think your footprint in the U.S. tends to be a little bit more secondary markets. So is it fair to assume that to the extent we see the same sort of recovery in those non-coastal, non-major markets, we should expect a little bit better upside in the future?

So first of all, let me put our business in the U.S. into perspective. We are 1, 2, or 3 in virtually every market, large, small, with 1 or 2 exceptions in the U.S. So we're one of the top players everywhere. And so from the standpoint of where the revenue will come from and where we can translate it. Yes, major markets generally generate higher revenues in part because the lease rates within those markets are significantly higher than they might be in a secondary market. So it's really all over the map. For those -- for those of our competitors that might have a much bigger business in, say, New York City than we do in terms of number of brokers, they would obviously generate more revenue on leasing in New York when leasing revenues are up versus us relative to size.

But I think we're -- Colliers is 1, I would say, 1 of 2 well-balanced globally real estate services firms with strong market positions everywhere. We would like to be bigger in certain markets, of course, but we're a well-balanced business. And if you look back over the past couple of years, at a time when real estate services has gone through some very soft times, Colliers continued to perform quarter after quarter after quarter, which has just shown the resilience of our business. And we're waiting for -- and we're continuing to strengthen making our business better. And as markets continue to get stronger, we expect our results to follow.

Our next question is from Stephen Sheldon from William Blair.

You've got Pat on for Stephen today. My first one, with the relative strength you're seeing in leasing and capital markets. Can you just touch on the puts and takes in terms of maintaining your real estate services revenue guide for the year? Were there any overly significant deals that came through this quarter? Or any dynamics we should be thinking about across those 3 services subsegments heading into the fourth quarter?

No, there's nothing -- no lumpy transactions in the third quarter of note. And to achieve our full year guidance, we do want to see an increase in capital markets activity year-over-year. And as I mentioned, capital markets had a very strong fourth quarter in 2024. So it is a tougher compare, but we do see the pipeline there for continued growth. Leasing should trend positively for the fourth quarter as well. That's really a global thing across all of our services.

And in our outsourcing business, that's the recurring part of our real estate services business. We've got a very strong trajectory in our valuation and advisory business, and we expect that to continue as well as increasing property management and loan servicing revenues. So we feel pretty good about all of these services, and there's nothing lumpy or unusual to note.

And Jay, just to piggyback off of a prior question and your prior commentary on data centers. I understand you all have significant capabilities across the portfolio there, including in the Investment Management business. But I wanted to ask, as you expand your platform through continued M&A, is it of interest to build out more technical capabilities on the services side? And as you think about that, what are you seeing in terms of the valuations for that type of asset?

Well, first of all, across the Engineering segment, which is, as I mentioned, it's about $1.7 billion now on a global basis. We do a lot of technical services today as do most engineering firms. So I don't know how many data centers we're doing globally now in some form or another, but it's a substantial number. Having said that, the acquisition costs of any firm that is around data centers right now, whether they're constructing them, whether they're project managing them, et cetera, servicing them or managing after the fact are very high. And from our perspective, we are -- we can't see a return in investing at those kinds of valuations. We're very happy continuing to build out our Engineering segment that serves it and continuing to look for more opportunities to finance and own data centers because that creates opportunities for us to potentially do more in the future. But valuations are high in that space, as you would expect.

And if I could just ask one more quick clarification, Christian, unless I'm looking about -- I am looking at this incorrectly, I think the guidance for Engineering implies that the 4Q growth takes a step down organically unless there's some sort of volatility in the pass-through costs there. Am I looking at that correctly? Or is there anything we should be thinking about there?

Yes, you're looking at that correctly. There could be a small step down in organic growth in the fourth quarter. I'll remind you that we did indicate on a full year basis that organic growth would be in the mid to high single-digit range, and we'll be firmly in that range for the full year. And we've been outperforming to that for the first 3 quarters.

Our next question is from Maxim Sytchev from National Bank Capital Markets.

Jay, I wanted to go back to your prepared remarks. And I think you made a comment, and unless I misunderstood, but the $9 billion of dry powder across the organization, do you mind maybe expanding a little bit on that figure unless I, again, misinterpreted it?

I didn't really hear that. I didn't hear.

He was asking about the $9 billion of dry powder we have across the organization and if we have any more details on what that is.

We do. We have all the details. But I think it's an aggregate number that we feel comfortable giving you. It's made up of all of the available capital across the funds, including alternatives, including debt, et cetera, et cetera. So it's an amalgam of all the capital available. And even if I gave you the breakdown, it wouldn't add much value because it's when you deploy that capital that it translates into returns. So as Christian said, in the debt space, our fee structure is lower than it is in our open-ended and close-ended funds. So it really depends upon putting that money to work and in what area and what kind of revenue we'll generate once that money is put to work. So I think $9 billion is a good number way back -- way more than it was last year. And we're just looking for the right opportunities to deploy that capital virtually across the board.

And I apologize for my connection. And another question I had in relation to the Australian foray on the Engineering side. Do you mind maybe talking a little bit about the reason why you went into that geography? I mean it has been a bit sluggish. So is the thought process that right now, you're kind of picking it up on a trough? Maybe any color would be very helpful there.

Max, the acquisition we announced last night is a well-established urban development consultancy and engineering firm operating in Adelaide. It's a market that is of significant size in the Australian sort of geography and a place we want to expand to. It's a relatively small firm, with 65 staff. So we were able to do this transaction, add these folks to our established platform, which I think, I believe we've got well north of 500 people now in our Australian engineering business, and these folks will tuck in to that business, and they will be nicely accretive for us. And we're able to do these tuck-in acquisitions, as you know, at very attractive valuations. So that makes this all the more compelling for us.

Question is from Frederic Bastien from Raymond James.

On Max's question on engineering. Really excited to see this segment perform strongly, and you continue to partner with industry leaders, both you saw that in Canada and Australia, but it really feels like it's the real deal here. And it feels like you're only scratching the surface. You've got good scale right now in Canada with Englobe. But can you comment on the potential for additional growth in the U.S., Australia, and Europe? Europe seems like there's massive opportunity there that you're still waiting to tap.

You've sort of summed it up beautifully. The U.S., we'd like to be growing faster. We're growing nicely there, but we'd like to be growing faster. So that's a big opportunity for us. Canada, we're doing phenomenally well there, and we're excited about that. Australia, Australia is doing nicely. As you can see, a lot of these smaller deals. There's not a lot of big players in Australia. So we're putting together our platform one step at a time. Europe is a big opportunity. We're spending a lot of time there. And there are some very interesting platforms that we've been considering.

And again, our partnership philosophy and our decentralized operation is attractive to large partnerships that don't really want to be acquired 100% by somebody else. They want to continue to own an equity stake in the business and be part -- participate in the future growth in this segment and take advantage of relationships that we might have across the platform, whether it's in real estate or it's in investment management. So we -- as you've seen so many times, Fred, over the years, as you followed other engineering firms, the segment is so massive. It's bigger than I even thought initially, and the white space keeps expanding. So we think that this is a great growth engine for us for many years to come, and we're just going to continue to build. We don't have to be the biggest. We just have to be one of the best, and we have to have a unique differentiated strategy, and we believe we have that.

So one step at a time got us to $1.7 billion in 5 years. Hopefully, we can follow the same format and double the size of it over the next couple, 3 years.

Last question for me. Regarding the Astris and Triovest deals that you completed on the RES side. They've only been contributing for a few months, but I was wondering if you could provide an update on how these businesses are performing under the Colliers umbrella?

Still too early to say. Triovest has been an asset that we've sought after for a lot of years. It's highly -- it's almost entirely recurring revenue. And we're in the process of integrating that into our Canadian property management operations. Interestingly, there are some clients -- Canadian clients that have assets in the U.S., that have asked us to take over some of those assets. So that's in process. So we're quite excited about Triovest, and we're also in the process of rebranding it.

And just to make the point one more time, whenever you do these things, it takes cost, it takes time, it takes effort. When you make acquisitions, you have to integrate those acquisitions. And somebody commented on our engineering margin down 20 basis points in the quarter, like it's 20 basis points. Give me a break. So Triovest, as I said, is going well, and we're excited about what that can do for us. And there was another acquisition in real estate, a company called Astris, which has so far been overperforming. We had a bit of an advantage with that acquisition because they had already had relationships with our investment management platforms in a couple of different areas.

So we had a good sense for the quality of the professionals. And we're seeing increased potential opportunity around financing infrastructure, mid-market infrastructure businesses through the Astris professional. So we're cautiously optimistic that that will be another successful business and service offering that we can build over the next few years.

There are no further questions at this time. I would now like to turn the conference back to Mr. Hennick. Please continue.

Well, thank you, operator, for passing it back, and thank you to everyone for participating, and we look forward to speaking again in our -- at our fourth quarter results in February. So thank you. Have a great day.

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