Risk factors

General Overview. Our business is complex, dynamic, entrepreneurial, and international. Accordingly, it is subject to a number of significant risks in the ordinary course of its operations. If we cannot or do not successfully manage the risks associated with the services we provide, our operations, business, operating results, reputation, and/or financial condition could be materially and adversely affected.

One of the challenges of a global business such as ours is to determine in a sophisticated manner the critical enterprise risks that exist or may newly develop over time as our business evolves. We must then determine how best to employ reasonably available resources to prevent, mitigate, and/or minimize those risks that we are able to identify as having the greatest potential to cause significant damage from an operational, financial, or reputational standpoint. An important dynamic we must also consider and appropriately manage is how much and what types of commercial insurance to obtain and how much potential liability may remain uninsured consistent with the infrastructure that is in place within the organization to identify and properly manage it.

Various factors over which we have no control significantly affect commercial real estate markets. These include:

  • Macro movements of the stock, bond, currency, and derivatives markets;
  • The political environment;
  • Government policy and regulations, in each case whether at local, national or international levels;
  • Interest rates and the availability of real estate debt financing for our clients;
  • The cost and availability of natural and non-renewable resources used to operate real estate; and
  • Emerging technologies that are potentially disruptive.

As an example, the severe financial disruption and global recession that occurred during 2008 and 2009 materially impacted global real estate markets as the volume and pace of commercial real estate transactions contracted and real estate pricing and leasing in many countries and markets fell substantially. More recently, political uncertainties in Russia, Turkey, certain countries in the Middle East, and Brazil have diminished the willingness of multi-national firms to expand their businesses in those countries, which in each case has affected our business. During 2016, the uncertainty created by the vote in the United Kingdom to leave the European Union (“Brexit”) caused an immediate price reduction in London real estate and a significant slowdown in real estate transaction volumes. The result of the presidential election in the United States resulted in an uptick in interest rates that created an environment for real estate debt financing to be more expensive than it has been in the recent past. In addition, the U.S. Federal Reserve began to increase its interest rate toward the end of 2016 in response to stronger employment and economic conditions in the United States. Although commercial real estate markets in most major cities held up during 2016, primarily as a result of the low interest rate environment that has been encouraged by the activities of various central banks, their continued strength became more uncertain during the year for various reasons beyond the increased interest rates that took place toward the end of the year. These include:

  • The slowdown of the economy in China;
  • Continued volatility in oil prices as the result of changes in demand and changes in outputs for political and other reasons across oil producing countries, including the United States and Iran;
  • Continued volatility in the prices of other commodities, partially as the result of the slowdown in demand from China and changing dynamics around infrastructure demand in other countries;
  • Volatility in global equities markets, which contracted during the early part of 2016 and rose toward the end of the year;
  • Uncertainties resulting from the randomness of terrorist acts, the effects of mass migration from countries experiencing hostilities in the Middle East, and the effects of climate change;
  • Risks from potential cyber-attacks, the sophistication of which continues to grow, including direct financial losses and damage to reputation;
  • Uncertainties relating to the consequences of the political dynamics in many countries within all of the regions in which we conduct business; and
  • The dynamic nature of government policy and regulations, in each case whether at local, national, or international levels, including among other issues with respect to trade, taxes, and immigration.

Governments are addressing the situations in different and sometimes unpredictable and politically motivated ways. Accordingly, it is inherently difficult to make accurate predictions about the future movements in the markets in which we operate.

For additional information, please see Item 1A Risk Factors on pages 58-86 of our 2016 Annual Report (or p. 42-70 of our 10K).

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