Emma Giamartino
Global Group President, Chief Financial Officer and Chief Investment Officer at CBRE Group
Thank you, Bob. As Bob noted, global economic sentiment has deteriorated since our last quarterly update. More specifically and as you've all been following closely, since we last reported, the 10-year treasury rate has spiked 140 basis points, the S&P 500 has declined by 7% and public rate prices have fallen by 16%. The futures market is now indicating that the Federal Reserve will raise rates more steeply and use them less quickly, resulting in a harsher and longer downturn than when we last reported. It is worth reiterating that this has all happened in just the last 90 days.
This more negative backdrop began to impact our business late in the third quarter and there will be more impacts in the fourth quarter. CBRE's core EPS down 19% from the prior year to $1.13. And as Bob noted, the drivers are weakening capital market conditions, the timing of development asset sales and a foreign currency headwinds. Our results were however supported by the continued growth in the lines of business that as Bob noted earlier, we see a cyclically resilient or secularly favored. Net revenue from these businesses collectively increased 12% in local currency, excluding the contribution from Turner & Townsend and 24% in local currency including Turner & Townsend's $284 million of net revenue in Q3.
Finally, our GAAP EPS grew by 7% in the quarter due to a $183 million mark-to-market gain on our investment in Altus Power, which continues to benefit from demand for renewable energy solutions and its synergy with our CBRE businesses. I'll discuss results for each business segment starting with advisory on Slide 6. Total advisory revenue rose 1% in the quarter or 5% in local currency, though performance diverged across business lines. Capital markets weakness emerged immediately following Labor Day, which historically has been a time of heightened sales activity. The decline was most pronounced in our Americas region where property sales revenue fell 16% during the quarter.
While Americas Capital Markets revenue, which includes sales and debt origination is relatively flat for July and August, September revenue fell by 43%. Outside the Americas property sales rose 3% or 17% in local currency for the quarter. The decline in U.S. property sales reflects sharply reduced credit availability. Typically, credit spreads have tightened as rates rise. However higher rates have been accompanied over the past three months by credit spread expansion. Many capital sources have tightened underwriting standards considerably and set pricing at levels that are uneconomical for borrowers.
Against this backdrop, our mortgage origination revenue declined by 28% versus last year's Q3, while the value of loans originated fell 34%. Revenue declined less than loan volumes because more financing in the quarter came from the government sponsored enterprises, which we had expected to occur during periods of market weakness. The decline in credit availability was broad based with only regional banks lending more than in last year's Q3. Difficult comparisons further impacted year-over-year growth.
Our combined property sales and debt origination businesses grew by 79% in last year's third quarter, driven by a resurgence of activity following the brief 2020 recession. We were encouraged to see our leasing revenue increased 14% or 17% in local currency, driven by a large office and industrial transactions in major markets. Globally, leasing revenue increased across all major property types with office growing mid-teens off a low base and industrial up high single digits.
Property management, valuation and loan servicing all proved to be resilient as expected, collectively realizing net revenue growth of 2% or 8% in local currency. Advisory Services segment operating profit declined by 19% or 15% in local currency. Overall advisory margins on net revenue declined by 4.2 percentage points, including the decline in loan origination related OMSRs.
Slide 7 illustrates the drivers of advisory's lower margin versus prior year. Just over half the decline in Advisory segment operating profit margin is attributable to higher cost of services with advisory gross margins declining 2.2 percentage points year-over-year or 1.9% excluding OMSRs. Approximately 80 basis points of the gross margin decline is due to higher broker commissions. Strong growth in the front half of the year resulted in an outsized number of brokers, achieving higher splits earlier than we've seen historically. This will also impact the fourth quarter albeit to a lesser degree before the annual reset next year.
For context, approximately one-third of our U.S. brokers had historically reached higher tranches by the third quarter. For 2022, the percentage of U.S. brokers reaching higher tranches is almost 50%. It is important to note that our average commission expense naturally increases during strong years and declines during soft years. For example, in 2020, only a quarter of producers had reached a higher tranche by the third quarter. The remainder of the gross margin decline is due to investments to support growth, broker recruitment costs and revenue mix as revenue erosion was steepest in debt originations, our highest margin line of business.
Additionally advisory operating expenses increased by $47 million or 10% with the majority of the increase due to hiring that occurred in late 2021 or early 2022 as we prepared for a more robust growth environment and higher employee compensation reflecting a tight labor market. While we have and will continue to invest in targeted areas of growth in our business, we've also undertaken an equally targeted cost cutting program, which I'll discuss shortly. While we began reducing operating expenditures during the third quarter, which showed the lowest year-over-year growth in opex since Q1 2021. Only a fraction of our cost cutting program was implemented during Q3 and thus did not fully reflect the impact of those reductions.
We expect our cost programs to result in a single digit year-over-year decline in Advisory segment opex in the fourth quarter. On Slide 8, our GWS segment posted strong net revenue growth of 8% or 13% in local currency excluding the contribution from Turner & Townsend and 32% in local currency including the contribution from Turner & Townsend. Both facilities management and project management net revenue grew organically by double digits in local currency. We also remain pleased with Turner & Townsend, which is performing in line with expectations.
Facilities management growth was supported by a significant expansion work with our existing client base, particularly with technology clients. And project management growth was driven by space redesigns and fit outs often tied to our clients changing use of office space. Our GWS new business pipeline is on pace to end the year above the prior year's fourth quarter with our opportunities coming from new and existing clients across a range of industries. GWS segment operating profit margin on net revenue was 11% excluding the impact of Turner & Townsend down from an unusually strong third quarter of last year. The 11% margin represents a sequential improvement and was in line with our expectations as margins continue to normalize from COVID related highs.
Turning to our REI segment on Slide 9, segment operating profit of $59 million represents an $88 million decline from the prior year. You'll remember last quarter we told you 75% of the REI segment total operating profit will be realized in the first half of the year due to the cadence of our development asset sales. This segment operating profit decline is predominantly due to this anticipated deal timing. Within REI, Investment Management realized operating profit of $44 million, down 12% from last year. In local currencies, the decline was 4%.
Beyond FX, prior quarter results were bolstered by an $11 million positive mark-to-market on our $335 million co-investment portfolio versus negligible mark-to-market in the, current quarter. The overall decline masks continued growth of asset management fees, which increased by 19% in local currency even though adverse currency movements reduced AUM to $143.9 billion. Our development business realized $17 million of operating profit against the $100 million in the prior year, reflecting fewer asset sales during the third quarter. While we expected most of this decline, when we provided our last quarterly update, we elected to pause on selling certain assets as we wait for capital market sentiment to improve. And as we noted last quarter, our development business utilizes highly flexible financing, which enables us to monetize assets when market conditions are accommodating and to pause when appropriate.
Please turn to Slide 10. While we cannot dictate the macroeconomic environment, we can control our costs and how we allocate our capital. We are targeting over $400 million of cost reductions due to management actions. This is an addition to the naturally flexible cost reductions when business declines such as discretionary bonuses, incentive compensation, profit sharing and commissions. As discussed last quarter, CBRE can ramp up cost reduction activities as market conditions necessitate.
Our current cost reduction program is driven by our base economic assumptions, which as we've discussed envision a more challenging economy than we communicated last quarter. Approximately $300 million of targeted cost reductions will be permanent in nature with the vast majority coming from headcount reductions. Beyond head count reductions, we also anticipate permanent reductions to our cost basis for third party and occupancy spending. The balance of the savings approximately, $100 million is more temporary in nature, but we will continue them until market conditions improve.
These cost savings will come from reduced travel and entertainment promotion and marketing spending and reductions to discretionary compensation plans. And to be clear, the planned reductions to discretionary compensation are above and beyond the natural flexibility of these plans that are already tied to financial performance. Against our $400 million cost target, we have identified $175 million to be completed by the end of the year with the significant majority of the remainder to be completed by the end of Q1 2023. Only a small percentage of the cost reductions taken to date are reflected in Q3 results due to a slight lag between taking action on headcount reductions and having those cost savings reflected in financial results.
Given the nature of our cost structure, almost all of the planned reduction will be reflected in our operating expenditures, although we do anticipate achieving targeted reductions to some of the more fixed costs within our cost of services. While we are adjusting our costs, you can expect us to invest more aggressively utilizing our balance sheet during market weakness. In the third quarter, CBRE repurchased 5.1 million shares for $408 million bringing our share repurchases through Q3 to nearly $1.4 billion. We expect share repurchases to increase sequentially in the fourth quarter ranging between $500 million and $700 million. We also to remain an increasingly robust pipeline of M&A opportunities. Current market conditions are increasing the likelihood that we'll be able to act on them. For now though buybacks remain the best use of capital, but that may change as we get into next year.
Please turn to Slide 11. As we've discussed today, the broader economic outlook has worsened since our last update, necessitating that we revise our expectations for full year performance. As Bob indicated, we now expect full year core EPS growth to be up by mid single digits compared with 2021. Our guidance most notably assumes that the capital markets remain under pressure. We expect leasing to remain more resilient than property sales albeit with more muted growth than we saw in the third quarter.
Due to the headwinds in our transactional businesses, we expect full year Advisory segment operating profit to decline by mid-to-high single digits with FX driving 3 to 4 percentage points of the decline. We expect our GWS segment will achieve low-to-mid 20% segment operating profit growth for the full year buoyed by continued strength in the fourth quarter. Absent foreign currency headwinds, we project segment operating profit growth for the full year in GWS would be 7 percentage points higher.
Within our REI segment, we believe we have realized approximately 90% of our full year segment operating profit, largely due to the expectation, a few development asset sales in the fourth quarter. As noted previously, our outlook has been negatively impacted by the continued strength in the U.S. dollar. At midyear, we forecasted a $100 million full year negative impact to core EBITDA from FX. We've now raised the expected FX drag to $125 million for the full year with $50 million hitting in Q4. Absent FX, we anticipate the core EPS growth would have been in the low double digits for the full year.
We remind investors that it is difficult to forecast macro conditions and certain components of our business, notably capital markets, the timing and development sales and to a lesser extent leasing are subject to fluctuations in overall economic sentiment.
In closing, while near term headwinds are intensifying, we remain energized as ever about our long-term prospects and are committed to using our scale, balance sheet and cash flow to accelerate long-term growth and value-creation.
With that operator, we'll open the line for questions.
