Company Reports

Jones Lang LaSalle, or JLL, has benefited from the secular trends in the real estate services industry and has experienced explosive growth over the past decade as it recovered from the global financial crisis in 2007. The company has transformed itself into a more resilient cash flow generator throughout the business cycle by broadening the basket of services that it provides and capturing an increased wallet share of real estate spending. The firm is a leader in inter-regional transactions, and we believe that its recent efforts to further enhance cross-functional cooperation and improve connectivity across various geographical regions will drive new growth opportunities and ensure better service to its multinational clients.

Narrow-moat JLL’s fourth-quarter results were mixed as weaker capital markets and equity losses within the JLL technologies segment weighed on overall results. However, the outsourcing business surprised to the upside. The company reported that global investment sales were down 24% during the fourth quarter, with the Americas down 30%, EMEA down 25%, and Asia-Pacific up 1%. The decline in investment sales was broad-based and affected all sectors in the Americas and EMEA. Given our macroeconomic outlook and high-interest rates, we think the pressure on the capital markets business will continue in the near term. It was encouraging to see that the global office leasing volumes were up 4% in the fourth quarter compared with the fourth quarter of 2022. In the industrial sector, gross leasing volumes in the U.S. and EMEA were down significantly on a year-over-year basis. Still, net absorption in Asia Pacific was above the five-year average, supported by a wave of new supply and ongoing demand from e-commerce.

Jones Lang LaSalle has benefited from the secular trends in the real estate services industry and has experienced explosive growth over the past decade as it recovered from the global financial crisis in 2007. The firm has transformed itself into a more resilient cash flow generator throughout the business cycle by broadening the basket of services that it provides and capturing an increased wallet share of real estate spending. The firm is a leader in inter-regional transactions, and we believe that its recent efforts to further enhance cross-functional cooperation and improve connectivity across various geographical regions will drive new growth opportunities and ensure better service to its multinational clients.

Narrow-moat-rated Jones Lang LaSalle’s third-quarter results were middling as the capital markets and leasing businesses were impacted by the industrywide slowdown but the outsourcing business remained strong. The company reported that global investment sales were down 48% during the third quarter, with the Americas down 51%, EMEA down 51%, and Asia-Pacific down 24%. The decline in investment sales was broad-based and impacted all sectors, but multifamily and offices were impacted the highest. Global office leasing volumes were also down 6% in the third quarter compared with the third quarter of 2022. In the industrial sector, gross leasing volumes in the U.S. and EMEA were down significantly on a year-over-year basis and were also below the five-year historical average. Industrial net absorption in the Asia-Pacific region remained strong and was considerably above the five-year historical average. We think that the pressure on the brokerage business will continue in the near term given our macroeconomic outlook and rising interest rates.

Narrow-moat-rated Jones Lang LaSalle’s second-quarter results were disappointing, as valuation declines in JLL Technologies’ investment portfolio and significant declines in global transaction volume affected profitability. The company reported that global investment sales were down 53% during the second quarter, with the Americas down 59%; Europe, Middle East, and Africa down 57%; and Asia-Pacific down 11%. Global office leasing volumes were also down 14% in the second quarter compared with the second quarter of 2022. In the industrial sector, gross leasing volumes in U.S. and EMEA were down significantly year over year and also below the five-year historical average. Industrial net absorption in the Asia-Pacific region remained strong and was considerably above the five-year historical average. We think that the pressure on the brokerage business will continue in the near term given our macroeconomic outlook and rising interest rates.

Jones Lang LaSalle has benefited from the secular trends in the real estate services industry and has experienced explosive growth over the past decade as it recovered from the global financial crisis in 2007. The firm has transformed itself into a more resilient cash flow generator throughout the business cycle by broadening the basket of services that it provides and capturing an increased wallet share of real estate spending. The firm is a leader in inter-regional transactions, and we believe that its recent efforts to further enhance cross-functional cooperation and improve connectivity across various geographical regions will drive new growth opportunities and ensure better service to its multinational clients.

Narrow-moat-rated Jones Lang LaSalle's, or JLL’s, first-quarter results were impacted by significant declines in global transaction volume. The company reported that global direct investment sales were down 54% in local currency during the first quarter, with the Americas down 61%, EMEA down 53%, and Asia-Pacific down 28%. Global office leasing volumes were also down 18% in the first quarter compared with the first quarter of 2022. In the industrial sector, gross leasing volumes in U.S. and EMEA were down significantly on a year-over-year basis and were also below their five-year historical averages. Industrial net absorption in the Asia-pacific region remained strong and was considerably above the five-year historical average. For context, the office and industrial sectors contribute approximately 85%-90% of leasing revenue. We think that the pressure on the brokerage business will intensify further this year given our macroeconomic outlook and rising interest rates.

Jones Lang LaSalle, or JLL, has benefited from the secular trends in the real estate services industry and has experienced explosive growth over the past decade as it recovered from the global financial crisis in 2007. The firm has transformed itself into a more resilient cash flow generator throughout the business cycle by broadening the basket of services that it provides and capturing an increased wallet share of real estate spending. The firm is a leader in inter-regional transactions, and we believe that its recent efforts to further enhance cross-functional cooperation and improve connectivity across various geographical regions will drive new growth opportunities and ensure better service to its multi-national clients.

Narrow-moat-rated Jones Lang LaSalle’s fourth-quarter results were weighed down by a weak capital market environment due to higher interest rates and a constrained supply of money. Global direct investment sales volume was down 56% in the fourth quarter, with the Americas down 61%, EMEA down 54%, and Asia-Pacific down 35%. Global office and industrial leasing volumes were also down significantly in the fourth quarter compared with the previous year. Management expects that the investment and leasing volumes will remain under significant pressure in the first half of 2023 with the volumes recovering in the second half of the current year.

The commercial real estate, or CRE, service industry has overseen a period of rapid growth since the nadir of the real estate-driven financial crisis of 2007. The industry recovered rapidly since the pandemic with record profitability in 2021 on the back of low interest rates, increased availability of capital, strong real estate valuations, and an upbeat economic environment. However, investors are increasingly worried about the prospects of CRE service firms amid the currently challenging macroeconomic environment with rapidly increasing interest rates and a slowing economy. We think that CRE service firms are in much better shape to weather the upcoming economic downturn with strong balance sheets and an ability to better control their expenses. In addition to this, some of the companies in the sector have materially increased their earnings contributions from business lines like facility management, project management, and loan servicing that are less cyclical than their legacy brokerage business over the past decade.

Narrow-moat-rated Jones Lang LaSalle, or JLL, posted underwhelming third-quarter results, as rising interest rates and a slowing economy weighed on the company’s brokerage business. Global direct investment volumes were down 18% in the third quarter across all regions, with the Americas down 21%, Asia-Pacific down 17%, and EMEA down 13%. Volumes slowed across sectors during the third quarter, reflecting a prolonged phase of price discovery that is elongating the time to close deals. We expect investment volumes to remain under significant pressure given high interest rates and relatively lower liquidity in the market.

Jones Lang LaSalle, or JLL, has benefited from the secular trends in the real estate services industry and has experienced explosive growth over the past decade as it recovered from the global financial crisis in 2007. The firm has transformed itself into a more resilient cash flow generator throughout the business cycle by broadening the basket of services that it provides and capturing an increased wallet share of real estate spending. The firm is a leader in inter-regional transactions, and we believe that its recent efforts to further enhance cross-functional cooperation and improve connectivity across various geographical regions will drive new growth opportunities and ensure better service to its multi-national clients.

JLL has benefitted from the secular trends in the real estate services industry and has experienced explosive growth over the past decade as it recovered from the global financial crisis in 2007. The company has been able to transform itself into a more resilient cash flow generator throughout the business cycle by broadening the basket of services that it provides and capturing an increased wallet share of real estate spending. The firm is a leader in inter-regional transactions, and we believe that its recent efforts to further enhance cross-functional cooperation and improve connectivity across various geographical regions will drive new growth opportunities and ensure better service to its multi-national clients.

Narrow-moat-rated Jones Lang LaSalle posted strong results in the second quarter, but rising interest rates and a slowing economy are major headwinds for the company in the medium term. Global transaction volume proved resilient in the face of rising interest rates and inflationary pressures as it was up 2% for the quarter and 19% year to date. The global transaction volume in the first half of the year was driven by the Americas region with mixed performance in Europe and Asia Pacific. We expect the real estate transactional volume to slow down in the upcoming quarters due to higher interest rates and a slowing macroeconomic environment resulting in a material impact on the company’s brokerage business. Management also pointed out that investors are starting to extend the timeline for closing deals, representing the greatest risk to the second half of the year.

JLL has benefitted from the secular trends in the real estate services industry and has experienced explosive growth over the past decade as it recovered from the global financial crisis in 2007. The company has been able to transform itself into a more resilient cash flow generator throughout the business cycle by broadening the basket of services that it provides and capturing an increased wallet share of real estate spending. The firm is a leader in inter-regional transactions, and we believe that its recent efforts to further enhance cross-functional cooperation and improve connectivity across various geographical regions will drive new growth opportunities and ensure better service to its multi-national clients.

Narrow-moat-rated Jones Lang LaSalle posted a solid set of first-quarter results on the back of strong brokerage activity, comfortably beating the FactSet consensus earnings per share estimate of $2.14 with reported adjusted EPS of $3.47. JLL delivered impressive results on all fronts with companywide fee revenue of $1.90 billion, a 36% increase year over year. Adjusted EBITDA also came in strong for the current quarter at $274 million, 47% higher compared with the first quarter of 2021. This resulted in an adjusted EBITDA margin of 14.4% for the quarter, up 110 basis points compared with the first quarter of last year. We are reducing our fair value estimate to $254 per share from $266 as we fully incorporate the first-quarter results in our model.

JLL has benefited from the secular trends in the real estate services industry and has experienced explosive growth over the past decade as it recovered from the global financial crisis in 2007. The company has been able to transform itself into a more resilient cash flow generator throughout the business cycle by broadening the basket of services that it provides and capturing an increased wallet share of real estate spending. It's a leader in interregional transactions, and we believe that its recent efforts to further enhance cross-functional cooperation and improve connectivity across various geographical regions will drive new growth opportunities and ensure better service to its multinational clients.

Narrow-moat Jones Lang LaSalle reported a good set of numbers in the fourth quarter, comfortably beating the FactSet consensus estimate of $6.81 per share with reported adjusted EPS of $8.66. Fee revenue came in strong as the company reported fourth-quarter fee revenue of $2.8 billion, a 42% increase on a year-over-year basis and a 16% increase from the fourth quarter of 2019. The company reported fourth-quarter adjusted EBITDA of $622 million, a 50% increase compared with last year and 26% higher than the fourth quarter of 2019. The adjusted EBITDA margin calculated on a fee-revenue basis was recorded at 22.4%, up 110 basis points when compared with fourth-quarter 2020 and up 180 basis points from fourth-quarter 2019. We do not plan to materially change our $266 fair value estimate for the company as we incorporate the fourth quarter results.

JLL has benefitted from the secular trends in the real estate services industry and has experienced explosive growth over the past decade as it recovered from the global financial crisis in 2007. The company has been able to transform itself into a more resilient cash flow generator throughout the business cycle by broadening the basket of services that it provides and capturing an increased wallet share of real estate spending. The company is a leader in inter-regional transactions, and we believe that its recent efforts to further enhance cross-functional cooperation and improve connectivity across various geographical regions will drive new growth opportunities and ensure better service to its multi-national clients.

We are relaunching coverage of real estate service firms CBRE Group, Jones Lang LaSalle, and Cushman & Wakefield after taking a fresh look at them. CBRE and JLL have built narrow-moat businesses that benefit from intangible assets and switching costs, supported by strong brands, superior market intelligence, broad scale, and various structural elements inherent to the commercial real estate service industry. We are maintaining the fair value estimates for CBRE and JLL at $94 per share and $266 per share, respectively.