Dive Brief:
- Jones Lang LaSalle reported a 9% increase in property management revenue during the second quarter of 2023, according to its Q2 earnings report.
- The firm’s facility management, project consulting and technology services businesses buoyed total revenue, counteracting heavy decreases due to lower leasing activity and portfolio service revenues.
- The JLL Technologies segment’s fee revenue grew 18% to $56.5 million. The company attributed the growth to strong retention rates and increased usage by large enterprise clients.
Dive Insight:
Total revenue fell 4% in the second quarter, but JLL noted that it generated year-over-year growth in operating activity earnings, despite lower leasing volume and transaction-based revenue. The company also posted a 16% decrease in leasing fee revenue, following a 24% growth rate a year ago, but said this decline is in line with a 14% contraction in global office leasing volume.
Despite missing earnings expectations and recording a 99% decrease in net quarterly income, JLL cited a positive outlook due to stability in its “resilient businesses.” These segments include property management, workplace management and JLLT.
CEO Christian Ulbrich noted that return-to-office mandates are driving high occupancy rates in high quality buildings, and emphasized that a majority of JLL’s office leasing fee revenue is attributable to “high-quality or Class-A buildings.”
JLL’s Work Dynamics group, which provides industry-specialized facilities management and consulting services, saw a 3% increase in fee revenue growth. This was largely led by an 8% increase in project management fee revenue, mostly from overseas. The workplace management segment showed a 2% growth, compared to 12% a year before. JLL said the slowdown is mostly due to the timing of new contract revenues.
“The decline in higher-margin portfolio services revenue and continued investments in technology and headcount to support future growth, drove the contraction in Work Dynamics adjusted EBITDA margin,” Karen Brennan, chief financial officer at JLL, said during the earnings call.
Ulbrich pointed to significant efficiencies stemming from JLL Technologies, which recently launched an AI-driven platform for capital markets lead generation as well as JLL GPT, a tool that offers conversation-based generative insights to facility operators and clients.
These comments stand against the segment’s $105.2 million loss in earnings before tax, depreciation and amortization. Ulbrich explained that the loss is primarily due to equity losses incurred in two JLLT proptech investments, which raised capital in down rounds, prompting the company to gradually decrease overall total funding while focusing on strategic investments.
