Dive Brief:
- JLL posted $5.88 billion in revenue for the fourth quarter of 2023, marking a 4% increase year over year. The growth was primarily fueled by strong performance in its Work Dynamics division and double-digit growth in its property management segment, which offset yearly leasing declines.
- Revenue in the firm’s Work Dynamics business increased 9% year over year to $3.97 billion in the fourth quarter and rose 7% year over year to $14.1 billion for the full year. Fee revenue in its property management business climbed 12% year over year to $155.2 million in the fourth quarter and clocked a 10% year-over-year rise to $551.7 million for the full year.
- Fee revenue for JLL’s leasing business dropped 4% year over year to $709.3 million in the fourth quarter and 15% year over year to $2.3 billion for the full year. In its earnings release, the company attributed the leasing decline to a reduced average deal size across nearly all asset types, especially in the office sector. “Occupiers continue to take a cautious approach, but office demand is stabilizing as many companies are making progress on their return-to-office initiatives,” JLL President and CEO Christian Ulbrich said during a Feb. 27 earnings call.
Dive Insight:
Office leasing volumes in the U.S. rose 9% year over year in the fourth quarter, with a continued concentration of demand on “premium-quality space,” the company reported in its earning presentation. Meanwhile, the sublease vacancy rate, previously high, has started to decline.
On the earnings call, JLL CFO Karen Brennan said the sustained leasing demand for high-quality assets is “favorable for our business mix.” Although large lease transactions are starting to reappear in the market, their impact has not been significant thus far, Ulbrich said on the call.
Fee revenue for JLL’s workplace management solutions, within its Work Dynamics business, grew 17% to $239.9 million in the fourth quarter and rose 7% year over year to $806 million for the full year. JLL attributed the revenue increase to recent global client wins and a ramp-up of mandate expansions in the second half of the year.
“The new workplace management contracts from Fortune 100 companies we secured in the early part of 2023, will continue to support solid momentum through the first half of 2024, though at a more moderate pace than the latter part of 2023,” Brennan said, pointing to the company’s continued focus on securing additional project management mandates.
“However, the slower economic and leasing backdrop may dampen the near-term growth rates,” Brennan noted. Gross leasing volumes in the North American industrial sector declined, with activity remaining subdued globally in the fourth quarter, JLL reported in its earnings presentation.
Ulbrich expressed a cautiously optimistic outlook for 2024 as “we are beginning to see green shoots emerge in the commercial real estate market,” with stabilizing interest rates and moderating inflation setting the stage for rate cuts in the second half of the year. Ulbrich added that he believes growing investor interest in high-quality assets will drive a modest recovery in transaction activity across North America.
Growth in JLL’s property management fee revenue for the fourth quarter and the full year were driven largely by portfolio expansions in the Americas, Brennan said. Property management fee revenue growth partially offset the lower leasing fee revenue in 2023.
JLL also reported a 14% year-over-year increase to $65.5 million in its technologies segment for the fourth quarter and a 15% year-over-year growth to $246.4 million for the full year. JLL Technologies’ fee revenue grew 14% in the fourth quarter, on top of the 21% year-over-year organic growth in the prior-year quarter. The segment’s fee revenue for the full year increased 16%, compared with a 23% increase in 2022.
The firm reported $306.4 million in adjusted earnings before interest, tax, depreciation and amortization in the fourth quarter, reflecting a 9% year-over-year decrease. For the full year, adjusted EBITDA declined 41% from $1.25 billion to 736.7 million.
