Dive Brief:
- JLL recorded $5.1 billion in revenue in the first quarter of 2024, a 9% increase year over year, driven by growth in its Work Dynamics business, which manages workspaces in a variety of business sectors, and its Markets Advisory division’s property management segment, which operates in office, industrial, retail, logistics, multifamily housing and specialty properties.
- Revenue in the Work Dynamics business rose 11% year over year in the first quarter, to $3.64 billion, fueled by its workplace management segment, where revenue grew 15% year over year, to $2.9 billion, the firm reported in an earnings release Monday. Within its Markets Advisory business, property management revenue grew 7% year over year, to $429.7 million, attributable to portfolio expansions across the U.S, UK and Canada, and incremental revenue associated with pass-through expenses, per the release. Leasing revenue rose 2% to $497.3 million.
- “Workplace management continues to see solid new sales trends, alongside strong contract renewal and expansion rates,” JLL CFO Karen Brennan said during an earnings call Monday. Large client wins from 2023 will “continue to support solid momentum through the first half of 2024,” Brennan added. Brennan noted, however, that a soft leasing environment in late 2023 and economic headwinds may dampen near-term growth rates.
Dive Insight:
Revenues from JLL’s resilient businesses — which it defines as workplace management within Work Dynamics, property management within Markets Advisory, value and risk advisory and loan servicing within Capital Markets, JLL Technologies and advisory fees within LaSalle — collectively rose 12%, JLL said. “The first quarter reflects the strength and diversity of our platforms as well as our continued focus on improving operating efficiency,” Brennan said, noting that the 12% increase in resilient revenues was consistent with the pace in the fourth quarter of 2023, led by growth in workplace management and property management.
The increase in Work Dynamics revenue was primarily driven by the revenue growth of workplace management; the absence of Tetris contract losses, which were recognized in 2023; and ongoing cost management, Brennan said.
Revenue in JLL’s Markets Advisory business increased 5% year over year, to $950.1 million, per the earnings release. Brennan said this growth was mainly driven by property management, with portfolio expansions in the Americas and the UK contributing to the 8% growth in property management revenue in local dollars after declines in the previous five quarters.
U.S. office leasing volumes were up 14% in the first quarter, with many occupiers across the country prioritizing space upgrades, according to the commercial real estate services firm’s earnings presentation. In the earnings call Monday, JLL President and CEO Christian Ulbrich attributed the increase in demand to occupiers continuing to “upgrade to premium-quality, sustainable space that improves the employee experience.”
While gross leasing figures for North America and Europe are at their lowest levels in recent years, “occupier demand for the limited amount of high-quality, sustainable space is expected to drive an uptick in activity later this year,” according to JLL’s earnings presentation.
The global office vacancy rate increased to 16.5% in the first quarter, compared with 16.2% in the fourth quarter of 2023 and 15.3% a year ago. North America is driving the change, the company said in its earnings presentation, as “the market continues to process leases with lower square foot requirements.” On the call, Ulbrich said tenants are seeking 10% to 15% less space.
In the industrial sector, global leasing activity remained subdued in the first quarter, driven by declines in volumes across North America and Europe, JLL said. On the call, Ulbrich attributed the decline to a slowdown in lease decision-making amid geopolitical and economic uncertainty. U.S. occupiers are continuing to navigate a record amount of space leased on the heels of the COVID-19 pandemic, Ulbrich said, noting that long-term fundamentals in the industrial sector remain strong, supported by “nearshoring requirements and demand for high-quality, sustainable space that allows for technology integration and automation.”
Revenue for JLL Technologies dropped 12% year over year, to $53.9 million. Brennan attributed the revenue decline in its property technology segment to lower bookings in the second half of 2023 and “delays in client decisions.” Lower sales and marketing spending for the division in the latter part of 2023, along with delays in client decisions, are likely to continue pressuring near-term growth, Brennan said.
However, JLL Technologies’ adjusted earnings before interest, taxes, depreciation and amortization loss shrank to $5.1 million in the first quarter, marking a 72% improvement from the previous year. The company attributed the improved adjusted EBITDA to reductions in certain expenses associated with cost management actions and incremental operating efficiency gains.
“We aim to strike an appropriate balance between investing to drive growth and progressing to sustained profitability within the segment,” Brennan said. “The combination of the revenue pressures and timing of expenses, including carried interest accruals, may adversely impact JLL Technologies’ profitability in the near term.”
