Leasing surge leads JLL to Q1 earnings boost, despite lagging investment sales

Increased investor interest in a shrinking number of properties for sale led to fewer deals getting done, CEO Christian Ulbrich said

TRD NATIONAL /
May.May 07, 2019 12:00 PM
JLL CEO Christian Ulrich and CFO Stephanie Plaines, and their headquarters at the Aon Center (Credit: JLL and iStock)

JLL CEO Christian Ulrich and CFO Stephanie Plaines, and their headquarters at the Aon Center (Credit: JLL and iStock)

Breakneck leasing activity in the Americas helped JLL reach a sizable boost in earnings during the first quarter, making up for sharply lower revenue from investment sales compared to last year.

The real estate services giant reported $461 million in revenue from global leasing fees last quarter, a 22 percent jump year over year, the company reported ahead of its earnings call Tuesday. The growth came entirely from its Americas division, which accounts for more than 80 percent of JLL’s leasing revenue.

JLL CEO Christian Ulbrich chalked up the company’s “excellent performance” in leasing to a 2 percent hike in gross leasing volume across 96 global markets, led by a 6 percent rise in total leasing during the Americas. The firm projects that growth to flatten out during the course of the year.

“The global office vacancy rate fell … to the lowest level of the cycle despite elevated levels of new delivery,” Ulbrich said. “On the whole, this is a very decent environment for commercial real estate.”

The company so far this year was named lead leasing agent for properties including the 813,000-square-foot “The Curtis” mixed-use building in Philadelphia and a 7 million-square-foot industrial park planned by Northpoint Development in the St. Louis suburb of Pontoon Beach, Illinois.

But the company’s 11 percent boost in total consolidated revenue was tempered by a hefty decline in earnings from its capital markets division, which notched less than $194 million in revenue last quarter compared to nearly $233 million during the same period last year. The step-down was especially steep in the company’s Europe, Middle East and Africa division, which saw revenue fall by 23 percent year over year.

The company’s lower investment sales revenue was due in part to deals taking longer to close, said Stephanie Plaines, who took over as JLL’s chief financial officer in March.

Ulbrich added a relative shortage of deals on the table has given sellers “very high expectations,” considering the growing pool of investors looking for real estate.

“We’re obviously in a pretty long-going cycle, and sellers are very hesitant to sell great properties, and buyers are hesitant to overpay,” Ulbrich said. “We have a massive capital overhang trying to get into the market, but there’s not enough product being offered.”

The firm’s capital markets wing capitalized on a series of high-profile debt deals this year, including brokering a $664 million construction loan for the coming supertall at 9 DeKalb Avenue in Brooklyn and a $215 million refinancing of Tower 28 in Long Island City, the tallest residential tower in Queens.

JLL’s LaSalle investment management wing raised about $1.8 billion in private equity capital last quarter, ballooning its assets under management to a $64.3 billion value.

Earlier this year, JLL announced a tentative deal to acquire Dallas-based HFF for about $2 billion in cash and stocks. The merger is expected to close in the fall.

Ulbrich said at the time he hoped the acquisition would “establish JLL as a leading capital markets intermediary.” In New York, HFF tallied the fourth-most investment sales by volume of any commercial brokerage last year, brokering 15 deals worth $3.3 billion.

Continuing a theme from JLL’s fourth-quarter earnings call earlier this year, Ulbrich said he expects the explosive growth of the flex office sector to keep the firm’s leasing business on a steady upward path.

“Co-working is something that is here to stay … and we expect there will be a pretty fierce price competition coming into that market,” Ulbrich said. “Our own positioning is especially strong, and we expect to take a higher share of that volume compared to our competitors.”

The price of JLL stock was down about 4 percent Tuesday in early trading after the earnings numbers were released.


Related Articles

arrow_forward_ios
Liberty Mutual at 27201 Bella Vista in Warrenville (Google Maps)

Chicago’s Q3 suburban office market hits highest vacancy in decade

Chicago’s Q3 suburban office market hits highest vacancy in decade
Mayor Lori Lightfoot (Getty, iStock)

Lightfoot to propose $94M property tax hike

Lightfoot to propose $94M property tax hike
Brian Whiting, CEO of Telos Group, and the Old Post Office (Credit: Google Maps)

Lonely at the top: 601W Cos. opens Old Post Office rooftop park in WFH world

Lonely at the top: 601W Cos. opens Old Post Office rooftop park in WFH world
Cars.com CEO Alex Vetter and the building (Credit: Google Maps)

Cars.com wants to shrink its space at West Loop HQ

Cars.com wants to shrink its space at West Loop HQ
Thor Equities’ Joseph Sitt and Palmer House Hilton at 17 East Monroe Street (Google Maps)

Thor’s Palmer House hit with $300M+ foreclosure suit

Thor’s Palmer House hit with $300M+ foreclosure suit
Sandeep Mathrani, 1155 W. Fulton and 1114 W. Fulton (Credit: Google Maps and John Sciulli/Getty Images for Bloomingdale's)

Exit strategy: WeWork eats Fulton Market leases

Exit strategy: WeWork eats Fulton Market leases
Cook County Assessor Fritz Kaegi and downtown Evanston

Cook County landlords get bad news about 2020 taxes

Cook County landlords get bad news about 2020 taxes
Joe Sitt and 905 W. Fulton Market (Credit: Thor Equities)

Thor Equities’ big bet on Fulton Market is paying off

Thor Equities’ big bet on Fulton Market is paying off
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...