JLL’s U.S. leasing revenue grew 39% in the third quarter, leading a quarter in which the Chicago-based commercial real estate services firm earned $6.85 a diluted share, which it called a record, and said it would buy back another $500 million of stock. Revenue rose 12% to $7.3 billion, according to the earnings release JLL filed Oct. 28.
The results matter beyond JLL’s shareholders because the firm reports its own revenue against market-wide volumes compiled by JLL Research. Those comparisons put numbers on a leasing and sales recovery that has been uneven by property type, and they show the company outpacing the market in each case it disclosed.
Leasing: industrial and data centers lead, office edges up
Leasing Advisory revenue rose 27% to $941.8 million, accelerating from earlier in the year. JLL said the gain came mostly from the U.S., “most notably in the industrial, office and data center asset classes,” and attributed the broad growth to “a meaningful uptick in average deal size.” U.S. leasing revenue rose 39%, while parts of Europe and Asia Pacific were soft.
The firm’s market data show how different the property types look. JLL Research counted U.S. industrial leasing volume up 38% from a year earlier; JLL’s U.S. industrial leasing revenue rose 56%. U.S. office leasing volume, by contrast, rose just 2%, while JLL’s U.S. office leasing revenue climbed 18%. Globally, office leasing revenue rose 9% against market volume growth of 5%.
That picture differs from the one CBRE gave on Oct. 22. CBRE’s third-quarter report showed its U.S. office leasing revenue slipping 2% even as U.S. property sales revenue jumped 37%. The two firms do not measure their businesses identically, so the gap is better read as a sign that office leasing gains are concentrated in particular deals and firms than as a clean comparison; that is our reading, not either company’s.
Segment Adjusted EBITDA for leasing rose 47% to $201.8 million. JLL said larger average deals pushed it into higher commission tiers earlier in the year, raising its commission expense along with revenue.
Capital markets: sales outrun the market
Capital Markets Services revenue rose 20% in dollars and 21% in local currency to $736.8 million, with growth across nearly all major geographies and sectors, led by the U.S. and Japan. Investment sales revenue grew 33% globally and 34% in the U.S., compared with market-wide growth in sales volume of 9% globally and 11% in the U.S. that JLL cited.
Debt advisory revenue rose 13% and equity advisory 39%. On a two-year basis, JLL said, investment sales are up 55%, debt advisory 61% and equity advisory 126%. Segment Adjusted EBITDA rose 46% to $131.1 million, helped by $6.8 million of lower loan-related expenses, including the absence of a loan loss recorded a year earlier.
The steadier businesses
Real Estate Management Services, the outsourcing and facilities business that makes up most of JLL’s revenue, grew 9% to $5.5 billion. Workplace Management rose 10% to $3.75 billion and Project Management 14% to $1.1 billion, led by the U.S. and India. Property Management revenue was roughly flat at $464.4 million.
Investment Management, home to LaSalle Investment Management, was the one decliner. Revenue fell 9% to $105.2 million as incentive and transaction fees dropped 44% to $12.6 million. Assets under management ended the quarter at $88.4 billion, up from $86.8 billion at the end of June.
Profit, cash and buybacks
Net income attributable to common shareholders rose 44% to $319.8 million. Adjusted diluted EPS was $6.76, up 50%, and Adjusted EBITDA rose 33% to $460.2 million. For the first nine months, diluted EPS was $14.73, up from $8.07.
“JLL’s record third quarter at the top and bottom line reflected our track record of converting growth into margin-accretive profit,” chief executive Christian Ulbrich said. He said the company had “raised our full-year Adjusted EPS target range, reflecting 37% growth at the midpoint,” and that the “imminent $500 million accelerated share repurchase underscores our conviction in our long-term strategy.” The release did not restate the new range itself.
JLL bought back $141.7 million of stock in the third quarter and $551.7 million through September. It said the new accelerated repurchase will bring full-year buybacks to more than $1 billion, and $2.5 billion remained authorized at Sept. 30. Net debt fell to $858.7 million from $1.19 billion at the end of June, for a net leverage ratio of 0.5 times, and corporate liquidity was $3.57 billion.
Quarterly operating cash flow was $609.7 million, slightly below a year earlier, and free cash flow was $556 million. For the nine months, free cash flow rose to $174.2 million from $43.9 million.
The quarter also follows an organizational change in JLL’s largest market: earlier this month the company created a U.S. country CEO role and named Mark Gibson to it. More earnings coverage is in our Commercial Real Estate section.
