JLL Returns To Profitability After Cost-Cutting Campaign
JLL turned a $66.1M profit in the first three months of 2024, driven by a jump in revenue and the effects of layoffs and other cost-reduction measures.
The Chicago-based brokerage reported $5.1B in revenues for the quarter, representing a 9% increase compared to the same period a year ago, according to a release. In Q1 2023, JLL posted a $9.2M net loss on $4.7B of revenue.
The firm grew its revenue year-over-year in leasing, investment sales and property management. The strong result substantially beat analyst expectations, but the recent rise in inflation muted optimism for the rest of the year.
"These green shoots encapsulate investors’ willingness to deploy capital when market conditions warrant," JLL CEO Christian Ulbrich said on an earnings call Monday. "However, once inflation data came in higher than expected and the hope for several interest rate cuts later this year diminished, real estate capital markets became much quieter again."
The earnings boost was driven by the combination of revenue increases and the company's "cost management actions," Ulbrich said. JLL went through multiple rounds of layoffs last year as it worked to shrink its expenses.
Its property management arm increased revenues by 15% compared to the same quarter a year ago, while its capital markets revenues rose 6% despite hesitations linked to interest rates.
Expectations for the brokerage’s performance had been muted, but JLL saw improvements in all its business lines, including leasing and capital markets. Earnings per share came in at $1.78, far higher than the 84 cents predicted prior to the earnings report. JLL's stock price rose 3% in Monday trading.
Globally, however, apprehension over macroeconomic trends continues to delay deals, particularly leasing. Deal sizes are also shrinking outside of the U.S., pointing to a potentially wobbly path ahead for the commercial real estate sector as a whole.
“Economic uncertainty has delayed commercial real estate decision making, particularly for large-scale leasing actions where JLL has a greater presence,” the brokerage's earnings release says.
While leasing revenue in the U.S. was up 14% year-over-year, the office leasing market hasn't returned to pre-pandemic levels, with leases being signed in 2024 averaging 7.8 years, down from 8.6 years in 2019, JLL Chief Financial Officer Karen Brennan told investors.
"We didn't see much movement from what we had last year," she said. "We expect that will continue while the market works through some of that space overall."
Brennan said she anticipates there will be more activity in 2024 than last year, telling investors the company is "cautiously optimistic for a pickup in transaction activity in the latter part of the year."
Ulbrich also told Bloomberg after the earnings call that there may be more deals this year, regardless of "remarkable" interest rate sensitivity in the U.S. or when interest rates in the U.S. finally come down.
"People will have to transact at some point, and whether interest rates are 25 basis points higher or lower shouldn’t make a difference if you have the right assets to deal with," he said. "Hopefully, people will come to terms that interest rate cuts will only come later this year."
In the meantime, JLL will be on the hunt for acquisitions or mergers, he said. The company repurchased $20.1M in shares during the quarter and has more than $1B available to buy back more shares.
"We are always looking for something which beats the alternative of buying back our shares," Ulbrich said.
