Q3 2020 Jones Lang LaSalle Inc Earnings Call
[laughter].
[music].
This time I would like to welcome everyone to the Jones Lang Lasalle incorporated third quarter earnings Conference call.
For your information This conference call is being recorded.
All lines have been placed on mute to prevent any background noise.
After the speakers remarks, there will be a question and answer session.
He would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question press the pound key thank you.
I would now like to turn the conference over to Kristen Executive manager Executive managing director of Investor Relations. Please go ahead.
Thank you and good morning.
Welcome to <unk> third quarter 2020 conference call Jones Lang Lasalle incorporated.
Earlier. This morning, we issued our earnings release, which is available on the Investor Relations section of our website along with the slide presentation intended to supplement our prepared remarks.
Please visit <unk> IR dot JLL dot com.
During the call, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors.
We include reconciliations of our non-GAAP financial measures to GAAP in our earnings release and presentation.
As a reminder, today's call is being webcast live and recorded a.
A transcript of this conference call will also be posted on our website.
Any statements made about future results and performance plans expectations and objectives are forward looking statements.
Actual results and performance may differ from those forward looking statements as a result of factors discussed in the annual report on form 10-K of the fiscal year ended December 31, 2019 and in other reports filed with the SEC.
The company disclaims any undertaking to publicly update or revise any forward looking statements.
I will now turn the call over to Christian Ulbrich, our President and Chief Executive Officer for opening remarks.
Thank you Chris Lawrence.
Lori and welcome Joe as the quarter unfolds.
The book continues to be a challenging and volatile year I remain impressed by the resilience of our employees across the world.
Bad dedication and success in providing unparalleled. So this two hour flight testing nothing short of remarkable.
Extremely proud and grateful for all that they have stopped.
As cases begin to rise and impact the re entry process to various degrees across the world. We continue to monitor the situation carefully as strictly a tier two big items local and global health facilities.
Help manage the spread of the virus.
The health and wellbeing of our people flying pay communities in May our first priority.
Turning to the market environment.
Noble economic activity, we covered some ground in the third quarter.
By the Pandemics continuing impact on both global and regional real estate fundamentals.
The improving economic indicators remain vulnerable to potentially sections of the virus.
Cases, and hospitalization pricing in many countries around the world.
Near term uncertainty continues to demonstrate full cost into the DVT and longevity of the effects of the pandemic.
The world await a broad base distribution often effective vaccine before we can begin to we gained some semblance of normality.
Total 19 have accelerate that menu updates trends that were prepayment in the commercial real estate industry prior to that does that.
These include experiential workspace to outsource real estate functions and increased focus on employee well be.
As a result of that changes the pandemic has had on how people work.
We both have increased that focused on real estate decisions to ensure that office spaces will choose their future needs.
Turning specifically to the global office leasing market sell our research reported that the activity of the third quarter was down 46% from a year earlier.
Collecting an improvement from Q2, but a continuation of stuff to be lost.
Asia Pacific reported a decrease in activity of only 5% relative to last year, while EMEA and the United States were down, 52% and 55% respectively.
Vacancy rates moved up across all regions in Q3 with a global vacancy rates now recorded a 12.1%, reflecting a 90 basis point increase declines in investment sales decelerated in the third quarter. This global volume was down 44% compared to the same period last.
Yes.
Despite the headwinds associated with the pandemic I'm pleased that our diversified end scale platform generated solid results for the third quarter overall.
Overall third quarter results were at the upper end of our expectations due to in part to stable or onetime items that are not expected to benefit future quarters to the same extent.
Consolidated revenue fell 12% to 4 billion and fee revenue declined 23% to 1.4 billion in local currency.
Adjusted EBITDA of $244 million, we presented a decline of 19% from the prior year, although adjusted EBITDA margin increased 90 basis points to 17.4% in local currency driven.
Driven by cost mitigation initiatives as well as government relief program.
Adjusted net income totaled $156 million for the quarter and adjusted diluted earnings per share totaled two dollar 19 up.
Corporate solutions again demonstrated its ability to withstand challenging market conditions, posting a modest fee revenue decline of 2% for the quarter. So.
Strengths and facility management was slightly offset by declines in EMEA and mobile engineering, which continues to face pandemic related headwinds.
There are pipelines for corporate solutions are stronger than last year, though the pandemic continues to create delays on real estate decisions affecting the closure rate.
As expected our transaction based service line capital markets and leasing the call is notable declines for the quarter as activity remains depressed due to the uncertainty caused by the pandemic.
Despite the overall decline there.
Courage by our performance in some of the less impacted sub sector, such as industrial and logistics, which have shown significant resiliency throughout this year.
Furthermore, we have seen a strong rebuilding of our transaction pipeline since Q2.
These improving pipeline figures offer encouraging indicators for future performance, though near term uncertainty continues to linger.
Find increasingly turn to JLL for our insights on operating the real estate and preparing for post pandemic world.
Our conversations focus first on helping them evaluate their workplace challenges and objectives.
Then we develop long term solution that will enable successful transitions, while preserving that entity to be at Jive, adaptable and resilient as well as productive and profitable.
Fifth prompted the framework for re imagining the workplace to assist in this transition which is focused on four strategic pillars. This.
Business people workplace and commercial real estate.
Our consultancy expertise is a significant demand and cost shale is uniquely capable of providing our clients advisory and execution services as a result of our global reach and full service platform.
Further investments in our technology platform has proven to be a strong differentiator when combining our capabilities in dialogue with our clients as endemic has accelerated technological disruption in the commercial real estate industry.
We continue to expand our collaborations across business lines to respond to clients evolving.
For instance, we were able to expand in existing engagement with a major regional American bank to fight the amended.
The multiple services. This assignment facility management transaction management, and brokerage project and development services occupancy planning and the management and optimization of all leases.
Thanks identified several benefits of consolidating these services into shale l., including our single provider technology platform, our shared services centers the ability to consolidate services and the opportunity to provide a sustainable Korea roadmap for the internal stuff from spring to JLL.
This is just one of the successful outcome of acting as one JLL, which reflects our ability to deliver the full value of JLL across business lines in every client engagement.
And this quarter. It took further action as part of our disciplined cost mitigation program, while simultaneously preserving our ability to maintain prudent investments across our business.
The actions taken to better align our cost structure with current demand.
And we'll discuss this in more detail, but let me assure you that we are positioning the company to drive strong growth and play a leading role in the recovery.
I am confident that JLL will gain market share over the medium and longer term as clients increasingly seek an advisor to global full service capabilities that has the expertise and resources to help them reimagine their workplaces.
Strong earnings and cash flow management led to another standout quarter for cash generation as evidenced by $320 million net debt reduction, resulting in our leverage now below three HF as transaction levels.
Our capital allocation policies anchored in maintaining a strong investment grade balance sheet and ample liquidity to support seasonality economic cycles organic and inorganic investments to drive growth and long term value.
In addition, we remain committed to returning cash to our shareholders.
In the third quarter, we repurchased $25 million worth of shares, bringing our year to date cash return to shareholders to 50 million.
This is slightly ahead of the amount returned and previous year by a dividend.
At least the foreseeable future, we do not expect to resume paying a dividend and instead, we'll return cash to shareholders via share repurchases.
As we move through the fourth quarter and 2021, we will continue to evaluate business and market conditions to determine the appropriate mechanism to return value to shareholders in alignment with our long term strategy.
I will now turn the call over to Karen will provide further detail on the third quarter results.
Thank you Christian over.
Overall, I'm pleased with our third quarter performance given the current environment.
There are three points I will highlight to summarize the corner.
First.
Our consolidated year over year fee revenue percentage decline improved slightly from the second quarter on an organic basis.
Our top and bottom lines reflected meaningful growth in dollar term over the second quarter.
This is an important trend in an unusual year and seasonal revenue growth is at risk of being disrupted.
Second.
We again generated strong cash flow, which we used to repay debt.
Below pre HF acquisition level.
Finally, we are taking action to align our cost structure to the current environment, while continuing to invest in strategic priority that we believe will drive long term value.
Our diversified business continues to be impacted in different ways by the pandemic economic shock.
The most significant impact continues to be on our transactional businesses.
While our pipeline both leasing and capital markets has increased since the end of June.
Uncertainty remains regarding the evolution of the pandemic and its impact that decision, making by corporate occupiers and investors.
Conversely property and facility management remains a growth area driven.
Driven largely by new business won as corporate occupiers and investors seek our services due to increased encoding management standard.
Partially offsetting this topline growth where continued headwinds from our UK normal engineering business.
And the late 2019 divestiture of our Continental Europe property management business.
Moving now to a detailed review of operating performance.
I remind everyone that variances are against the prior year period, and local currency unless otherwise noted.
[music].
Our consolidated adjusted EBITDA margin expanded 90 basis points to 17.4%.
Driven by our ongoing cost management actions and a 240 basis point impact from various government early program globally.
Partially offset by lower transactional revenue.
Consolidated leasing fee revenue declined 30%.
Our investment in the higher gross asset classes of industrial supply chain and logistics continue to provide partial offset to the current softness in the office sector.
We compared favorably with a 46% decline in global office leasing activity.
In the strength of our platform.
Probably clients remain cost conscious and seek to delay significant decisions regarding future real estate strategy.
According to JLL research the U.S. office market has seen an increase in the share of this activity from our new home to 55% in the third quarter from 29% in 2019.
As well as a reduction in aggregate effective ramp of roughly 7% since mid March through both an increase in free rent concessions and a decline in starting ramp relative to pre Kelvin.
Looking ahead, our fourth quarter us gross leasing pipeline increased 16% from three months prior.
We are encouraged by these trends, but emphasize closing rates and timing could be delayed in this environment.
Capital markets fee revenue declined 43%.
Driven by an over 50% decline and investment advisory and debt placement.
However, we did see stability in our multifamily business.
Again, reflecting the resiliency of our diversified platform.
Looking at the global capital market environment markets at scale with access to domestic capital and Asia Pacific in Western Europe outperformed.
While the Americas continuing to experience the most significant decline.
Global investment volume dropped 41%.
Activity has been curtailed as investors adjust valuations and pricing to reflect the current environment.
So we are seeing a tightening of the debt ASCII Brent in some markets.
The industrial and US multifamily sector has been the most resilient today.
Our capital market Twentytwenty pipeline improve modestly across geographies as the quarter progressed.
With pipeline at the end of September up high single digits in percentage terms from the end of June.
We are also encouraged by the recent reemergence of cross border activity.
The longer term trend increased allocations to real estate is very much intact. The significant capital on the sidelines ready to be deployed with highly liquid debt market.
There was no change to our multifamily portfolio loan loss reserve and forbearance activity has been minimal to date.
As Christian mentioned, our corporate solutions business was down 2% in the corner and flat year to date.
We continue to be encouraged about the secular outsourcing trends.
Turning to our real estate services segment mix.
We experienced relatively consistent percentage declines and fee revenue across geographies, but meaningful differences in profitability.
In the Americas strong fee revenue growth and property and facility management was more than offset by material declines in other service line.
We are encouraged by the moderation and the pace of decline and Americas leasing.
And they are reasonably stable rate of organic decline in America capital markets compared with the prior quarter.
Our ongoing cost mitigation actions.
And a 180 basis point benefit from Governor early program drew.
Growth and adjusted EBITDA margin of 20.9% coming.
Compared with 19.3% a year earlier.
In EMEA all service lines reported fee revenue decline.
The most significant decline in capital market due to softness in the office sector.
EMEA leasing.
24% materially outperform the approximate 50% decline in market volumes.
Including a 120 basis point benefit from government early program.
The adjusted EBITDA margin was 2.7% compared with 6.1% a year earlier.
The decline in profitability was driven primarily by lower transactional revenue.
Partially offset by ongoing cost saving actions.
With and our Asia Pacific business.
Equity and facility management, and advisory and consulting fee revenue for reasonably stable, but.
But the transactional businesses were down meaningfully purchase.
Particularly capital markets.
Our underperformance and Asia Pacific Capital markets was largely concentrated in Japan in greater China.
Including a 710 basis point net benefit from government relief program.
The adjusted EBITDA margin was 20.2% compared with 14.2% a year earlier.
The relative stability and profitability, excluding the government relief, but primarily due to ongoing cost mitigation actions.
Turning to Lasalle.
Fee revenue was down 2%.
Advisory fees, which are annuity like in comprised approximately 80% of the south fee revenue this quarter grew 4%.
Higher transaction fees tied to a Japanese secondary offering mostly offset lower incentive fees.
We expect a similar level of incentive fees in the fourth quarter as the third quarter.
Which would be considerably lower than a level around and fourth quarter 2019.
Equity earnings were $8 million, driven mostly by our co investment in a publicly traded route and Japan.
Without the AUM totaled $66 billion at quarter end.
Sequentially up about $1 billion.
Now I'll comment on how we're thinking about our cost structure.
Changes in client need parts.
Particularly in our transactional businesses.
And continued uncertainty about the pace of recovery made it clear that we needed to accelerate certain cost management actions.
Year to date through October we have taken action that will result in over $135 million of annualized fixed cost savings.
Separately our.
Expense management focus delivered over $240 million of non permanent fading over the first nine months of Twentytwenty.
Including about $180 million from cost mitigation actions and $67 million from govern that really.
Roughly half of these non permanent savings were realized in the third quarter.
These non permanent savings represent costs likely to return in future periods as business volumes recover.
Our cost actions are part of an ongoing process to improve our operating efficiency.
We are confident these actions combined with process improvements and leveraging our technology platform.
Will allow us to continue to deliver exceptional value to our clients and not impede our long term growth potential.
Pivoting to our balance sheet.
The sequential improvement in earnings and modest Capex and investment spending drove a $320 million reduction to net debt.
Which ended the quarter at $752 million.
At the end of September leverage was 0.8 times down from 1.1 times at the end of June and just below levels prior to the HF acquisition.
One quarter ahead of our initial expectation.
We have nearly $2.8 billion of liquidity, including approximately $440 million of cash and 85% of capacity available on our $2.75 billion revolver.
We are well positioned to invest in strategies that generate long term profitable growth.
While also returning cash to shareholders.
Looking ahead much will depend on the evolution of the pandemic inclines decision on their go forward real estate strategy and investments.
Long term, we are confident that our continuous efforts to refine and enhance our differentiated global platform positioned JLL to fulfill the evolving needs of our clients capture market share.
And benefit from a long term secular growth tailwind of our industry.
As such we remain focused on achieving our 2025 beyond targets.
And believe we are well positioned to continue to generate significant free cash flow and stakeholder value in the years ahead.
Back to Christian for further remarks.
Thank you Karen.
As we look to the rest of the year a shop, we filed in global GDP growth experienced in the third quarter compared with the second quarter is expected to slow due to combination of unwinding fiscal stimulus and ongoing caution leading to a more prolonged recovery period.
With that backdrop and realizing the difficulty in forecasting the recovery from the Pemex, we expect the fourth quarter operating environment to be relatively consistent with previous quarters on a year over year comparison.
We expect that our higher March which was actually based service lines, we continue to face significant headwinds, which hasn't this positive impact on profitability.
I'd like to take a minute to provide our latest thoughts regarding the future of commercial real estate and specifically the office.
Commercial real estate remains a very valuable asset clouds for Investor alert beneficiary of continued rising allocations OPEC capital as they are keenly aware of the long term fundamentals that position in the industry for gross.
As regard to the future of office.
We knew the transition to a hybrid work environment as the new normal.
One in which employees have a greater sense of empowerment in determining where and how they want to work.
This sustained increase in renal growth opportunities will largely be offset by a combination of job creation and the densification of the office space.
Expanding upon risks, we believe that the transformation to a hybrid growth rates will see a reallocation of office space to able creation collaboration communication and culture.
As I've stated in the second quarter coal, while may look different and be utilized the way. The office will continue to have a vital future specifically as a key driver corporate culture.
Changes strengthen the value proposition of JLL as they are few corporations that cutting guides our clients through this evolution of the workspace on a global scale and.
Information Jello solid third quarter performance is testament to our dedicated employees and our collective commitment to providing world class advice and solutions to our clients regardless of market conditions.
Our results demonstrate the strength of our business model diversified exposure to both business lines, and geography, and our ability to transact across asset classes.
We remain very well positioned to capitalize on not only the anticipated recovery from the pandemic, but the long term macro trends that support robust commercial real estate growth I'm confident JLL the ability to succeed regardless of the circumstances in delivering sustainable long term growth.
And achieving our goal of shaping the future of real estate for better or worse.
Operator, please explain the Q on a pro set.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q and a roster.
Yes.
Your first question comes from the line of Anthony Paolone with JP Morgan Your line is open.
Okay. Thank you and Hello, everybody.
My first question is on the cost savings, particularly with the government part of it how should we think about that rolling off what does that do you have a.
Line of sight on on when those borrowers come back at Us.
Hi, Toni good morning.
As we look at.
Our future expectations around government release, we don't expect that to the significant portion of our expense savings and as we look to the fourth quarter, we estimate approximately 25% in that in third quarter will be available to us.
Okay, and then in the remaining 100 and warranty.
Our non permanent savings can you talk a bit about what was in that range, helping us understand sharp.
How quickly some of those costs could come back. So was that like you knew that naturally has come down in this environment or is it stuff that you specifically on the action or just maybe a little bit more color there.
Sure. So it for 120 million and third quarter and that break down that breaks down roughly 230% from the government relief.
30% from non permanent decisions on compensation and benefits and fixed expense category and 40% from a layoff of fixed and variable.
Okay, and then I think.
You talked about fourth quarter topline working pretty comparable to the third quarter, but your fourth quarter typically is going to seasonally have more volume and you would see margins go up.
Do you or should we think about margins sequentially improving this year.
Yes, so thinking through the revenue story, yes, definitely seasonal impact to our revenues and so we remain cautiously optimistic we saw the pipelines increasing from the end of the second quarter and third quarter and the current environment every day, we're hearing some dish.
No bad news out there as it relates to.
Different government locked down and actions taken to control the virus.
So definitely an area to watch on our top line as it relates to the expenses were going to continue to.
Carefully manage those within that 120 million of non permanent savings, they're different levers, we can pull in flex and respond to what's going on the business environment and so we'll continue to do that being mindful of the fact that we have the government relief going away some of our permanent.
Savings coming through and that remain are remaining bucket, we will manage quite carefully.
Okay, and then last question for me.
Leverage back down to pre HF levels can you talk about strap rytary for for M&A or just investing in general.
Sure It's Christian speaking high.
Listen, we're really determined to deliver value to our shareholders.
And so we are cautiously evaluating different opportunities we have for capital allocation M&A is one of them.
And the opportunities are increasing quite significantly at the moment.
So we will we will continue to stay very close to it.
But for the time being we.
Having seen anything which we would think was worth spending our shareholders money on.
Okay. Thank you.
Your next question comes from the line of Stephen Sheldon with William Blair. Your line is open.
Good morning, Thanks for taking my questions.
One of the asset couple of questions on the more permanent cost mitigation efforts you talked about cost efforts last call. Although I don't believe you quantified it versus.
First as a way to frame how much you stepped up the more permanent fix cost mitigation efforts relative to what you thought two months ago, and then second out of the $135 million on annualized cost reduction how much of an impact and they actually having a full quarter apologies I missed that.
Sure. So we did and we referenced that that $135 million.
Annual.
Savings last year. It was based on actions taken year to date through October and sell a number of.
Those actions did occur in the last 30 days.
As it relates to how much of that actually flowed through the third quarter results at approximately 15% of the total.
15, 15% 15, one five yes, okay. Thanks.
Got it and then a really easy answer pipeline detailing we can talk a markets really appreciate that when asked about the factors behind the improvement is that more driven by the areas that have held up well so far this year like industrial.
Multifamily or is it being driven more by potential stabilization and a weaker area like the office sector.
I think it's both I mean, obviously, we have some asset classes, which are holding up really well.
Mostly coming from what we would call the alternative asset classes, but also obviously on the logistics side, but.
But we have seen also some some strong deals on the office side. Most to you when we talk about Super core buildings, where there is appetite right as we have stated in our previous calls.
A real strong overhang of capital, which is waiting to be invested and so.
When you have stable assets, which are very very strong covenant those assets are actually trading.
Okay got it and then last one for me I know there are a lot of moving pieces on areas of uncertainty looking into 2021, but when you look at it broadly.
Either notably more optimistic or pessimistic over the last few months on a potential recovery in transaction activity next year. There just I guess too many unknowns to gauge it roadmap.
I don't think that our view on 2021 has has changed in any notable way.
At the end of the day.
We need to half a vaccine and we need to have.
CLIA way of treating infected people before something which is closer to what we would call normality is coming back, but we didnt expect that for this year and the fact that we have now a second wave in eastern Europe and the us.
Was kind of in range of our expectation for this year and that second wave would probably go well into next year until spin.
Especially for the more northern parts of the world, but climate is changing again and we are getting some of that.
That was again expected.
I think as I, just said, we have a very very strong appetite for investors to get into real estate and we have a very strong appetite for corporate real estate outsourcing both of those trends will be.
The bath once the environment of the pandemic kind.
Kind of allow small normality. So we are reasonably optimistic and we will weather the storm as long as it will be there.
Great appreciate the color.
Your next question comes from Jade Rahmani with Kate with KBW. Your line is open.
Thank you very much appreciate your taking the questions.
The thing I get from investors a lot as a comparison between tayloe and CB and.
Look at the Companys results in the third quarter stripping out.
The $120 million of non permanent savings and compare jails adjusted EBITDA margin to CB really is what do you think explains.
Carries higher margins you think its business mix do you think its scale or geographic footprint.
Well actually Jay.
We are pretty much focused on shale and less so focused on CBS E book.
You are there to make those comparisons.
Okay, I appreciate that and.
In terms of the permanent cost reductions.
Also have been got getting a lot of questions from some of your largest shareholders. So some insight would be helpful. How.
How much is severance related versus a reduction in fixed operating and administrative costs.
Yeah. The majority is due to reductions in our head count.
And so when you talk about the annual.
Number of permanent cost reductions.
Im sorry, I think that is about $135 million.
In.
Permanent reductions how much how much of that.
Assumes.
An unchanged revenue outlook in another words flat revenues.
Yeah, we're really that's not how we made the decision so as we looked ahead.
We were really focused on.
Two things one orientating around improved cost efficiency for the business and then also looking ahead as it relates to which areas of our business would return to growth.
And different periods of time and so the all the other thing to emphasize around at $135 million number that I quoted is that relates to salary and benefits only and does not incorporate elements is a variable.
Compensation.
Okay.
Could you give some color as to how it breaks out amongst the various business lines, which seabury did on their call on Thursday capital markets leasing occupier outsourcing property management et cetera.
Sure I will do it around the four segments we report so.
50% of it was in EMEA.
40% of it in the Americas.
And then the remainder in APAC and myself.
Okay.
Bigger picture question around the office sector and I would note that Harvard business review, just put out a study about work from anywhere policies and common thing that there's productivity gains related to that what are you hearing from your clients in terms of how they're viewing.
Office lease re signings and generally office lease terms I think last quarter Kristen we set off lease terms on the vaccines were down about 16% indicative of a compression in the average lease duration that.
Occupiers are willing to sign onto just was wondering if you could give an update on that sector.
Well I kick it off and then I'll hand, it over to Kevin.
[music].
I think the large occupiers are lost or you still a bit in a holding pattern, we see our smaller occupiers to be slightly more active but that trend, which I indicated on the last call is still around.
And.
Occupiers.
Obviously up the moment much more concerned around the question.
What is the debt.
Best use of office in the future rather than the question when can they get back into office.
Offices, but many other people have already stated publicly we see a pretty strong trend of the densification.
And.
And.
Determination to make office is not only very inspirational, but also a very very safe place where are the uses of offices are all looking forward to get.
Two and that is something which is.
Needing a lot of advice and an area of our focus for Clos in our in our.
Overall advisory practice and also around the corporate real estate outsourcing.
Karen do you want to add something.
Yes.
There was a statistic that you quoted around that pipeline. After that was for US office leasing that question referred to in our second quarter discussion and so it was interesting that was still pretty early on in to look at what actually transpired third quarter based on that pipeline in terms of the reduction in lease term.
It was down approximately 8.5% compared to that 16% pipeline number and so when we look into the details.
There were actually a handful of larger deals primarily done by tech companies that were larger and longer term.
And duration and they made the commitments in the third quarter less impacted that statistic. So we're still watching it very closely in terms of how that unfolds, but certainly seeing a higher probability higher.
Higher frequency of renewals over ordering new deals and shorter terms overall.
Thank you and I was wondering are there any exact.
Executives from the various business lines, specifically capital and leasing who might be able to provide mark.
Market update as to what they are seeing.
We don't have anyone joining the call specifically on this morning with us, but please feel free to ask any questions and we'll we'll answer the best we can.
Yes, if you could just provide some color as to.
Specific capital market side, you are seeing.
In terms of private equity and large real estate asset managers and their appetite.
I think that various market participants have noted some increase in transaction pipelines on the very small.
Deal front guts curious if there's any update that you could provide there.
Well on the capital market side, sorry noted earlier, we have a very large sum off.
Capital waiting to be invested.
For the time being that capital is focused on the Super core deals and in some of the more specific asset classes and the transactions happening, mostly either domestically or by institutions, who have people on the ground in the fall.
Market.
Because there is still a strong desire to have personal inspections before they sign up for those deals. This will continue as long. This pandemic is kind of.
Impacting travel.
But we we expect and that maybe a bit counter intuitive, but we expect the capital markets business.
To actually come back earlier and stronger than the leasing business because of that massive capital overhang, which is waiting to be invested.
On the corporate side.
You know pick already patients opt a moment.
Relatively.
Cautious to make decisions on outsourcing and that is not because they don't believe in it they very much believe in it but it just takes a lot of.
Physical into action people.
Looking into into space and taking.
A lot of granular.
Analysis before those contracts are being signed interestingly enough our own pipeline is significantly stronger at the moment than it was 12 months ago, which is just supporting that underlying strong trend towards about outsourcing we are incredibly well positioned for.
Thank you for taking the questions.
Sure.
Your next question comes from the line of Patrick O'shaughnessy with Raymond James Your line is open.
Hey, good morning.
So regarding working from home, whether its import employees, primarily working from home or having some sort of a hybrid approach how.
Does that vary for companies based on regions.
Would you expect worked from home to be as big of a compare.
Component going forward in EMEA and Asia as you were in the Americas.
I think that depends very much where you are in the Americas and Asia and in Europe.
I think what is generally true around the globe employees do want to get back to the office they do enjoy.
The vibrancy the exchange with their colleagues and and all.
Also two degree the ability to hopper CLIA difference between.
Working hours and the private hours.
The big box, if what kind of working in via what kind of office environment do they have to they do need to take public transportation to get to the office to they have to queue up at an elevator in a high rise building.
Can they take their private costs and have a pocket case right next to their office space for lease up many many different factors. So if you put that into into the mix. It is probably fair to say if I were to generalize now that you will see less working from home in Asia, especially.
In the big cities of China, and Japan, and other dairy.
Crowded places.
But maybe not in Australia, where people.
We'll have the opportunity also to.
Q.
Work from home.
And do.
The reason for the Asia piece is you also have to look at their living environment.
If you have if you have very.
Spacious.
Abilities to work from home that creates a different working from home environment than when you are sure.
Having your apartment in downtown New York and so they have so many factors playing into that.
I think what is what is safe to say is that we will continue to see hybrid between working from home and coming to the office.
And and that if something companies have to get there.
Arms around how they can really state as productive in that hybrid model than they were before.
Got it. Thank you and then question about dealer sell business.
It was down about $2 billion year over year I think your commentary was that was a trivial to valuations and FX, but.
Underlying our flows looking in all the cell business and how competitively do you think that businesses.
Faring relative to other major commercial real estate asset managers.
Now, we've actually experienced and.
Continued capital flows into the wholesale business within our release, we identified the 2 billion in the third quarter that $2 billion that was raised.
And so it's certainly a slower pace than we've experienced in the last couple of years, where we had really strong momentum with analysts out business, but it's continuing nonetheless, and it's creating Christian mentioned earlier Theres still.
Very strong interest in capital funds to real estate overall and significant dry powder available.
To deploy and Arthur and.
Certain segments that are remaining quite active in the current environment.
Great. Thank you.
Your next question comes from the line of Anthony Paolone with JP Morgan Your line is open.
Hi, Thanks, just had a couple of follow ons. One is with regards to market share. It seems like you're in some of your peers have talked about picking up some share here, where do you think that's coming out of.
Yeah.
Smaller regional names or other.
Folks like worst market you are coming from.
Well one of the reasons for picking up market share is that.
The most active.
Companies still doing deals are coming from the big Tech sector and.
And those companies.
Tend to be advice by the likes of us.
And so that helps.
The other.
The reason for that is that.
We and some of our competitors have invested very heavily in technology, which allows us to serve our clients even in a in.
Work from home environment.
Seamlessly and that obviously helps us now to to win a disproportionate market share in this current environment.
Okay. That's helpful and then just.
Another question is with regards to the outsourcing business.
If we look ahead you do you think there's a point in time, where companies are going to step back and say, okay. We're now going to look to save money and either.
You know look for ways to cut footprints in fees and if so how do you think about the offsets on a contract by contract basis that Youre think you can.
Used to kind of protect that revenue stream.
Well the lifting.
Corporate real estate outsourcing has evolved very much from the times, where it was only about reducing cost too.
Today's world with very much about increasing the quality the experienced the employees having to work space get best practice in as quickly as possible.
Reducing cost is very often.
Additional.
Last but depending on what industry you are in.
In some industries.
The point about reducing costs is just less relevant for them.
Real estate is a very important factor to retain and attract best talent.
And for that there's a real need for best practice from around the world and that is why.
We are having such big successes in that part of our business.
Sure Okay.
Okay.
Sorry, just going to add as occupiers evaluate the real estate cost not everyone. Right now is as within an outsourcing model into will also benefit from first everything generation outsourcing needs.
New business win.
Okay. So you don't think that there's this is something to look out and anticipates.
More headwinds as companies trying to get through the through the pandemic you feel like there's other levers to keep that growth.
Going.
Yeah right now the trends are showing us good momentum I will continue to watch carefully and.
Nothing at the moment.
Okay. Thank you.
There are no further questions at this time I will now turn the call back over to management for closing remarks.
Thank you operator, there's no further questions, we will close todays call on behalf of the entire JLL team. We thank you all for participating on the call. This morning.
And I look forward to speaking with you again following the fourth quarter.
Safe and healthy.
This concludes today's conference call you may now disconnect.
[music].