Q2 2021 Jones Lang LaSalle Inc Earnings Call

Pat.

We would like to withdraw your question press the pound key.

Thank you.

I would now like to turn the conference over to Chris Stent Executive managing director of Investor Relations. Please go ahead.

Thank you and good morning.

Welcome to our second quarter of 2021 conference call for 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 IR that J L L 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 non-GAAP financial measures to GAAP in our earnings release and presentation.

As a reminder, today's call is being webcast live and recorded.

The 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, 2020 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.

Hello, and welcome to all of you joining of while the second quarter earnings call.

Our exceptional performance this quarter amongst the broader market recovery demonstrates the strength of our global platform. The resilient business model and continued operational and strategic execution of our long term debt.

However, we continue to advance our sustainability agenda and development of our related market heating product capability.

Our most recent responsible real estate survey, we have from debt, reducing the environmental impact is of key priority across the industry proposed UNITAID occupiers and investors.

We take price in our 2020 channel our global sustainability report, which highlights our latest initiatives, including our commitment to net zero carbon emissions by 2040 across all areas of operations, including client management globally as well as our need to be fully equipped to help.

Clients in their own journey.

The change the name of our corporate solutions group to work dynamics to more clearly reflect that our technology enabled and wide ranging services help our clients enhance the productivity of the people as employers are increasingly empowered to make the decisions on how and where they book.

Our suite of solutions also benefit the performance of the portfolios and help them realize the sustainability and broader ESG goals.

I'd like to express my gratitude for all of our employees continue to work diligently and provide outstanding service to our clients and communities.

The pace of activity increase choppy throughout the first half of the year, leaving many of our teams obex.

The pilot efforts.

Ongoing challenges and uncertainties and body EBIT of strong culture of teamwork and collaboration Akshay L. L.

Let me briefly touch on the future of office subject being closely analyzed by our best in class research team.

While the actual long lasting effects of the pandemic remain unclear back couple of key points I would like to highlight.

The first is that the office will remain the center of the work ecosystem.

Belief of the pandemic has reinforced the importance of rolled up the office can play and fostering a culture of waiting each company's unique culture in the basin.

The second point is that employers are increasingly expecting if not demanding additional flexibility and the ability to choose where and how they work.

Leading to the durable presence of hybrid work.

These demands have also been coupled with health wellness and safety, becoming top of line for employees.

As a result employers are now increasingly evaluating holistic approaches to address these demands, which ultimately acquire consider both investment into existing and new office space.

The matching workspaces, which serve to not only attract and retain employees, but also enhance the sales of safety and wellbeing of becoming a new currency in the war for talent.

This leads me to conclude that the initial net impact on future space demand and footprint for investment grade office building will be relatively minor.

We believe that the combination of growth from job creation. The Densification and the addition of collaboration space were broadly offset any anticipated reduction of workspace as companies continue to embrace hybrid growth model.

Furthermore, we believe that given the world class capabilities of our project management business.

We're well positioned to benefit from accelerated demand for the services as we assist our clients as they embark upon this transformation.

The increasing complexity required to create these global integrated workplace transformation.

In terms of demand more technology across not only of the operations of the building, but the entire ecosystem.

We are encouraged that our significant investment in technology, and our desire to provide clients access to leading edge technology results in a significant competitive advantage.

The power of data leading to better decision, making will allow <unk> to be in the center of this ecosystem.

Continue to work diligently with our clients as the strategic advisor as they transition to the new post pandemic normal and assist in the development of hybrid growth model centered around employee satisfaction and productivity.

Turning to the market environment.

Action activity saw sharp recoveries across the world.

The <unk> research reports of the tentative signs of improvement in global office leasing activity witnessed in the first quarter have solidified and continued throughout the second quarter.

Quarterly global leasing volumes were up 44% higher than a year ago. However, they are still 36% below Q2.2019.

Across all of the 3 regions quarterly lithium volumes are below where they were in 2019 of the U S. The hardest hit on a 44% decline, while Europe and Asia Pacific record of declines of 32% and 21% respectively.

Our current frankly conditions persist in most markets, we are seeing a noticeable stabilization of headline rates.

The recovery across capital markets broadened in the second quarter, the global transaction volumes locking of 103% increase on the truck a year ago and of 2% increase from Q2.2019.

Each region posted significant year on year gains of transaction volumes with activities, particularly robust end markets was sectorial diversity of opportunities of scale.

Allocations to the real estate sector, our strengths in may as lend the diversity of risk appetite trend towards pre pandemic normalcy.

Assuming no major setback in the global fight against COVID-19 the.

The positive trends recorded in the second quarter are anticipated to carry on in the second half fueling continued recovery across the commercial real estate industry and global macro economy.

With that backdrop I'm pleased to turn the attention toward our second quarter performance.

Our exceptional results reflect the continued momentum across our business that we have witnessed since the depths of the pandemic.

We delivered excellent second quarter top and bottom line performance.

<unk> operating margin and continued to execute on our long term strategy.

Consolidated revenue rose, 18% to $4.5 billion and fee revenue increased 41% to $1.8 billion in local currency.

Adjusted EBITDA of $332 million represented an increase of over 200% from the prior year with adjusted.

Adjusted EBITDA margin, increasing to 18 in the half percentage from 8.3.

3% in local currency driven by the significant recovery of our transaction based service line cost mitigation actions taken in 2020 realization of growth initiatives and select discrete items.

Adjusted net income totaled $221 million for the quarter and adjusted diluted earnings per share totaled $4 in 'twenty.

Our transaction based service lines recorded significant growth across all 3 regions leasing benefited from strong demand in the industrial and life Sciences sector, while the industrial and multifamily debt origination were key drivers for capital market outperformance.

We recently passed the 2 year anniversary of our acquisition of HFF and are pleased of the acquisition of have delivered on both our strategic and financial ambitions. Despite the pandemic.

1 of the key secular trends driving growth in our industry is increasing capital flows to real estate.

The addition of the HFF platform.

The market leading position in the U S allowed us to not only become the top 2 player in the U S capital markets business, but also cement the strength of our global platform to force greater price for the world lots of investors.

I also would like to provide an update of the financial synergies we projected on the HFF acquisition transaction was announced in 2019 of.

The year ago, we achieved our gross 12 months synergy target of $28 million. Despite unforeseen pandemic headwinds, having just passed the 2 year anniversary of the acquisition I'm pleased to say that we have achieved our target of $60 million.

Of synergies on a run rate basis, which we had originally predicted within the 2 to 3 year timeframe.

The strong recovery in our transaction based service lines were complemented by solid growth in our property and facility management and advisory consulting and other businesses.

The resilience of the service lines continues to benefit throughout the course of this pandemic and we are encouraged by the overall trends supporting that growth.

Over the course of the quarter, we continued to invest to drive future growth focusing on investments that strengthen and differentiate our market leadership positioning gel for long term growth. For example, we announced the launch of sustainable operations for now the real estate industry's only end to end of <unk>.

The thing ability product offering developed to help come companies configured launch and managed portfolio wide sustainability programs.

During the quarter, we invested approximately $84 million NGL out of technology investments, bringing the year to date amount to $109 million.

The continued investment through our J L. L technologies business further our strategic objectives to be an industry leader in technology innovation.

We also have resumed share repurchases, returning approximately $100 million to shareholders through July.

Looking ahead, given the strong momentum in the business successful integration of HFF and increased visibility into the post COVID-19 future, we're increasing our 2021 adjusted EBITDA margin target to 16% to 19%.

Up from 14% to 16% previously.

I will now turn the call over to your current Brendan who will provide further detail on the results for the quarter and our outlook for the rest of the year.

Thank you Christian.

Our strong results reflect continued disciplined execution as well as the impact of our investments in strategic initiatives over the past several years.

We are encouraged by the broad recovery in our industry and business, particularly capital markets and leasing.

And the fact that fee revenue and profitability surpassed 2019 levels and of certain service lines by region.

The recovery has exceeded our expectations to date and we are optimistic about the second half of the year. The significant uncertainty remains around the evolution of the pandemic and global economy.

Our balance sheet provides a strong footing to confidently execute our task force and build upon our operating momentum.

Prior to providing a detailed review of our operating performance.

And everyone that variances are against the prior year period, and the local currency unless otherwise noted.

Our overall real estate services fee revenue increased 43% in the second quarter with all regions generating double digit growth due in part to lapping COVID-19 impacted results from the prior year.

Of note capital markets fee revenue increased 110% inclusive of the investments South advisory of 105% GAAP.

The advisory up 157% and loan servicing revenue up 26%.

Reflecting the market recovery as well as the strength and breadth of our global platform.

Our leasing fee revenue grew 69% and was the only down 3% from second quarter 2019.

The real estate services adjusted EBITDA margin of 17, 2% compares with 6.6% of your earlier.

The benefits from our cost reduction actions taken in 2020, and the strong execution of recovery within our transaction based revenue streams were key drivers of our strong margin performance.

Approximately $16 million of noncash valuation increases to investments by channel now technologies and early stage prop tech companies and of $6 million multifamily loan loss reserve release contributed approximately 130 basis points to the real estate services adjusted EBITDA margin.

It is important to note debt second quarter margins clearly benefited from an expense base that is not yet fully normalized particularly the variable components such as T. Any but also fixed compensation costs.

In the near term, we intend to accelerate hiring for critical positions to execute on growth opportunities that we see ahead.

Turning to the Americas fee revenue grew year over year across all service lines, most of markedly in capital markets and leasing.

Within Americas capital markets fee revenue from U S investment advisory sales grew 146% and the U S debt advisory increased 153%.

The U S capital market service line witnessed a pronounced rebound with the optimism broadening from high growth areas, such as industrial to other segments of the market, including retail office and hotels.

Our multifamily debt origination and loan servicing businesses continue to demonstrate strong momentum highlighted by 26% growth in our loan servicing fee revenue.

Our Americas capital markets pipeline has increased from the prior quarter.

Now to Americas leasing.

Our growth meaningfully outperformed the market driven by continued gains in the industrial sector as well as strength in retail office and life Sciences.

<unk> velocity has increased meaningfully the average deal size has declined.

Our full year 2021, Americas leasing growth pipeline is up 38% from 2020 and 7% from 2019.

Supporting our optimism for continued strong growth in the second half of 2021.

So the evolution of the pandemic, we will continue to be the critical factor and the recovery range.

The Americas office sector remains below pre pandemic levels, though we are encouraged by a multitude of factors, indicating an improving market environment.

According to javelin research towards the 5% increase from the first quarter and net effective rents and class 8 offices across the major U S cities, bringing the rins to approximately 15% below pre pandemic levels.

Also average lease terms increased for the second consecutive quarter to 7.4 years from the fourth quarter 2020 trough of 6.7 years.

It remains below the full year 2019 average of 8.6 years.

Renewals as a percent of the transaction next Helena.

About 2 times the historical average Max at about 56% in the second quarter.

From a profitability standpoint for the corner the Americas adjusted EBITDA margin increased to 22, 2% from 10, 8% driven.

Driven primarily by strong growth in transactional businesses as well as the benefit from cost mitigation actions taken in 2020, and an unsustainably low head count and cost base.

Non cash valuation increases within our <unk> technologies investments and the release of a portion of the multifamily loan loss reserve contributed approximately 180 basis points to the expansion.

In EMEA the fee revenues grew year over year across all service lines and much of the region.

Part due to reducing pandemic headwinds.

Fee revenue within each of the EMEA capital markets leasing and valuation of advisory.

Within the advisory consulting and other service line.

With the ahead of 2019 levels as vaccinations and a return to the office trend has led to improved market sentiment.

EMEA leasing growth was broad based across sectors, but most pronounced in office and industrial.

Any of the second quarter profitability was the highest it has been in several years driven by the higher fee revenue, particularly in the transactional businesses as well as the cost savings, especially in the fixed compensation from actions taken over the past year.

Asia Pacific fee revenue growth accelerated to 26% from 12% in the first corner is the activity picked up across most service lines, most notably in capital markets and leasing.

However, our performance was mixed across the region to the varying pandemic recoveries.

Asia Pacific capital markets fee revenue exceeded the 2019 level and its particularly strong year over year growth was driven largely by several large transactions in Australia.

Asia Pacific leasing activity continues to pick up across most countries, but the pandemic resurgence is weighing on momentum across the region.

Asia Pacific Advisory and consulting fee revenue materially exceeded the second quarter 2019 level with strong growth driven largely by our valuation advisory service.

On a global basis property and facility management service line fee revenue growth with study much like it has been throughout the pandemic.

Growth of more annuity like business is more than offsetting non recurring revenues from quick response tasks like supporting pop up medical sites, we saw in 2020.

Additionally, our U K mobile engineering business has benefited from some easing of lockdowns compared to the prior year quarter.

Corporate occupiers and investors CCAR services, not only for higher building management standards, but also channel allows broad views regarding the best practices and reopening of the workplace.

Our global work dynamics business fee revenue growth improved to 8% driven by sustained good growth in the Americas and EMEA starting to recover from the pandemic impact.

We are encouraged by the number of new client wins and contract expansions that are fueling the growth, which is further buoyed by the secular outsourcing trend.

Corporations are increasingly seeking our extensive knowledge and the breadth of our services, including sustainability delivered seamlessly under our 1 channel of philosophy.

Turning to Lasalle fee revenue increased 10% driven largely by advisory fee growth within its core open end funds.

Incentive fees of $15 million were driven by strong performance in our public securities mandates.

We now anticipate full year of 2021 incentive fees of approximately $45 million with approximately $10 million coming in the third quarter.

The sales of assets under management grew approximately 6% from the prior quarter to $73 billion, driven by valuations and continued capital raising and investment.

The sales $23 million of equity earnings primarily reflects noncash fair value increases across our co investment portfolio, including our JV.

Shifting now to an update on our balance sheet and capital allocation.

Our balance sheet remains strong with reported leverage of 0.6 times and liquidity of $2.9 billion inclusive of cash on hand, and Undrawn credit facility capacity.

Providing us a solid foundation to execute on our strategic priorities.

We are continuously evaluating growth opportunities, both organic and inorganic and plan to continue to invest in both Lasalle co investments and in our jail technologies initiatives, which comprised 2 buckets.

1 investments in the early stage prop tech companies that are transforming the real estate industry and to investments in technology companies that accompany of strategic partnerships to drive revenue growth such as our investment in rootstock earlier this year.

Overall, we have not completed any significant M&A year to date, but are constantly reviewing potential opportunities holding to our underwriting standards and return thresholds comfortably above our cost of capital.

Importantly, we are committed to returning capital to shareholders, while also investing in our business.

Through the end of July we've repurchased $100 million of stock year to date and have $500 million remaining on our authorization.

The repurchases to date are roughly equivalent to full year 2020, and more than double the annual dividends distributed in the years preceding 2020.

The level of capital returned to shareholders in any particular year will be dependent on a variety of factors, including debt levels and investment opportunities and return expectations amongst others.

As we move through the balance of 2021 of next year, we will evaluate the use of capital in the context of the current and anticipated opportunities and the broader economic environment.

We will continue to focus on maintaining flexibility to invest for growth, both organic and inorganic while maintaining our investment grade balance sheet kind of returning cash to shareholders.

Looking ahead to the second half of 2021.

The market environment is quite dynamic and we are mindful of tightening labor markets globally, and an uneven recovery across markets and business lines.

Our improving underlying business fundamentals strengthening pipelines global diversified platform and added visibility on the macroeconomic recovery give us confidence that the momentum in the first half of the year is likely to continue.

As Christian mentioned, we are now targeting to operate within an adjusted EBITDA margin range of 16% to 19% for the full year 2021.

This is due to the strong momentum in the business and increased visibility into a post COVID-19 operating environment as well as the number of steps we've taken to strengthen our business and operate more efficiently over the past several years.

Including the successful integration of HFF and the cost reduction actions in 2020.

We do expect of our cost base to increase in the second half of this year as we continue to invest in our strategic priorities and growth initiatives across business lines.

Such as our technology capabilities and people.

We will drive long term value.

While we maintain strong cost discipline, we continue to expect of certain variable costs, such as T any to gradually return.

I also reiterate the first half of 2021 included $89 million of equity earnings and $14 million of loan loss reserve releases.

Considering these factors our earnings mix between the first half and the second half of the year will be different versus prior years.

And that we will still expect the majority of our earnings to be generated in the second half of the year, but not to the same extent as in prior years.

We will target to run the company in the near term within the adjusted EBITDA margin range of 16% to 19% and.

And we will be undertaking a holistic analysis of our long term financial targets and we'll have more to share with you next year on this topic Inc.

In closing.

I would like to thank my <unk> colleagues for their outstanding efforts and collaboration to deliver best in class service to our clients.

Which is clearly reflected in our financial results.

Christian back to you.

Thank you Karen.

While we continue to remain confident in our expectations of continued recovery of <unk>.

<unk> availability provides the line of sight to of post pandemic future. We are mindful of the hurdles that could hamper of complete macroeconomic recalibrate.

Consumer and business confidence has seen a sharp recovery, though uncertainty lingers regarding a return to pre pandemic normal spot behavior pattern.

So the while inflation continues to be culture. The transitory for 2021 concern about of extended inflationary environment makes the early of monetary policy tightening cycle.

In closing the REIT.

Covering growth outlook, the global scale of our platform the increased value of our technology investments and continued assets from our out the new colleagues around the world fuel our confidence in jail else ongoing strong performance.

Operator, please explain the Q&A process.

Thank you at this time of me if he would like to ask a question of please press star 1 on the telephone keypad again Thats Star then the number 1 we'll pause for just a moment to compile the Q&A roster.

Your first question comes from Stephen Sheldon of William Blair.

Hey, Thanks, good morning.

Congrats on the results.

We're now 2 years out and the closing of the HFF acquisition. It seems like most of that type of capital markets teams of either probably been focused on integration or we're dealing with the pandemic.

And I know at the time isn't out there were questions about the valuation paid but just Christian Christian as you think about that acquisition now how meaningful with HFF and.

And contributing to a quarter like the does it seem like this is the first quarter, where the earnings power of that acquisition may be starting to show.

Well we have been.

Very happy with that application right from the start from the strategic point of view.

We have of Super strong capital markets business in EMEA and in.

In the Asia Pacific for a long time.

And we will.

The lagging behind in the U S. I've seen all of that a lot of the the U S. <unk> become very dominant globally of course volume.

And for Us.

To get to a similar strong capital markets business in the U S and be able to help those clients also to go to the other 2 regions of the world.

And so.

We had a very strong quarter vis vis the last quarter.

The inter regional.

Transactions were still.

Relatively small compared to previous year.

The volume was no because travel day.

With me not wet.

I was supposed to be before we hope it will be soon again and so the full strains of the combination.

The 2 come and so what the what.

What we have seen so far.

Great.

We are very very positive for the outlook.

Got it that's helpful and it sounds like Youre planning to hire an added capacity, but curious if you think about the last year of what you've seen in terms of growing your producer headcount and capital markets and leasing it hasnt been.

Meaningful contributor to overall growth, especially this quarter or is the growth there been more about increased productivity per producer in the transactional business line.

It has the next me and increase productivity per producer of the.

Labor markets relatively.

Difficult.

<unk> had some recent successes.

That is.

Very risky.

The hiring more.

Our teams in so there's more to come but we are incredibly pleased with how we were able to increase productivity per producer.

Not least through our investment into technology, but also the outstanding work of all of our colleagues.

Got it and then 1 more if I could just wanted to ask about on the on the J O L technology side as you continue investing there.

Are there certain category of of solutions the seem like they could get much more meaningful adoption with property owners of tenants across.

The office real estate ecosystem over the next 3 to 5 years and I'm thinking about areas like smart access.

Tenant experience solution of things like the <unk> jet your investment HQ of just just curious for any thoughts there.

Yeah I mean.

First of all the loans meaningful area, everything which helps to collect data on on buildings and the how people actually use the EBIT buildings.

Really drives value to our clients and sort of any kind of product, which helps us on that and is it.

So the key for our clients, but the whole area.

Using technology within buildings and in the core of real estate sector, I would still say build relative to the at the beginning the so much potential.

The used technology to to make buildings more efficiently.

The employees more productive when the when the.

Operating in those buildings and drive better returns for owners of buildings.

It is massive and we feel that we have built.

<unk> built a really strong.

Business around that.

Knowledge for the MLR gel technology teams. So this is the sixth.

Key pillar of growth going.

Going forward.

Great. Thank you.

Your next question comes from Anthony the loan of Jpmorgan.

Alright, thank you.

My first question relates to the of 16% to 19% margin range should we think of that as being the new <unk>.

<unk> thousand 14 to 16 that you all had laid out a few years back or is this something we should think of as just the 2021 number.

Yeah, the 16% to 19% is really of near term targets that we think about that for the share in next share and as I mentioned, we are undertaking a broader view of our longer term targets and the that we back to you next year on that.

Okay.

Is there any way to put any additional brackets around just the the pickup in hiring in some of the variable cost of that may come back as we think about.

The incremental margins in the second half of the year and perhaps in the next.

Yes, there is.

Obviously, a lot of variables to consider as you think about what's going on in our expense base, maybe we start with.

Some of the items, we've talked about historically as it relates to the permanent savings in the non permanent savings from actions. We took last year and then moving to kind of other variable so on the permanent savings side.

$135 million that debt.

That came through 80% of that has been reflected in the current run rate through the end of the second quarter and then on the non permanent savings excluding government debt that is about.

The 40% of those have returned the gives you a sense of kind of what's left to go.

As it relates to the other comments around hiring you know there's a lot of variables to consider that where we are considering in our planning business next geography of the fixed versus variable of the hiring pace.

Not going to be giving specific commentary on that because it remains a dynamic environment, but we will be running our business.

Within that target, we're targeting to run our business within that range.

Okay got it and then just last 1 for me.

The mobile engineering business any way to quantify.

What the EBITDA pickup would be either quarterly or on an annual basis.

If you were just out of normal.

Level of probability I guess.

Yeah, we're not going to provide that level of detail right now as it relates to that business kind of continue to monitor the trajectory there based on reopening and return to Telework.

But that's a fairly specific.

Specific plant.

Okay, but would it be would it be profitable or is it just a drag of the business right now.

Yeah.

Yeah.

I think of getting to your question is really around profitability of anemia overall and he saw what happened there this quarter was largely.

Results of the transactional business is recovering and pulling through in our margins. So that's really the driver as you think about EMEA margin.

Okay. Thank you.

Thanks.

The next question comes from Jade Rahmani of K B W.

Okay.

Thank you very much.

Looking at historical seasonality it seems that generally third quarter of fever rose by around 6% to 7% kind of quarter over quarter.

Quarter basis.

Fourth quarter fee revenue grows by around 25% on a quarter over quarter basis.

Just looking at the strength.

Revenues in the second quarter do you anticipate a moderation in that normal seasonality.

Yeah, I think first of all of the dynamic here. So just as in 2020, our historical seasonality patterns as it relates to our top line did not hold in that environment. I described in 2021 of them the same way.

So as you think about it we really focus on first half versus the second half and and really what's the earnings contribution overall and as I mentioned, we do expect the that the majority of our earnings will still occur in the second half of the year just not to the same extent as we have experienced in prior years.

Okay, and that's inclusive of some of the unusual items you mentioned.

Yes. It is.

So if you go through the first half of the year and you called out the $89 million of equity earnings.

To date in 2000.14 million of of the reversal of the loan loss reserve.

Okay.

In terms of the pipelines you mentioned the office leasing pipeline is strong.

Are you seeing any diminution.

Diminution in that as a result of.

Some of the Delta.

The Delta is so incredibly dynamic I won't force.

Poor crop.

<unk> dot topic, but we can.

<unk>.

Up to now the pipeline is very strong for the second half of the year and we see the around the globe.

So as.

As much of Delta.

The other thing so far it hasn't really had a negative impact on our pipeline.

You never know whats happening tomorrow on that topic.

Thank you and looking at the overall business mix is it possible to quantify the.

The exposure to the contribution from various property types, such as office multifamily hotels industrial the.

Way to put a range is around those property sectors.

You mean on the leasing side.

Back to your question yes.

Yes, if you included the capital markets and leasing how.

How much of the business comes from the office sector versus the others CBRE has highlighted.

Life Sciences, and industrial and strong growth <unk> seen there and they've given some of your.

Arranges are for those businesses.

Okay.

Grateful the you well I can assure you that life sciences, asking a very strong contributor to our leasing business as well as well as the industrial asking a very strong contributor.

We don't book these 2 sectors to get the leasing and capital market.

Within the.

Our leasing business.

We do see offices tend to be roughly half.

And then.

Roughly 30%.

Coming from from industrial.

And the rest of the split.

And on the on the capital markets volume.

Hum.

The industrial is equally very very strong.

<unk> tends to be usually around.

Around.

Could you check that here.

Thanks.

Yes per seconds anything because I have it right.

Helpful.

Okay go ahead.

I'll now 23% right.

Yes.

Yes.

The 23% in the second quarter.

It has been growing.

No.

For some time.

And and and.

So the industrial in the resi sector.

Tend to make up about 50% slightly more than 50%.

And then the remainder of goes to the other asset classes.

Thank you for taking the questions.

Sure.

Again to ask the question. Please press star 1.

And your next question comes from Patrick O'shaughnessy of Raymond James.

Hey, good morning, another question on margins, if I could 1 of the key variables that you're thinking through as you are contemplating and what your long term margin.

Look move towards.

Yes, we are.

There's obviously a lot that goes into that and which is why do you really want to be thoughtful about it and Ron the signal.

Analysis before we quote that longer term number.

Certainly as you think about <unk>.

Top line in the business.

It has to deal with the overall business mix and geography.

We see the greatest growth going forward and where we are.

Strategic objective.

To grow in particular markets.

And then on the expense side.

Looking to see how we can continue to run our overall operation and aware of that's increasingly efficient and drive performance.

Got you. Thank you.

Then Clare for clarification question when you guys are.

Talking about the near term margin outlook are you referring to the back half of this year as well as 2022 or just the back half of this year.

Referring to the full year.

Okay, and not referring to 2022 at all.

Correct.

Okay.

I am sorry, and sorry, I misunderstood your question I think full year for 2021 and 2022.

Okay perfect.

You guys spoke about wage inflation, a little bit to what extent is that starting to.

Show up in your property and facilities management businesses and to the extent that of does show up are those generally expenses that youre passing through to your clients.

As the mix.

We tried to parse the approach to our clients.

And in some cases that is not in the possible.

But it is nothing which would create massive concern to us in that area. It's more of general point to note.

The labor market.

The <unk> tied of the moment and that's the talents into pretty significant wage inflation.

Which.

Is something.

Any sort of its business to watch on the 1 hand.

As we have demonstrated in the second quarter.

Our strong investment on the technology side helps us to drive productivity.

<unk>.

Much higher.

But we like to grow our business, even further and therefore, we have.

The ambition to hire the talent and the talent is becoming.

More expensive than the past.

Got it and on that last comment.

You guys, obviously do some head count reduction of last year does the hiring now reflect that maybe you cut too deep last year or is this hiring in different areas.

Well, usually it's actually hiring in different area the.

Now everything is kind of the balancing quite nicely.

So.

Pretty much all of our areas.

The well.

Going forward more people employed.

We had a pre pandemic again.

But the skill set.

Obviously changing.

Average person working in our company needs to be quite tech heavy going forward.

<unk>.

A lot of the the.

On a more simple execution roles.

Being taken over by technology sales.

Sales rose very very important and so.

You have the different skill set which is needed. So it's not that we were the hiring you expected the same people, which we lost all of the or during the time of the pandemic.

Okay I appreciate that and then last question from me.

Curious about your current thoughts on the strategic merits of value of development services business. Obviously, 1 of your large competitors continues to make investments in that space and recently did another deal strategically.

Do you think about your development and project management business.

How important is that to the rest of your franchise right now.

Well I think youre covering the 2 very different topics.

We refer to as all of our project and development services business value.

So the business, while we are <unk>.

Servicing our clients in in on the project management side of on the development side that business.

Yeah.

Roes in the future.

At the very very strong demand towards the I alluded to also in my prepared remarks.

Buildings in general and all sorts of things.

Pacific of being upgraded very significantly, but also everything around that whole topic of the environmental sustainability will drive that business.

<unk>.

The other aspect Inc.

The.

So that the companies moving.

Into the development business.

As an investor.

And that is a very different thing, which we haven't done in the past and.

No current plans going forward on that topic.

All right very good thank you.

Next we have a follow up question from Jade Rahmani of K B W.

Thanks, very much just in response to Patrick's question about margins I wanted to confirm the 16% to 19% is for both of the full year 2021, and Youre also saying for 2022.

Confirmed.

Great. Thank you.

Secondly regarding share repurchases.

Is there a target as a percentage of the revenue or earnings that you'd think about.

Over the long term.

The annual basis.

No. There is no target because we are very prudent with regards to our capital allocation and we constantly value the different opportunities we have.

Best thing into the growth of our business.

Justice.

<unk> back.

Our share or finding other ways to return capital to our shareholders.

And.

So it depends very much what alternative investment.

We see versus potentially share buybacks, but we have set in the path.

We see 20%.

Long term percentage for now.

And we will constantly rethink the SaaS in light of our ability to find other.

Gross area going forward, but we will not fall below that mark.

Thank you and lastly on the equity income side I know that you mentioned your patience for Lasalle incentive fees, but.

In the Americas and in the Lasalle business are you anticipating any significant equity income in the second half of the year.

We.

We continue so those are both portfolios or do you think about the Lasalle.

Equity earnings and also the channel technology of equity earnings than we do.

At the pace further.

Further benefits from the portfolios in the performance. However, I would say those valuations are out of our control and the timing with which they come through are as well. So we're not going to provide specific guidance by quarter as to what the we would anticipate total day.

Thank you for taking the questions.

At this time there are no further questions I will turn it back to the panel for closing remarks.

Thank you operator.

The old product questions, we will close today's call on behalf of the entirety of LTE. We thank you all for participating on the call. This morning, Kevin and I look forward to speaking with you again following the third quarter.

This concludes today's conference call. Thank you for participating you may now disconnect.

[noise].