Q3 2022 Jones Lang LaSalle Inc Earnings Call
Yes.
[music].
Ladies and gentlemen, Hello, and welcome to the Q3 2022 J L. L Earnings Conference call. My name is Maxine and I'll be coordinating today's call. If you would like to ask a question tool Nicole you may do so by pressing stuff they'd buy one listen I think he pad.
Now how JBT, a haste sculptor I'm beggar Investor Relations officer at Jay and out to begin Scott. Please go ahead when you're ready.
Thank you and good morning, welcome to the third quarter 2022 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 Dot J L L Dot com.
During the call and in our slide presentation, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors.
We will include reconciliations of non-GAAP financial measures to GAAP.
Our news release and slide presentation.
As a reminder, today's call is being webcast live and recorded.
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 for the fiscal year ended December 31 2021.
And then other reports filed with the SEC.
The company disclaims any undertaking to publicly update or revise any forward looking statements.
On November 16th jail Al will host an investor briefing in New York City for additional information and to register for the event. Please contact J L L Investor relations at <unk>.
J L L Dot com.
I will now turn the call over to Christian Ulbrich, our President and Chief Executive Officer for opening remarks.
Thank you Scott.
Hello, and thank you all for joining our third quarter earnings call.
Over the last couple of months, we have experienced a significant change in the economic environment and the overall outlook for the global economy in the coming quarters is not favorable.
For real estate markets around the globe fast rising interest rates and significantly widen spreads has created a notable imbalance between our overall financing cost and Hugh.
Then that's a cautious and underwriting assumptions are becoming more restricted.
According to <unk> research.
Global commercial real estate investments totaled $234 billion, a yield decline of 18%.
Bid ask spreads continue to widen and the desire for greater price discovery is elong gating the time to close deals.
In addition currency fluctuations are limiting cross border capital flows.
Leasing markets are typically slower to react to an economic decline and this is highlighted by the leasing markets outperforming when compared to capital markets in the third quarter.
The global office leasing market volume was up 10% year over year. According to <unk> research.
The flight to quality continues with rental growth increasing in prime office assets for the fifth consecutive quarter.
On a year over year basis, Opex vacancy rates ticked up slightly in the third quarter to 14 in the 5% globally.
Corporate clients across many industries are also experiencing the impact of the changed economic environment and are focused on lowering the cost base.
Some clients are delaying investments into their real estate footprint. Most clients are also running strategic revenues and efficiency programs around that build environment, creating additional demand for our advisory and consulting services.
<unk> financial results for the third quarter reflect the points I just discussed.
Our capital markets business saw a sharp drop in profitability as volumes declined during the last months of the quarter.
Our leasing business held up well, especially when you factor in the comparison to a record quarter last year.
Contrasting the decline in capital markets work dynamics was able to deliver a record quarter showing the resiliency that makes this business so attractive and we saw an equally strong performance in our <unk> business.
Finally, our solid increase their assets under management and crew advisory fee revenue during the quarter highlighting strengths in their underlying business.
I will now turn the call over to Karen will provide the details on our results for the quarter.
Thank you Christian.
Before I begin I remind everyone that variances are again, the prior year period in local currency unless otherwise noted.
Our fee revenue for the quarter grew 4% over our record third quarter of 2021, and despite a 24% decline in our investments out debt and equity advisory fee revenue in the month of September .
This resiliency was the result of the strength in other business lines.
Particularly in our work dynamics business, which grew 14% as well as double digit growth in our property management and valuation and advisory business line and over 20% organic growth in jail all technology.
Adjusted EBITDA was $276 million, a decrease of 19% from the prior year quarter Alright.
Our adjusted EBITDA margin declined approximately 390 basis points from the third quarter of 2021.
Period, which generated a margin well above our pre pandemic levels and was not reflected fully normalized cost basis.
The margin decline was driven by lower capital markets revenue.
Typically our second highest margin segment.
Well as the investments in our people product and growth initiatives over the past year.
Incremental <unk> and marketing expenses and lower equity earnings also contributed to the margin decline.
It is important to note that our operating platform remained resilient and we have a flexible cost structure.
Excluding pass through costs.
<unk>, 55% of our 2021 and compensation and benefits and operating and administrative expenses were variable.
In the context of a more challenging macroeconomic backdrop, we are focusing on reducing costs, while also being selective about investments in growth initiatives.
Well this may cause our near term profitability to be somewhat more volatile we have a track record of healthy margin expansion over the long term.
Moving to a detailed review of operating performance.
Beginning with markets advisory.
Leasing fee revenue grew 3% on top of that 75% growth rate in the prior year quarter, though the pace of growth decelerated as the quarter progressed.
With macro conditions are bearing across region leasing fee revenue growth was most notable in Asia Pacific up, 17% and EMEA up 14%, while the Americas grew 1% on top of a very strong quarter a year ago.
The office sector grew across the region, but was offset by declines in the industrial and retail sectors.
Our third quarter office sector fee revenue growth outpaced the global office market volume by approximately 200 basis points.
And the industrial sector fee revenue growth declined 12% as anticipated given a tight supply and significant growth seen over the past several years as well as a decrease in global industrial market activity from a year ago.
While our overall average transaction size increased.
Sale value materially decrease.
Property management fee revenue growth accelerated to 12% compared with 10% in the second quarter in part due to inorganic contribution from a 2021 strategic joint venture in the U S.
The leasing market overall continues to moderate varies by asset class and geography.
For instance, our growth U S leasing pipeline is down slightly from a year ago, driven by contractions in the office sector, partially offset by growth in the industrial and retail sectors.
Gross leasing pipeline is also down slightly anemia.
Up marginally in Asia Pacific.
We continue to see a flight to quality as occupiers shift to new <unk> class a space with the amenities and sustainability profile needed to attract employees back to the office.
Market Advisory adjusted EBIT margin declined 200 basis points from a year ago to 15, 8%, primarily due to the impact of higher commission rate periods being that more broadly investment and talent to meet growth demand over the past year and incremental penny and marketing expenses.
Shifting now to our capital market segment.
The elongated deal cycles that Christian described were a key factor in a 5% decline in segment revenue.
Growth in valuations and are more annuity like loan servicing businesses provided a partial offset.
And note the decline is off a third quarter 2021 growth rate of 85%.
The strength and breadth of our global capital markets platform is evident as the decline in <unk> global investment sales to be rather now of 7% in the third quarter compares favorably to the 18% decline in global deal volume According to javelin research.
Nearly all major asset classes exhibited declines most notably in the Americas and EMEA residential sectors.
The hotel sector, continuing to recover exhibiting strong year over year growth.
Fee revenue from U S investment advisory sales declined about 11%, which compares favorably to the 21% decline in market volume in the Americas, According to jail or research.
Notably Asia Pacific investments out debt and equity advisory fee revenue grew 5% driven by strength in the hotel sector.
EMEA investment sales debt and equity advisory declined 1% with strength in the U K and much of Continental Europe , offset by softness in Germany and France.
Valuation and advisory fee revenue, which is more resilient than investment sales and debt and equity advisory grew 12%.
Growth was broad based across regions and sectors and in part due to M&A in the U S.
Despite headwinds from a decline in prepayment fees or loan servicing fee revenue grew 5% driven by increases in our servicing portfolio, particularly from Fannie Mae originations.
As we look to the rest of this year, the global capital markets investment sales and debt and equity advisory pipeline is down mid single digits compared with this time last year.
Most notably in the Americas and EMEA.
We saw notable deceleration in September compared to July and August .
Considering the factors Christian described and a tougher growth comparison to a year ago. We expect the decrease in fourth quarter fee revenue in capital markets to be more pronounced than in the third quarter.
Capital markets adjusted EBITDA margin declined 740 basis points from a year ago to 14, 3%.
And lower fee revenue.
The impact of net changes in incentive compensation structure.
And the incremental T&D and marketing expenses.
The change in our compensation next two more commissions from cash bonus along with the strength in capital markets activity earlier in the year led to higher commission expense and earlier cash outflows than in prior years.
Moving next to work dynamic feedback.
<unk> revenue grew 14% with double digit growth across our annuity and transactional revenue streams within the segment.
Continued easing of pandemic restrictions and momentum and the return to work trends across all regions drove 16% growth in project management.
Client wins and global contract expansion, particularly in the Americas propelled 19% fee revenue growth in workplace management.
The work dynamics adjusted EBITDA margin expanded 190 basis points from a year ago due.
Due to both revenue growth and cost management strategies enacted over the past year.
Moving to jail all technology.
Fee revenue inclusive of M&A accelerated to 54% from 48% in the prior quarter.
Organic growth of 28% was driven largely by enterprise clients, which compared with 22% in the prior quarter.
As a reminder, <unk> technologies also influences fee revenue across channel all through investments specific to differentiating our services.
Despite materially lower equity earnings on a year earlier and continued investment in people and our platform.
<unk> technologies, adjusted EBITDA margin improved on a higher revenue.
Like all our segments long term profitable growth of <unk> technologies is a primary focus.
Turning to Lasalle.
The past 12 months of capital deployment and valuation Mark up drove a 9% increase in assets under management and translated to 11% advisory fee revenue growth, mostly within our core open end funds.
Valuation declines stemming from the macro operating environment are likely to be a headwind to near term advisory fee revenue growth and incentive fee generation.
Equity earnings were about $10 million lower than the prior year in part due to an approximate one $5 million adverse swing in the fair value Mark of our publicly traded REIT in Japan.
As well as the absence of valuation increases on the remainder of our co investment portfolio that benefited the prior year period.
The increase in advisory fee revenue with more than offset by the lower equity earnings lower incentive fees and expenses related to the loss of a client mandate in the U K.
<unk> and a decline in our Lasalle adjusted EBITDA margin for the quarter.
I also highlight a material new global investment mandate client win.
With an investment horizon and equity deployment ramp over the next few years.
Shifting now to an update on our balance sheet and capital allocation.
As of September 30, our net leverage of one one times is just above the midpoint of our target leverage range and up from 0.4 times a year earlier, primarily due to share repurchases and incremental investments in our business.
M&A and lower profitability.
Our liquidity totaled $2 1 billion at the end of the third quarter.
During the quarter, we expanded our credit facility by $600 million.
233 5 billion.
On September 30, we used our lower cost credit facility and redeemed our four 4% fixed rate $275 million of senior notes that were set to mature this month.
Our third quarter share repurchases brought our year to date cash returned to shareholders to approximately $600 million.
And drove a 6% reduction in our quarter end share count from a year earlier.
Given our significant cash flow already returned this year and the uncertainty looking into 2023, we have temporarily paused our repurchase activity.
Returning capital to shareholders is a critical component of our holistic approach to long term capital allocation and we will continue to prioritize debt alongside investments in our business for future growth.
Approximately $1 2 billion remained on our share repurchase authorization as of September 30.
I will now address the free cash flow.
We generated $88 million of free cash flow in the quarter, reducing the year today outflow to $538 million materially below the same period a year ago.
The primary factors behind the lower free cash flow include one.
<unk> higher bonus payout tied to 2021 performance too.
Two a shift to more commission based compensation from bonus driving earlier payments this year compared to past years.
Three and abnormal timing mismatch of Reimbursable payables, and receivables and for lower profitability in part due to a more normalized cost base.
We note that a number of these factors are timing related and that we remain focused on cash flow conversion to optimize our capital structure and maintain flexibility in a more challenging macroeconomic environment.
Entering the fourth quarter, we have generated $909 million of adjusted EBITDA year to date, and a 14, 8% margin.
With changes in the economic sentiment caused largely by the sharp increase in the interest rate prior to our seasonally strongest quarter is expected to materially impact our full year growth and profitability expectations. Despite our variable cost base.
So the environment is fluid and much will depend on the pace of activity and our leasing and investment sales debt and equity advisory business lines for the remainder of the year.
We now anticipate our full year 2022, adjusted EBITDA margin to be below the 16% to 19% range. We had originally targeted for the year.
We are taking action to adjust both our existing cost base as well as prioritization of investments in the business.
While some costs like T. Any can be flexed quickly. It takes time for other cost savings actions to be realized.
We remain focused on generating margin expansion across our business lines and see further opportunity to do this in a normalized macroeconomic environment.
The evolution of our operating model to global business lines provided increased transparency into our cost structure.
Allowing us to capture opportunities to drive productivity and continuing to improve our operational efficiency profile.
As the intensity of macroeconomic headwinds is expected to increase we will continue to calibrate our cost structure balancing steps necessary to respond to the near term challenges with opportunities to further strengthen our platform during the downturn.
Focus remains on cementing the resiliency of our diversified business and on driving long term profitable growth and value creation Chris.
Kristian back to you.
Thank you Karen.
While rising interest rates currency headwinds and geopolitical events are likely to continue to put downward pressure on the macroeconomic environment.
We shouldnt lose sight of the structural tailwind in our industry that provide a backdrop for regulatory recovery.
Corporate clients around the world will be even more eager to have the best and most efficiently run real estate footprint possible.
Our platform is uniquely suited to deliver exceptional results to clients and I expect our work dynamics business will continue their impressive growth story.
Our leasing business is looking forward to the near record.
Which are due to expire in the next 18 months.
Many of these continued carry over from the pandemic.
Our capital markets business is benefiting from our global platform and access to gel else unique life data.
Data enables our brokers to provide clients with industry, leading advice, allowing them to make the best possible decisions in the current market environment.
Eating with transaction volumes likely to remain low over the next couple of quarters. Our team is laying the foundation for a strong rebound.
Dry powder remains at near record levels, and once interest rates stabilize and price discovery comes to an end.
Investors are eager to deploy capital into the market.
Finally, the need to make portfolio future proof with regards to the built environment carbon footprint has become even more complicated in this market.
I'll, let Bob is needed more than ever and we expect this to result in ongoing strong growth for our sustainability services.
While we don't know how deep and how long this economic cycle will be our current belief is that the north American real estate markets will begin growing again in the second half of 2023.
We take comfort in the significant transformation process that has occurred within shell over the last couple of years.
These changes have created an industry, leading one gel platform across the world, which positions us well to navigate any type of macroeconomic environment and return to growth.
Before I close with these prepared remarks, I would like to thank all our employees across the world for their outstanding work, which they have delivered once again in this quarter.
Operator, please explain the Q&A process.
Thank him if he would like to ask a question. Please press star followed by one on your kind of think he pack now if you do change your mind. Please press stuff they buy to blend dependents Ross Your question piece and show your line is muted.
The first question today comes from Checkmate <unk> from Goldman Sachs. Please go ahead. Your line is now open.
Hi, Good morning, Thank you for taking my question.
Karen I think this one's for you if you could please talk about the.
So does the cost structure of the business I know you basically said that 55% of <unk>.
Compensation and benefits last year variable, but if you look at it collectively.
Uh huh.
Sort of taking all the cost cuts.
What portion is variable and we're in the fixed do you have more give versus other than perhaps it's only a matter of time, but that you would be able to flex.
Yeah. Good morning. Thanks.
Good question, So maybe just take a step back and talk a bit about.
The three different categories as we look at our cost structure and how we're thinking about you to that.
So first and foremost it's what is the quality of our overall operational efficiency and what is the opportunity to improve that going forward.
Second we think about where the requirements we have from an expense base to meet the demands of our clients in the here and now and it really near term and then third we think about where we're making investments to position our business.
For our medium and longer term growth. So I'll talk about each of those three buckets.
First on the overall operational efficiency you know I referenced in my earlier remarks that we've now evolved in the final stages of our global transformation to business lines, which provided more transparency of our cost structure and we really do see opportunities, where we continue to evolve there.
Leveraging shared service center is really harmonizing and streamlining our operations around the world.
Through that process and so now it's really the time as we think about that to make an aggressive acceleration of our push on driving that operating efficiency.
The second category.
<unk> referenced that our clients are now asking us more than ever for advice and so we are certainly being rigorous in terms of.
Pulling back on discretionary spending and being really focused on our costs, but we also are making sure. We're balancing that we have the talent and the people that are meeting with our clients who are asking for advice right now.
And then third as it relates to the medium and long term growth priorities, while I mentioned that we do expect the next few quarters and Christian referenced as well. There is some uncertainty ahead, we're looking for the long term and making sure that we're taking decisions and adjusting our investments for the future and prioritizing those areas, where we see the greatest opportunity for <unk>.
Term profitable growth, but also not losing sight of our longer term objective. So it's all about really remaining agile and resilient in the short term to withstand this current environment by making sure we're strengthening the business for the long term as well.
Understood. Thank you and as a follow up as we think about the outlook for capture markets next year for the industry as a whole.
How much do you think it is a function of tight lending markets, where there's a bid ask spread that persists and when do you think that the malaise of beats you know do you think it's a second half activity do you think it's just a question of.
Fed actions being completely done how should we think about just give us some contours going into next year don't capture market space.
I'll take that one good morning, it's Christian.
This is what we have seen over the last couple of months. So very rapid disconnect between the overall refinancing across real estate and the property yields.
And this has all please see.
<unk> put a lot of pressure on transaction volumes and this disconnect has to result itself, we cannot expect that.
Financing cost will come down.
Notably over the next couple of months. So what it means is that yields have to go up that's what we call the price discovery.
And the source of that price discovery is happening there.
Quick transaction volumes will come back again.
As we said for North America, we expect that to take probably another couple of quarters and we see increased transaction volumes.
Back in the second half of next year.
Honestly, it's not easy to predict but it could also be that this goes foster and we will already see recovery in the second quarter of next year is enormous amount of capital waiting to be invested and as usual when you have those type of trends.
For those who are invested it's much tougher than for any fresh money.
It would probably create one of the best vintages going forward.
So.
Obviously, very focused and advising our clients accordingly, how to deal with that current situations.
Thank you so much.
Thank you. Our next question comes from Anthony <unk> from Jpmorgan. Please go ahead. Your line is now open.
Great. Thank you I guess Karan just trying to.
Stand the margin and cost piece of this again, so if we look at third quarter year over year margins were down 370 basis points.
And it sounds like the business is just getting worse going into <unk>. So can you give us some sense as to just order of magnitude. We should expect in terms of year over year margin decline in <unk> does that down 370 get worse.
Yeah. So the fourth quarter of the year is typically a seasonally important one for us in terms of both the topline and bottom line in terms of profitability and so much of what the full year and fourth quarter will look like will really depend on the final outcome for capital markets transactions.
And we do expect they will remain depressed in the short term the other key determining factor for our fourth quarter is really going to be around at what happening happens from a leasing activity perspective. So leasing is certainly more resilient. It held up you saw it held up better in the third quarter and you know we've referenced before theres always transactions that need to occur because of natural.
Lease expirations, but the we're continuing to see additional leasing activity related to corporate growth in your expansion rate, that's obviously pulling back and becoming more muted and so, particularly when we're looking at that compared to fourth quarter of last year, which was another really strong quarter.
As we finished out 2021, those two will really impact.
Our overall top line and our profitability overall, we obviously have a variable compensation components that will naturally flex in reaction to that and we're going to continue to be further had further focused on calibrating. Our other expenses discretionary expenses through the remainder of the year, but there is you know you won't you have so many <unk>.
Levers you can pull between right.
Fourth quarter between when the activity decline really started strongly in September and December .
I mean does the does this change I guess in the commission structure and the capital markets at.
It sounds like going from May.
Maybe some some salaries and bonuses to maybe more variable, but it sounds like a negative effect does that have a more pronounced effect than in <unk>.
Just I guess it sounds like it's just being implemented.
So that's something that has been implemented at the beginning of this year and as I've talked about it a few times over the last couple of quarters and just to recap that was really we've changed to a more condition Commission based structure for a number of our producers to come closer to a competitive that really for simplification and recruiting purposes, but we still have.
<unk> to our net income via some profit participation plan. So the ultimate impact of that while it will have a somewhat of a net negative impact for a full on a full year basis will really depend on what the final profitability numbers are for our capital markets business on a full year basis.
Okay.
And then I guess as it relates to thinking about a stock buyback and free cash flow you talked about free cash flow and some of the drugs, but.
How do you think about just capacity to do buybacks. If we roll forward a couple of quarters like it would seem like your net debt to EBITDA, probably moved into the middle of your target range does that change.
The view on buyback.
Yeah. So just to first recap we've returned approximately $600 million of cash to shareholders. This year compared to $343 million last year. So it was a significant uptick.
And as we look ahead, you know as I mentioned, we're pausing right now and we'll continue to look at the landscape in terms of both.
You know risk and being prudent but also more for opportunities and looking at what's ahead certainly on an.
Uncertain environment, we're heading into now we'd like to maintain maximum flexibility.
But we are still committed to returning cash to shareholders alongside investments in our business. So we'll look to balance those.
Over the course of the next several quarters as the macroeconomic environment becomes clearer.
Okay. Thanks.
Okay.
Thank you last one as a reminder, if you would like to ask a question. Please press star followed by one on your kind of think he Pat now.
The next question comes from Jade Rahmani from <unk>. Please go ahead. Your line is now open.
Thank you very much.
Big Picture question is.
There's a lot of capital on the sidelines dropped dry powder.
I think that capital has levered return targets and so you need to borrow money to invest in real estate and right now we have a state in the debt markets were borrowing costs are pretty uninhabitable for investors in real estate, it's very hard to make a decent levered return so.
You either need tighter lending spreads in the credit markets or do you need a big decline in commercial real estate prices, how do you expect those dynamics to unfold.
Yeah.
As I said earlier, we have that mismatch exactly what you pointed out.
Not only about interest rates went up very sharply spreads also widened.
And so we have to narrow that gap again to make it work.
Now, we shouldnt underestimate that there is a significant pool of buyers out there, which are going all equity on the basis that they expect that at a later point they have more favorable refinancing rate. So it's not all black and white.
But it will take as we predicted.
From today's perspective, as we predict from today's perspective, a couple of quarters until that fully plays out.
But.
We have a couple of significant differences to the situation, which we saw during the CFC.
<unk>.
One I think is really important is that.
Banks have much much stronger balance sheets.
And so there will be potential.
Potentially a situation where things will just play out much faster because the market can digest potential losses.
And so that is kind of.
The situation, which during the TFC direct uphold problem pretty far out and it took a very long until the market really fully recovered.
Don't expect that to happen again, there will be a much quicker recovery in this situation, but it will not be as immediate ask was coming out of the pandemic.
Thank you very much what are you expecting for Lasalle incentive and equity income in the fourth quarter, but also.
In 2023, if we still have a very soft transaction environment.
Yeah.
Yeah. So incentive fees are typically driven by actual dispositions or some that are triggered based on valuations within within a fund at a point in time, but as a result of the current environment and headwinds we would expect those to be more muted today compared to what we would've expected at the beginning of the year.
So that is something that.
You know well will impact us I would say on the equity earning side. This quarter. If you look to what happened there were some write ups and some write downs within the portfolio and kind of not not.
We are down a little bit and so what we should expect some more headwinds there as well as they move forward.
Thank you very much in terms of the office outlook I also cover our commercial mortgage Reits and I'm starting to see.
A lot of distress emerging.
Some some office loans up for maturity that theres not the liquidity to refinance those deals even.
Good well performing well occupied properties or going into default.
Do you expect a lot of distress in the office sector.
Yeah.
Okay.
That's what I said.
Playing out much faster than we saw during the CFC for the reasons I described earlier.
I wouldn't.
Really pin it down to office as an asset class, but it is an.
Asset class, which is more challenged than others.
Because of the reasons coming from the question of where people want to work from.
And also driven by the whole ESG.
Investments needed going forward, So you will see.
Probably more product coming to market and trading at significant discounts over the next couple of months.
Because refinancing will be even more challenging for then taking the hit on on the valuation.
Okay.
Thank you Brian .
Yeah.
Oh go ahead.
And yes, sorry, Jonathan that in a couple of points to.
There's just some interesting dynamics as it relates to the countervailing forces and office dynamics overall, because we still have.
There is pent up.
Lease renewals and explorations that needed to be addressed we have occupiers, saying, we really want people back in the office, but we have to reconfigure offices and do different things and invest capital to make that happen and they were all preparing to do a lot of those things and make changes, but now with a sharp increase in interest rates.
The cost of capital.
For all corporates has gone up dramatically and so then you have to take a step back pause and say why do I really want to prioritize.
My investments going forward. So there's there's definitely going to be some more.
Tension there but are.
You may have also seen that the U.
U S Bureau of Labor statistics came out with them.
Productivity stats for the first half of 2022, which declined the most they have ever on record and so that mirrors. Some of what we're hearing from a number of our clients around the desire to get people back in the office and productivity challenges and then now you have these other these other forces at play so they'll definitely be a number of factors impacting how things.
Play out in the office market overall from both the leasing and capital markets perspective, and obviously when is that related to each other.
Yeah.
Thank you very much.
Thank you as a final reminder, if you would like to ask a question. Please press star followed by one I think he pack now.
The next question comes from Patrick O'shaughnessy from Raymond James. Please go ahead. Your line is now open.
Hey, good morning can you speak to your client pipeline workplace management business.
Yes, I mean, the client pipeline is very strong that is not necessarily impacted by short term economic developments, it's more of the behavior of those clients, which is impacted by those economic developments of all the outlook for the business.
Earlier is very very strong.
What we have seen in the past when we have those economic development is our clients are more eager to have that portfolio run by professional hands to see how they can optimize usage of their.
Built environment raise productivity for their people end up at the same time reduce cost as.
As much as possible. So we are not concerned at all with regards to the client pipeline going forward.
Great I appreciate that.
And then with <unk> technologies, obviously, there's a number of components within that segment, but can you kind of speak to how is the demand for those various solutions impacted at all by the macro our budgets getting tightened and maybe new technology adoption slows or does demand maybe pick up as people look.
For some of these innovations.
Well.
It's not always a clear picture to one site, but.
It's it's clearly more heightened interest for those technology solutions in a current environment than the opposite so we have a lot of SaaS revenues within that business.
And that continues to grow.
Very nicely as you saw in the third quarter results.
And we.
We are very optimistic that this is an ongoing trend, which will also continue in 2023.
They all have some more.
Actual kind of pieces in that.
Coming from our technology solutions business interestingly enough that has grown above our own expectations in the third quarter.
Continues to have a very strong pipeline, which goes back to what I just said the corporate clients are looking up.
Identifying solutions to drive productivity of their footprint out of footprint.
And that leads to these additional assignments how that will play out going forward depends a little bit how deep the recession will be key as we believe that for the U S side for the North American side. It will be relatively quick downtown we expect that business to <unk>.
Continue to perform really well.
That's helpful. Thank you.
Thank you. This concludes our Q&A session for today, So I'll hand, you Christian.
For closing remarks.
Yeah.
Thank you operator with no further questions. We will close today's call on behalf of the entire <unk> team. We thank you all for participating on the call today I'd like to remind you that we are hosting an investor briefing event in New York City on November 16th.
We hope to see many of you there in person.
And I also look forward to speaking with you again following the fourth quarter.
Thank you ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your lines.
Uh huh.
Yeah.