Revenue at Jones Lang LaSalle’s newly formed Real Estate Management Services segment grew 14% in the first quarter from a year ago on the back of workplace management and project management, the company said in its Q1 earnings report, released May 7.
“Our real estate management services business has capitalized on the growing trend of outsourcing as well as the increased focus on building operations and tenant experience across occupier and investor portfolios,” Christian Ulbrich, president and CEO of JLL, said on an earnings call. “We are now globalizing our property management business with a shift into this segment, which went into effect on January 1.”
The segment’s performance suggests the economic uncertainty from the Trump administration’s tariff policy has so far had a negligible effect.
“To date, there have been limited direct impacts on our results from the recent policy volatility and uncertainty, although some clients are delaying decision-making as they monitor macro development,” Ulbrich said. “Slower economic growth could have spillover effects for our industry, but it is still too early to predict the future implications for our business.”
JLL’s total revenue during the quarter was $5.75 billion. Resilient businesses grew revenue 13% collectively during that time, with workplace management and project management growing revenue 15% and 16%, respectively.
Workplace management benefited from a balanced mix of client wins and mandate expansions, with incremental pass-through costs bolstering high single-digit management fee growth, the company said.
Ulbrich also attributed JLL’s Q1 results to the firm capitalizing on “the growing trend of outsourcing,” noting that many geographies and industries have significant untapped potential for outsourcing penetration and advancements in technology. The reason for outsourcing real estate needs are “numerous,” Ulbrich said. “It could be driven by your interest in cutting costs.”
“And so this is an environment where people will look at their operating costs, and we will see that there may be an opportunity … that would drive them to talk to people like us in order to get those [cost] benefits. The other reason is very often, they are expanding,” Ulbrich said. He noted that while current market conditions could cause large companies to pick up less strong companies, providing opportunities for the best companies in each sector, JLL also expects companies to slow decision-making, which could cause short-term impacts to the business.
“The picture is slightly mixed. It’s way too early to tell whether [the current market environment] has a negative impact on our outsourcing business or whether it will almost be unimpacted by it,” Ulbrich said. “For the time being, we don’t see any impact.”
Despite the revenue increase at the new real estate management services segment, its net earnings fell 7% year-over-year to $66 million. The drop was primarily due to continued investments in technology, including artificial intelligence and project management capabilities, and increased investments in talent during the second half of 2024 aimed at supporting business growth, the company said.
JLL also benefited in the first quarter from a broader recovery in the office sector, supported by the expansion of return-to-office mandates, moderation of downsizing rates in office leasing activity and improvements in office sales and financing, according to Ulbrich.
“Corporates around the world are gaining more clarity on future space needs and with historically low development pipelines in the U.S. and Europe, office fundamentals and trends are likely to continue to strengthen for top-tier buildings,” he said. “Quality assets are also growing more scarce, creating spillover demand for the next tier of buildings.”
North America office leasing volumes were up 15% year over year in Q1, and the global vacancy rate inched up 10-basis-points to 16.9%.
While the firm has seen improvements in office transactions revenues in the past year, especially in the U.S., JLL Chief Financial Officer Karen Brennan noted that large transaction volume in the region still remains about 30% below pre-pandemic levels.
“Within office, tenant requirements are generally steady with sectors such as professional services, finance and legal, driving demand in many markets,” Brennan said on the earnings call. “So as we’ve seen in the recent past, this could evolve quickly as clients consider the macro outlook.”
