JLL has shunted its financial targets out beyond 2025, with chief executive Christian Ulbrich blaming the slowdown in real estate dealmaking.
On an analyst call to discuss the agency’s third-quarter results, Ulbrich said that although it was “not our typical practice” to update mid-term targets during a financial year, “we believe additional colour is needed given the prolonged softness in transaction activity”.
“When we confirmed our mid-term targets for 2025, our baseline assumption was for recovery to begin in the second half of 2023,” he added. “Based on what we know today, we do not expect a recovery in transaction activity to take place in 2023 or early 2024. As a result of the industry-wide softness in transaction activity, we are extending the timeline to achieve all of our mid-term targets beyond 2025.”
Those targets include fee revenue of $10bn-$11bn (£8.2bn-£9bn) and an adjusted EBITDA margin of 16-19% – JLL said it expects to hit the latter first. For this year the firm expects an adjusted EBITDA margin of 12%.
Ulbrich said the agency’s research team had tracked $131bn of real estate investment globally during the third quarter. That marks a 14% fall quarter-on-quarter, compared with a historic increase of 7% between the second and third quarters.
“Overall investment activity in the third quarter remained subdued across asset classes, though there were notable differences across sectors, with office down the most, while residential, hotels and retail have fared comparatively better,” Ulbrich added. “The average deal size declined in the quarter, underscoring the challenges of closing large deals.”
Ulbrich described the backlog of capital markets as “relatively good”, adding: “But investors are still hesitant to transact on it, so the conversion timing is much higher than what we have seen in previous times.”
He continued: “The one thing which has been quite clear over the last couple of quarters [is that] the most active buyers have been private buyers, high-net-worth individuals who are coming into the market, who see this as a great opportunity to get hold of exceptional assets.”
With the outlook still uncertain, Ulbrich nonetheless sounded a note of optimism that the agency will be ready as a first-mover when conditions improve.
“Listen, if we could see what the world will do in 2024, that would be really helpful – we certainly haven’t foreseen the turmoil of the last couple of months, but we stay very optimistic,” he said.
“We are prepared for every uptick. As we have stated, we haven’t chucked any people which we will need to rehire if the market is recovering. So JLL is ready for any improvement in the market environment and so, I guess, we will see some growth – but I will not predict the size of that growth.”
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