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Robust Leasing Drives Strong Midyear Results by Top Brokerage Firms

Booming Economy, Solid Property Fundamentals Continue to Generate Plenty of New Business for Big Brokers
August 9, 2018
"Demand remains strong, with a growing number of investors increasing their real estate allocations," Jones Lang LaSalle Chief Executive Christian Ulbrich told analysts Wednesday.



The largest publicly traded commercial real estate services companies reported solid financial performances and brisk deal activity at midyear, highlighted by some of Jones Lang LaSalle's strongest sales and leasing numbers in a decade, even as the number of property sales in the broader market have trended lower.

Sales have been declining nationwide, the result, of elevated prices and an increasing number of owners taking a long-term hold strategy with their properties, according to investors.

Chicago brokerage Jones Lang LaSalle on Wednesday reported its strongest first half for capital markets activity in more than a decade, increasing 13 percent to $341 million, despite the broader trend toward declining property sales.

The volume of leases completed last quarter rose 15 percent over the year-ago period, amounting to the company's second-strongest performance since 2007. Revenue increased 11 percent.

Chief Executive Christian Ulbrich said he expects that global commercial property vacancy rates would edge up slightly this year, reflecting the strong leasing and absorption activity even as many markets are seeing high levels of new supply and construction.

Ulbrich said the company expects 2018 investment volume to match last year's $715 billion.

"We see full-year [leasing] totals matching 2017 levels of 442 million square feet," Ulbrich said. "Demand remains strong, with a growing number of investors increasing their real estate allocations."

Toronto, Canada's Colliers International earnings again exceeded analyst expectations, reporting solid revenues and improved earnings. Colliers further shored up its revenue base last month, finalizing its $550 million purchase of a 75 percent stake in Harrison Street Real Estate Capital, a Chicago real estate investment management firm.

Chief Executive Jay Hennick said the acquisition of Harrison Street, which manages $15.6 billion in education, health care and self-storage properties, taps "massive investible markets that won't change with the changes in the economy."

Hennick also noted that leasing activity has increased as property sales have slowed, with institutional investors opting to hold rather than sell their assets.

"I'm seeing people holding real estate longer and less trading and better quality real estate than has been historically," Hennick said.

CBRE Group, Inc. in Los Angeles reported 18 percent growth in leasing revenue last quarter, as well as steady growth in its development and property management businesses.

"The macro environment remains favorable, with solid economic growth," said CBRE Chief Executive Bob Sulentic. "While we are mindful of potential risks on the horizon, particularly from heightened trade tensions, we have so far seen no discernible impact to our business."

Jones Lang LaSalle, Colliers International and CBRE announced heightened investment in technology initiatives in the first half.

JLL Spark, the Chicago-based company's new business tasked with creating new products and investing in property technology, announced a $100 million fund to identify seed investments in property tech startups like Skyline AI, which develops artificial intelligence-driven products to help clients identify institutional investments.

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