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JLL Increases Severance Costs As It Reckons With Slowing Investment Climate

JLL is cutting its global earnings forecast amid deteriorating economic conditions in 2022.

JLL, one of the world’s largest commercial real estate brokerage firms, has increased its severance spending after months of beefing up its staffing.


The firm spent $9.4M in the third quarter on severance and other employment-related charges, including those related to external service providers, up from $1.2M in the same period last year, and widening from the second quarter, when JLL spent $8.3M.

While the brokerage's revenue rose 6% in Q3, its net income fell by more than 40% to $140.2B, led by a 13% year-over-year quarterly loss in capital markets revenue. Global CRE investments dropped 18% year-over-year to $234B in the quarter, according to JLL research.

JLL executives on the company's Nov. 2 earnings call did not give any reasons for the severance increase.

“In the context of a more challenging macroeconomic backdrop, we are focusing on reducing costs while also being selective about investments and growth initiatives,” JLL Chief Financial Officer Karen Brennan said on the call.

She added that JLL is fielding more requests for consulting work through this period, which is balancing the revenue lost by a down period for transactions and allowing it to keep more staff. 

“Our clients are now asking us more than ever for advice. And so we're certainly being rigorous in terms of pulling back on discretionary spending and being really focused on our costs,” she said. “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.”

JLL is the latest CRE firm reckoning with the effects of rapidly rising interest rates and their impact on global real estate markets, particularly with investor demand as real estate values and yields come into question amid higher borrowing costs. Last week, JLL's chief rival, CBRE, announced it would spend $400M on cost reductions, the majority of which would come from staffing cuts.

“For real estate markets around the globe, fast-rising interest rates and significantly widening spreads have created a notable imbalance between our overall financing costs and yield. Lenders are cautious and underwriting assumptions are becoming more restrictive,” JLL CEO Christian Ulbrich said on the call. “Bid-ask spreads continue to widen and the desire for greater price discovery is elongating the time to close deals. In addition, currency fluctuations are limiting cross-border capital flows.”

JLL follows CBRE, Newmark and Colliers in cutting projected earnings growth for the year, CoStar reported. Brennan said JLL’s anticipated full-year 2022 adjusted margin before interest, taxes, depreciation and amortization to fall below the 16% to 19% range initially predicted.

Ulbrich projected the investment environment to improve in the second half of 2023, especially given the amount of investor demand sitting on the sidelines, waiting for a return to certainty with interest rates. 

“What it means is that yields have to go up. That's what we call the price discovery. And the faster that price discovery is happening, the quicker transaction volumes will come back again,” Ulbrich said. “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. But honestly, it's not easy to predict.”


CORRECTION, NOV. 7, 1:50 P.M. ET: A previous version of the story reported that the increase in severance was in response to economic conditions. A JLL spokesperson said the increase is a normal part of its business and was unrelated to executives' economic outlooks.