JLL preps for bigger deals to return

JLL is preparing for an uptick in larger investment and leasing deals to come back to the market, following a relatively flat year of revenues. The agent reported full-year revenue of $20.8bn (£16.4bn) for the 12 months ended 31 December 2023 yesterday, down 0.5% on the year before. Capital markets revenue, like its peers, was down by 29% over the full year to $1.8bn.  But chief executive Christian Ulbrich said he was confident the market was coming back and that transaction volumes and sizes would grow even if “the path forward may be uneven”. “Sentiment in the global real estate market has improved since our last earnings call in early November, a result of the drop in the 10-year US Treasury bond yield, and a growing consensus that interest rates have reached peak levels across most major economies,” said Ulbrich. “While falling debt cost will lead to a more predictable operating environment going forward, it will take time and prolonged stability for pricing to fully adjust. The path forward may be uneven, but we are confident that bid-ask spreads will normalise and transaction volumes will improve.” Ulbrich said liquidity remained available and he was seeing activity in the debt markets, particularly for residential, industrial and data centres, but added that in the current market environment, smaller deal sizes remained the most attractive to lenders. He added that the firm was seeing a “modest number” of larger deals come into the market over the past few months, however. In leasing, Ulbrich said the trend continued to be that occupiers were taking a cautious approach, but that office demand was stabilising as the return to office push from companies intensified. “Similar to investment sales, large lease transactions are starting to return to the market but have not come back in a meaningful way yet,” he said. “As larger transactions come back into the market, we expect to benefit disproportionately.” Looking ahead to 2024, Ulbrich said there were “reasons for cautious optimism” with the first signs of green shoots emerging in commercial real estate. He said JLL’s global bid intensity index had shown a growing number of bidders entering the market since late 2023, which was an encouraging sign for transactional markets. “As interest rates stabilise, lenders and investors will be able to appropriately price real estate assets, which will lead to a tightening of the bid ask spread,” said Ulbrich. “This process is already under way, with the US, UK and Australia furthest along in the price adjustment cycle.”