Jones Lang LaSalle Incorporated

Thank you for standing by. My name is Ian, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 2023 JLL earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, Again, press star 1. Thank you. Scott Heideberger, Head of Investor Relations, you may begin your conference.

Thank you and good morning. Welcome to the second quarter 2023 earnings conference call for Jones Lang LaSalle Incorporated. Earlier this morning, we issued our earnings release. along with a slide presentation and Excel file intended to supplement our prepared remarks. These materials are available on the investor relations section of our website. Please visit ir.jll.com. During the call and in our slide presentation and accompanying Excel file, we reference certain non-GAAP financial measures, which we believe provide useful information for investors. We include reconciliations of non-GAAP financial measures to GAAP in our earnings release and slide presentation. As a reminder, today's call is being webcast live and recorded. A transcript and recording of this conference call will be posted to our website. Any statements made about future results and performance, plans, expectations, and objectives are forward-looking statements. Actual results and performance may differ from those forward-looking statements as a result of factors discussed in our annual report on Form 10-K for the fiscal year December 31st, 2022, and in other reports filed with the SEC. The company disclaims any undertaking to publicly update or revise any forward-looking statements. I will now turn the call over to Christian Ulbrich, our President and Chief Executive Officer, for opening remarks. Thank you, Scott.

Hello and thank you all for joining our second quarter 2023 earnings call. Conditions impacting global real estate markets were largely unchanged in the second quarter. The consistent tone coming from the US Federal Reserve with regards to inflation and the interest rate tightening cycle has kept real estate markets muted. Overall, higher costs of capital tighter lending standards, and elevated price uncertainty has limited transaction volumes. During the second quarter, we grew our resilient business lines while also effectively managing through the industry-wide slowdown in investment sales and leasing activity. To put this into perspective, global commercial real estate investments totaled $139 billion in the second quarter. a year-over-year decline of 53%, according to JLL research. The second quarter decline in investment dollars was in line with the deceleration seen over the last two quarters, which would support the view that the market has found its bottom with regards to transaction volumes. On the leasing side, volume for the global office market was down 14% year-over-year in the second quarter, according to JLL research. Occupiers continue to have a cautious outlook on the macroeconomic environment, and as a result, are extending their timeline to make decisions. Large-scale leasing activity remains slower than normal, but is showing signs of improvement with second-quarter activity up sequentially from the first quarter. Global office vacancy rates are up modestly to 15.6% in the second quarter compared to 14.4% last year. Asia Pacific leasing volumes remained stable compared with last year, but volumes declined in both Europe and the US. Demand, particularly in the US, continues to be focused on high quality and sustainable spaces in prime locations. These types of best-in-class assets have proven to be much more resilient than the overall market with rental growth remaining positive despite the slowdown in office leasing activity. We are observing corporates shedding lower quality space while also directing employees to return to the office at least three days a week, which is leading to peak occupancy rates at or near capacity in high-quality buildings for many of our clients. As a reminder, a significant percentage of JLL's office leasing fee revenues comes from transactions in these high quality or class A buildings. Turning to the industrial sector, global leasing activity moderated the second quarter. Asia Pacific showed positive net absorption during the quarter, while gross leasing volumes in the US and Europe slowed. Overall market fundamentals in the industrial sector remain healthy with low vacancy rates and positive rental growth in many markets. The industrial sector has grown to become one-third of our total leasing fee revenue, and we expect growth in this asset class to continue in the coming years. The hotel and retail sectors have benefited from healthy consumer spending on experiences and services, a rebound in international travel, has also boosted the hotel and retail markets globally, particularly in the tourist corridors of Europe and Asia Pacific. Overall, these macro and industry-specific trends are playing out largely as we expected when the year began, though we had forecasted a slightly stronger advancement of transactions in the second quarter. In contrast, our resilient business lines collectively delivered positive fee revenue growth during the second quarter, highlighted by growth in our property management, workplace management, and JLL Technologies business line. Basal's business performed well given the decline in real estate asset values and incentives were better than expected, demonstrating the diversification and strengths of this portfolio. Before I turn the call over to Karen, who will share more detail on the quarter, I want to touch on the JLL technology segment. While it is the smallest of our five business segments, the value it brings to our company and our clients is substantial. The core of this business is our built-by-partner invest strategy, which we spoke about at our investor briefing last fall. Perfect example of this strategy coming to life is the AI-powered platform our capital markets team is using to identify, analyze, and source pipeline opportunities. Earlier this week, our JLL Technologies team took this one step further with the unveiling of JLL GPT, a secure, generative AI model for commercial real estate that we built in-house. Our teams are beginning to use this new tool to provide clients with even better insights into the current market. These are just a few examples of projects our technology team is working on that we believe will translate into long-term shareholder value, especially when you consider the tech-driven transformation that is playing out in the commercial real estate sector. Part of our strategy is investments in prop tech companies that are positioned to drive further efficiencies or in some cases disrupt the commercial real estate industry. As a reminder, the three main reasons we invest in these companies are, first, to enable our business with technology tools that will drive growth and improve productivity. Second, to provide clients with best-in-class technology solutions. And third, to gain insight into technology that will potentially disrupt the industry and inform our strategic direction. While we have a disciplined approach to these investments, venture capital investing is subject to increased volatility during economic cycles. As a result, we have to be comfortable with equity gains and losses associated with these investments. In the second quarter, our JLL Technologies investment portfolio generated a non-cash equity loss that primarily resulted from two companies raising capital in down rounds. These losses came after approximately $200 million of gains over the past few years. Even after reflecting these recent equity losses, the portfolio is valued at 1.2 times the original investment amount of $405 million. Today, we have built out a mature portfolio that includes more than 50 companies, and while we will continue to invest in PropTech companies, the dollar amount of incremental investments will be notably less than the past three years. The medium-term outlook remains healthy for many of the companies we have invested in, and we are focused on bringing the strategic benefits of these investments to our company and clients. With that, I will now turn the call over to Karen, who will provide more detail on our results for the quarter.