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Letter from the CEO
Strategy and business model
Global strategic priorities (G5)
Integrated service model
Integrated reporting approach
History and acquisition activities
2015 marked another outstanding year of record revenue and profit at JLL.
While real estate market conditions remained favorable in most parts of the world, success is never the product of healthy markets alone. We thank two groups for such a good year: our clients, who trusted us to represent them in all parts of the world, and our own staff, who earned that trust by delivering superior client service, advice and results.
We continued to invest in growth throughout 2015, accelerating the pace of investment across our firm to advance our strategy for focused growth. In doing so, we expanded both the quality and breadth of the services we provide to clients and the career opportunities we create for our own people. The year’s acquisitions included leading retail management and leasing companies in Istanbul and Tokyo; a U.S.-based pioneer in cloud-based facility management solutions; a U.S. multi-family and senior housing debt financing business; Australia’s largest privately-owned national valuations firm; and design and fit-out companies in Germany and the UK.
Record financial results
The year’s financial results confirmed our ability to create long-term value. Fee revenue increased to $5.2 billion in 2015, 17 percent higher than the year before in local currency, while gross revenue reached $6 billion, an 18 percent increase in local currency. Adjusted earnings per share totaled $10.01, 26 percent above 2014 levels, despite an $0.87 foreign currency exchange headwind. Adjusted EBITDA margin calculated on a fee revenue basis in local currency was 14.6 percent for the year, compared with 13.8 percent in 2014. In December 2015, Moody’s revised its outlook up to Positive, acknowledging our strong cash generation. And our investment-grade balance sheet continues to position JLL for additional growth in the future.
Continued investments in our G5 global growth priorities
More than a decade ago, we began to focus our strategic investments on five growth priorities that cross service lines and geographies. We call them the G5. Not only have they made us a leader in the areas where we choose to compete, but they have also helped us generate long-term sustainable growth. They have added to the value we create for clients, employees, shareholders and other stakeholders. And they have produced potent competitive differentiators for us within our industry.
The first G focuses on our constant drive to build and strengthen our local and regional operations. G2 through G4 help us identify growth opportunities globally in outsourcing and related corporate real estate services, in real estate investment sales and in institutional funds management. G5 helps us accelerate and leverage growth across the first four priorities by strengthening connections between our markets, people, business lines, and as featured in this year’s report, our technology. Together the G5 make us more effective and efficient at serving clients, accelerating growth, increasing productivity, managing risk and, ultimately, promoting the long-term success and sustainability of JLL.
G1 | Building our leading local and regional market positions
Our leading position as a global real estate services provider is driven by our service capabilities and competitive position in key regional and local real estate markets globally. So we constantly assess strategic opportunities to strengthen our capabilities in relevant markets geographically and in different industry segments and asset classes within markets. We reinvest more than 90 percent of JLL’s profits back into the business to create additional growth, improved client services and new opportunities for our employees.
In 2015, we attracted many talented individuals and teams to our ranks, including our new colleagues who joined JLL as part of the twenty acquisitions we closed. (They are listed in the accompanying 10-K and also at jll.com.) To date in 2016, we have completed another 11 acquisitions. Our approach in each instance has been to acquire selectively and with rigorous due diligence. We examine finances, operating risk and strategic, cultural and client fit. We maintain pricing discipline and focus on high-profit, high-margin opportunities. We minimize operational overlap that can destroy value. And we plan for and manage integration carefully as we welcome new colleagues to JLL.
G2 | Strengthen our leading position in Corporate Solutions
In 2015, we continued to build our leading position delivering integrated real estate outsourcing services to corporate clients in all parts of the world. Corporate occupiers focused actively on restructuring their portfolios and leasing new space to attract and retain top talent in an increasingly competitive business environment. And businesses in all parts of the world worked to manage their real estate expenses more effectively by outsourcing real estate services to trusted advisors.
As just one example of the momentum and strong client relationships we have established in this business, banking and financial services firm HSBC extended our assignment to provide facilities management services across its 55 million-square-foot global real estate portfolio for an additional three years. We will remain HSBC's global provider until 2021.
During 2015, we provided corporate facility management services for 1.3 billion square feet of client real estate, a 17 percent increase from 2014. We had 137 new business wins, expanded existing relationships with 75 clients and won 35 contract renewals.
G3 | Capture the leading share of global real estate capital flow for investment sales
Two market trends continue to drive our third strategic priority, which is to deliver capital markets services globally: first, increasingly international, cross-border flows of capital into real estate, and second, global marketing of prime real estate assets.
Since few competitors have the integrated service platform and worldwide market presence to match our reach and experience, this creates a distinct competitive advantage for JLL in an active investment sales market.
During 2015, we provided capital markets services for $138 billion of client transactions, a 17 percent increase from 2014. Our Capital Markets and Hotels revenues increased 25 percent in local currency for the year.
G4 | Strengthen LaSalle Investment Management’s leadership position
LaSalle continued to provide its clients with superior service and returns in 2015. Operating revenue for our institutional funds management business increased 16 percent in local currency for the year, as LaSalle generated double-digit increases in advisory, transaction and incentive fees, its three major fee categories.
During the year, LaSalle increased assets under management to $56.4 billion, 5 percent above the 2014 total, and raised $5 billion of capital. Confirming its industry-leading status, London’s Estates Gazette named LaSalle ‘Global Real Estate Company of the Year.’
G5 | Differentiate and sustain the organization by connecting across the firm and with clients and other stakeholders
Throughout 2015, we continued to link different parts of our business more efficiently and productively. This allows us to leverage and accelerate our investments in the first four Gs, differentiate JLL from competitors, increase profitability and sustain the company over time.
Our clients look for partners who can deliver services that are both specialized and integrated. They want those partners to address their specific needs, which can change over time and from one geography to another. They require multiple approaches to serve those needs: from global to local and everywhere in between, perhaps with a single point of contact at the top, plus additional links at the local level. And they demand that their service partners always act with integrity and, increasingly, be able to demonstrate a commitment to the environment, citizenship, regulatory compliance, safety and cybersecurity
As we connect our people, systems, technologies, service lines and geographies more effectively, our client-service capabilities increase dramatically. Improved connections also contribute to increased productivity, and to greater profitability as a result. And our JLL culture supports connections: teamwork, ethics and excellence frame our culture, bringing us closer to each other and to the firm’s clients.
Our 2020 strategy for focused growth
To support and accelerate progress for each of our G5 priorities, four years ago we introduced an interrelated group of business and operational strategies to help us drive focused growth to 2020.
The 2020 strategy has confirmed that the G5 continue to contribute to our business and financial goals, guiding us to pursue them effectively. That includes identifying and investing in resources that help the strategy succeed:
Diverse talent equipped and motivated to accomplish our strategic objectives.
To attract and retain talented individuals in all parts of our business, in 2015 we increased efforts to make JLL a more diverse and inclusive company. Led by our Board of Directors, Global Executive Board and senior leaders around the world, our goal is to prepare the company for the future business world, and for how much more diverse our clients will be in the coming years. So Diversity and Inclusiveness (D&I) is now a strategic priority at JLL. We are making progress. In 2015 Diversity MBA magazine named us one of its ‘Best Places for Women and Diverse Managers to Work.’ Later in the year, we earned a perfect score on the ‘2016 Corporate Equality Index,’ a benchmarking survey on corporate policy practices administered by the Human Rights Campaign Foundation. And three out of the eight nominees for independent members of our Board of Directors this year are women, including the Chairman of the Board.
Our Employee Engagement Index, which measures the percentage of survey respondents reporting high levels of engagement with the firm and their work with us reached 76 percent as measured in 2015, up 3 percent from 2012, the last time we completed a full survey. Substantially all the survey results improved over 2012 and also were higher than the global norms reported by our independent survey provider.
Productivity measures to improve margins.
Productivity also received increased attention and action in 2015. To counter the long-term fee pressures that affect all service businesses, we are driving productivity improvements in everything that we do: from the way we manage costs—both for ourselves and our clients—to the services we offer clients. We are making major investments in supply chain management and centralized procurement. We are investing heavily in data and information management to help us work more efficiently for clients. In essence, we are asking everyone at JLL to look for ways to work more effectively and efficiently as we continue to grow the company. We have even established a firm-wide ‘Productivity Prize Challenge’ that will assess and reward the best ideas our employees create, both for clients and in our own operations.
Investments in data and technology tools to help our people mine the depths of our intellectual property and help clients maximize the value of their real estate.
Commercial real estate is in the midst of a digital revolution. Winning business and serving clients successfully depends increasingly on our digital, data and information-management capabilities. So, once again, we grew our technology and data investments and initiatives significantly in 2015. Our goal is to digitize all JLL data, workflows and business applications by 2020.
While quality data is the foundation of these efforts, IT applications take data and interpret it for our commercial applications. Last year we continued to work to bring IT systems developers closer to our business professionals and to develop practical business applications and make them work globally. By concentrating resources on universal, high-quality applications, we are reducing efforts to design and maintain large numbers of locally customized systems.
You will find examples of recent investments in data and technology later in this report.
Standardized tools and processes that make operations highly productive and minimize enterprise risk.
Our Business Network teams—Legal, HR, Professional Standards, IT, Finance, Risk Management and Internal Audit—collaborate with their business line colleagues to balance the need for procedures that facilitate revenue generation—by making it easy for our clients to do business with us—against the need to protect the firm contractually and financially. Accordingly, we have built significant document management, knowledge management and tracking and training systems to manage the significant enterprise risks we face as a complex global organization.
A brand that differentiates JLL and LaSalle, and clearly reflects the breadth of our expertise, wisdom, governance and integrity.
We continued to build our brand in 2015. In an industry characterized by consolidation and globalization, our goal is to set out our own position with clarity and consistency, defining our space in the market and unifying how we express our brand.
To support these efforts, we conducted a comprehensive, global image survey across all our client sectors. The survey measured how clients perceive both JLL (and separately LaSalle) and our principal competitors.
We are using the survey findings to define what we call ‘The JLL Way,’ highlighting our values of teamwork, ethics and excellence as points of differentiation for JLL and creating clear positioning messages that will make us stand out in the minds of clients and prospective employees alike.
An important element of the The JLL Way is our sustainability leadership agenda, which we call ‘Building a Better Tomorrow.’ At JLL, our commitment to sustaining our business over the long term, which we have done for more than 250 years, means successfully managing the financial, environmental and social risks and opportunities our complex organization faces, and helping our clients do the same.
Senior management changes at JLL
In February 2016, Alastair Hughes announced that he would leave JLL on June 30th of this year. Alastair joined the firm in London in 1988. Later he served as our UK Managing Director, as EMEA CEO and, starting in 2009, as CEO of Asia Pacific. He has also been a member of our Global Executive Board for 11 years. Everyone at JLL thanks Alastair for all that he has brought to our company over the years, and we wish him well in the future.
Anthony Couse has been named to succeed Alastair as Asia Pacific CEO, effective June 1st of this year Anthony joined the firm in London in 1989, moved to Hong Kong in 1993 and then to Shanghai in 2006 as Managing Director, Shanghai and East China. He has built an extensive network of Asian clients in 26 years at JLL, contributing to our rapid growth in East China. He has also provided strong leadership as head of D&I for Asia Pacific. We welcome Anthony to his new role.
Later in February, we announced that Christian Ulbrich, currently CEO for our EMEA region, would become President of JLL on June 1st. In his new role, Christian will focus on managing our regional businesses in Asia Pacific, EMEA and the Americas. Our regional CEOs will report to Christian, and he will report to me. I will retain the Chief Executive Officer role following the June 1st transition. Christian has also been nominated for election at our 2016 Annual Meeting to become a member of our Board of Directors.
Christian joined JLL in 2005 as Managing Director of JLL Germany and became EMEA CEO in 2009. Throughout his JLL career, he has delivered sustained growth, earning the respect of clients and colleagues in the process. As one measure of the region’s recent growth, since 2010 our EMEA revenue has doubled and profits have risen fourfold.
Guy Grainger will replace Christian as CEO of EMEA on June 1st. Guy has served as UK Chief Executive since January 2013, overseeing significant growth in revenue, profits and capabilities during that time. He played a leading role in developing our global Retail 2020 strategy, has championed efforts to grow our international Residential capabilities and led the UK’s significant sustainability efforts.
Chris Ireland will succeed Guy as UK Chief Executive. Chris joined JLL in 2011 as one of the joint managing partners of King Sturge. Following that successful merger, he took a dual role as JLL’s UK Chairman and Lead Director of UK Capital Markets.
These assignments demonstrate JLL’s commitment to careful succession planning and developing the firm’s future leaders. We are fortunate to have so many experienced senior managers who are prepared to take on increasingly important roles as our business continues to grow.
Changes on our Board of Directors
David B. Rickard and Roger T. Staubach have decided not to stand for re-election to our Board of Directors at our 2016 Annual Meeting. We are grateful for the significant value that each of them has contributed to the Board, Dave for nine years—including as Chairman of the Audit Committee—and Roger for eight. Roger will continue as Executive Chairman of our Americas business.
Moving forward with confidence
Three months into 2016, we continue to see positive momentum in most real estate markets, sectors and client segments worldwide, even as we face more challenging geopolitical and economic situations in some parts of the world. In this environment, we will continue to focus on generating additional growth at JLL and LaSalle. We will rely on the strength and depth of our client relationships, the depth and flexibility of our finances, and, above all, the skills and hard work of our people.
As I do each year, I want to end this letter by thanking our people for their unparalleled commitment to clients, colleagues and our firm.
To punctuate their contributions, consider some of the awards they helped us earn in 2015 and to date this year, listed on the next page. They are extraordinary for the diversity of what they honor and where they have come from, the best possible indication that The JLL Way is far more than words.
Thank you for your continued interest in JLL.
Colin Dyer, Chief Executive Officer
Awards earned in 2015 and to date in 2016
Chief Executive Officer and President