Jones Lang LaSalle Incorporated (JLL) Earnings Call Transcript & Summary

Good afternoon, everyone. I'm Chris Stent, Executive Managing Director of Investor Relations and Corporate Finance at JLL. I'd like to welcome everyone to the webcast. As a reminder, this event is being recorded and will be available for replay on our website, ir.jll.com. The purpose of this webcast is to provide our investors and analysts an opportunity to understand more about our Corporate Solutions business. 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 the annual report on Form 10-K of the fiscal year ended December 31, 2020, and in other reports filed with the SEC. The company disclaims any undertaking to publicly update or revise any forward-looking statements. Joining me today is Neil Murray, who has been CEO of Corporate Solutions for the past 2 years. Neil will begin the webcast with a brief presentation, which will be followed by live Q&A. We will begin with questions from the sell-side analysts covering JLL. [Operator Instructions] Before we begin, I would like to provide some context to help frame the discussion. While we do not currently report financials on the Corporate Solutions segment and will not be providing any additional financial disclosures today, we are pleased to provide more insight on the long-term vision and profitable growth that we see ahead for the Corporate Solutions business and also to shed light on the technology-enabled solutions we provide for our clients. Neil will focus on Corporate Solutions' compelling value proposition, including how we are helping clients create, shape and manage the future of work while serving the full breadth of their long-term real estate needs, including on sustainability. Neil, thank you for participating in the webcast this afternoon. Before we commence Q&A, let's begin with a brief overview and some slides about the business. The slides have also been posted to our website, ir.jll.com. With that, I'll turn the webcast over to our Corporate Solutions' CEO, Neil Murray.

Hello, everyone. Glad to be here with you today. I've had many questions during my tenure as CEO of the Corporate Solutions business from analysts and investors wishing to better understand the business itself. I understand that it is complex, multifaceted. So I thought we would put together some slides just to give you an overview of the business, and I know you'll have varying degrees of knowledge about that. And from there, I think we want to reserve the majority of the time today to take your questions. And I'll do my absolute best to illuminate the business to try and get across to you how excited we are about the future prospects of this business from a growth perspective and try and get across to the sort of evolution of the market and where we see it's going and the lessons we've learned from the past and from other industries. So I will take you through a handful of slides for about 15 minutes now. Maybe starting with a sort of overview of the business itself and what we do, the kind of very basics of the business. It's in the 3 major categories, I think, on the left-hand side there, the graphic you see. So in the first instance, looking at clients' real estate portfolios, helping them with a strategy around their portfolio, its locations, what countries, cities they should be in, managing mark-to-market on their lease portfolio, for example, or their owned portfolio. And there's a capital element, which is about helping clients plan capital replacements, upgrades for their often large and complex real estate portfolio, having them design workplaces that will help them attract and retain and engage talent. And then the operations element, that many of you will be sort of most familiar with. It's often referred to as facilities management, that part of the business where we run the offices and real estate business for our clients. And it's everything from engineering services to managing a pretty complex supply chain of all the services you would expect in a building, from often AV to catering, to janitorial services, much of which is done through a supply chain. I think worth noting on the operations element on the facilities management, it's moved more recently to experience services, to workplace services. It's less about sort of turning wrenches and keeping buildings running and more about curating, if you like, an experience based on the brand culture that a client is looking to portray in their business. All of that is surrounded in red there by what we describe as business intelligence data management and technology. This is where we have to invest in data systems that really integrate all those myriad of data points that I described to you, whether it be in the real estate portfolio itself, capital planning dimensions or indeed the ongoing operational costs, the utilization, how buildings are being used and so on. All of that has to be integrated to provide not just data, but converting data to usable information and to insight in order for clients to be able to make decisions about their portfolio. So you have points on the right there. There are very few, as you know, global players that can execute this integrated range of services at scale, we're in a strong position. Technology is obviously a much greater dimension nowadays capturing, as I said, those myriad data points, making them useful. And as you can see, there's a sort of a full suite of products. We describe corporate real estate as a sort of top 5 spend for many of our corporations. It's often second after their #1 spend category, which is their people. We like to think of it as a very important dimension of servicing that #1 spend category. So a bit of an overview of the business itself. We have some 42,000 employees around the world, and as I mentioned, a deep supply chain also behind that. Run across about 500 accounts. And to be clear, all accounts are not made equal. Many kind of household name logos, as you'd expect, but some larger multi-services where we've got a full suite that I described to you earlier. Some where there's just an element of that, maybe we'll just look after the portfolio or the operational element or indeed the capital element on behalf of the client, all opportunity to do more. Across 80 countries, so that spread, that coverage is a really important factor when you're trying to service multinational clients. And about 1.6 billion square feet of space under management. I was looking for some metrics around on how you visualize that, but I found it very difficult to do. But suffice to say, it's an awful lot of space. Businesses are very well balanced across industries and across asset types. Obviously, office is a really big part of it. But we have everything from hospitals to data centers as well as your more traditional office buildings. I thought it's important to talk a little bit about some of the kind of long-term occupier trends that -- now these have been around for a long time, and you'll recognize them, but they've been accelerated and intensified by the pandemic. And I think it's important to make a distinction between things that are happening as a result of the pandemic and very much now and the trends that will still be around in a few years' time. So just highlighting some of those. Obviously, cost optimization is ever present and became even more spotlight on it through the pandemic for many industries and companies. Sustainability is really important one, and I'll touch on this, I think, several times today. It's not an aside, it's not an ESG report that's sort of outside of the core focus of the business anymore. Extremely important to almost all of our clients. I think last count, 90% of our clients have made some sort of a statement in the open market about sustainability and their sustainability ambitions. And from our perspective, the great opportunities, less than 20% of those have a clear executable plan as to how to get there. It's also extremely important, a company's position on sustainability, when they think about recruiting staff. Next generation of workers coming into the workplace have strong views in this area. And we can really help clients there. Health and wellness. Health and safety has obviously been a focus for a long time in real estate, but wellness is now front and center post pandemic and will remain so. I don't think any of us know the long-term implications of the year we've just all been through from a mental health perspective. But also things like indoor air quality, where we can really help clients are now far more relevant than they've ever been. In terms of the procurement, I think some of this may come through in your questions and understanding the dynamics of the business. Increased outsourcing tends to happen after a major sort of event, whether it be a recession, a global financial crisis or indeed a global pandemic. There is a realization that solutions are complex, and external advice needs to be aggregated and provided to clients. So we tend to see increased outsourcing around those times. Continuation of the trend towards centralized procurement. It's no longer decentralized and fragmented in vast majority of our corporate clients. ESG often has an R put after it. Think about resilience, resilience of supply chain, the sort of interdependence and interconnectivity of supply chain, for example, is more important than ever. And therefore, procurement functions are being centralized more and more, which again gives us opportunity for consolidation and simplification clients' supply chain. And I think that plays well to the larger-scaled players. I've mentioned some of the points down on the bottom already around data and analytics and technology. And you'll be seeing this in every industry you follow. I think it's really accelerated in our industry and will continue to do so as we have so many data points that need to be integrated for decision-making. So if you take, for example, the return to work, the concept of understanding how space is going to be used, who's going to be coming in when. So we're pulling together information like starting with ERP system data, connecting it with reservation system data, data around sensors about how space is being used, all being brought together in a meaningful way so that proper decisions can be made, and of course, an increase of automation in that domain. So the trend to touch on is the concept of people first. We -- I use this slide to kind of illustrate this mantra I've been using at work, workforce, workplace portfolio. We used to have our conversations with clients in the domain of workplace and portfolio, and they've very much gone upstream. The pandemic has made, particularly corporate clients, think about the very nature of work. What is the nature of work? What work is being done? How it needs to be done, where it needs to be done? Is there a creative or a collaborative dimension to it, for example? And we're part of those conversations, really assessing how work is being done; then the workforce that's required to do the work; then downstream of that, thinking about workplace and real estate portfolio. So there's been a shift where, I think, for the first time, every Chief Executive in the world has got a view on their real estate portfolio that they probably didn't have 12 or 18 months ago, which is an exciting time for us. It means we're having very different conversations with different people. And so forgive the complexity. I'm just trying to illustrate here the different dimensions of real estate portfolio, who the stakeholders are on the client side that we're now engaging with in meaningful ways that we never did before. I mean an obvious one is that many of our corporate real estate, the CRE clients, now report into HR because real estate is seen as that manifestation of a company culture and brand and no longer a factor of production but something that's key to the attraction and retention of people. So that's a really important move that we're seeing. Similarly, sustainability, it means that we're engaging with executive leadership teams, the ESG function if it exists with our client organization, Chief Information Officer around technology because all the things we do have some sort of connection with client technology. So CIO is now a client. All of which, this complexity that I'm referring to, means that our position, I believe, is a very strong one because of the depth of domain expertise and the breadth and ability to integrate such complex themes. You've seen it in this sort of slide in many industries, but just trying to draw your attention to the value evolution that I see before us. We talk about our business often as a sort of outsourcing business. I think a more accurate description of it previously that was a tasked business, similar to other industries, IT as an example, a lot of professional services, BPO in the sense that clients retained strategy and real estate expertise within their own organizations and add tasked elements of it through an RFP process to a supply chain. I think as the industry evolved and we started to bundle more service together, we started providing more value to our clients and potentially some more margin to the company, but it's still a disruptable, RFP-driven and commoditize-able, if that's even a word. I think when you move to the right-hand side and talk about integrated products, so moving much more towards outcomes, bringing together the best of what we do in a consistent, repeatable way in bringing those solutions to market, I think, allows you to have a very different conversation about value creation with your clients. That's a place, I believe, we're getting to at pace every day towards that sort of holy grail, if you like, of being a strategic partner for the long term for our clients across a multitude of services and needs. So to sum this up in a bit of a narrative for the business to hopefully land with you, if you'll indulge me, a better description of what Corporate Solutions is about. It's not a workplace business. It's not a workplace management business. You see at the top there our company purpose that many of you will be familiar with. We relaunched this purpose some time ago, 2 years ago now almost, about shaping the future of real estate for a better world. And it's about our responsibility when it comes to sustainability and diversity and many other dimensions of what we do and our desire and responsibility to shape that future. If you think about Corporate Solutions in that context, it's about enabling large complex organizations to shape their workplaces, their workforce experience to achieve a more human-centric, more resilient and more responsible real estate offering to create a better world of work. So to my point earlier, the emphasis is on work and not as much on workplace anymore. That's all I had for you is a bit of an overview of the business because I wanted to leave a majority of time to interact and give you the best answers I can to your questions. So I'm happy, Chris, to pass on to you and the moderator to take questions from the team, if that's all right.

Great. Thank you very much, Neil. The first question is going to be from Stephen Sheldon of William Blair.

Chris, can you hear me?

Yes. Thank you, Stephen.

Hey, Stephen.

Neil, I really appreciate you doing this. Great to be able to dig in a little bit more here.

Pleasure.

I guess first, I just wanted to kind of ask, I guess, at a high level what changes you've seen and the breadth of solutions demanded on a per client basis over recent years. And maybe just talk a little bit more about the types of solutions that have been seeing, I guess, the highest levels of demand.

Yes. As I touched on, I think the solutions are getting more complex, needs are getting more complex as the data that drives decisions we're making sense of, and we're being able to provide insights that we probably couldn't as an industry a few years ago. So there is more propensity to outsource at larger scale across multiple dimensions. That's obvious, and we're seeing it. Pandemic, obviously, the last 12 months has been interesting. As you'd imagine, a lot of clients were pressing pause on real estate strategies while wrestling with what the future would hold. We've seen lots of movement in that. I think we're fairly sure, Stephen, that real estate office will still be the center of the work ecosystem for some time to come, and we're very confident about the role it plays. But there's been a renewed focus on that, on the value of office and its purpose, which has been sort of music to our ears and the fact that we've been able to have conversations at the level with clients at a strategic level that we've wanted to do for some time. So maybe to answer your question, since the -- in the -- certainly, the 5 years after the global financial crisis, we saw a little bit of a race to the bottom in this industry. It was all about cost. It was all about efficiency. How can you take cost out of the portfolio and do things in different ways? And that affected and manifested itself in many ways in the industry that you will have reported on and seen. I think those days have gone. I think this is -- there's a deep understanding now that this is a source of value creation and differentiation for our clients. You'll have heard things like the tsunami of turnover of staff that people are expecting as people have had time to contemplate and cogitate on their futures. During this pandemic, people are assessing purpose in whole new ways. And so real estate is a real means to compete for that talent. I think you asked me about some examples. I mean we just, in the last 6 months, mobilized a large kind of multifaceted contracted for an energy company -- global energy company household name energy company, which involved every dimension that I presented to you in the first slide. But I think more importantly, the contract type had changed. It was -- what we refer to as a vested contract, the major dimension of which is win-win outcomes. JLL incentivized to deliver client core outcomes and protected against downside with the partnership being at the core of it. We've brought in elements like dynamic occupancy planning, for example, which is the bringing together of this sort of live utilization data, understanding, Stephen, if you're coming to work, who you might need to sit next to if anybody and had to schedule those things in a dynamic way with a little layer of AI. So the return-to-work stuff was right at the heart of it, a design element of their future workplace strategy, what they wanted to be given the demographic of people that are trying to attract into their business now and who they're competing with. So all of those elements are sort of a good example of a recent contract win and pointing towards where the industry is going.

Got it. That's really helpful. And then I guess on the shift that you kind of -- or I guess it's not even shift, it's kind of the shift from tactical to being more of a strategic partner, if you thought about the next 3 to 5 years, I guess, some of the -- you're still doing a lot of the tactical work. You're getting more into the strategic side. Would you expect any other side to be more valuable or grow quicker than others? And how does the trend of -- if you thought about institutional owners versus privately held owners, does that play into that dynamic at all? I guess maybe just talk about that a little bit.

This is an -- institutional owners versus private, let me deal with the first question first. I think there'll always be an element of procured RFP-ed services that we provide. There's no doubt about it. We need to think about technology and how that will evolve our business models going forward. So some of the core FM services may remain procured in a consistent way and to your nomenclature, a little less strategic and more tactical. I think that complexity is the driver of strategic relationships. And when we think about the complexity of global dynamics of people's needs and preferences, the fact that we have various -- I think, an emerging gap between the desire of many, many CEOs in terms of where people work from and the desires of some workers of -- in particular areas and age groups, profiles and so on. And so that complexity requires strategic advice. And we've seen it, as I said, in other industries. If you make parallels to maybe the IT outsourcing industry that started without tasking of elements of it, and so companies were willing to give the sort of the keys to the family silver over to the outsourcing partners on the basis of their depth of knowledge and their systems, which -- where a delta emerges between what a company that does this for a living can do and what a noncore activity within a corporation can do. And we're really seeing that delta emerge with the greatest respect with in-house real estate function client organizations, they need strategic advice now. In terms of the institutional versus privately held, maybe Stephen, can you just illuminate that question a little bit for me?

Yes. I mean I'm just trying to think through -- I guess one of the things it seems like this playing out as the institutional ownership of commercial assets is increasing. And just as I think about their level of sophistication, their need for a strategic partner that think through real estate footprints, all these other things, does that trend play out to maybe more demand for some of the strategic advice you're giving versus -- I guess, does that influence it at all is the...

Do you mean institutional owners of real estate?

Yes.

Yes. I mean I think that -- yes, absolutely. The management of real estate assets, in general, has become more complex and more operational. I mean this is -- it's no longer a, not that it ever was, a completely passive investment, right? It's an operationally intensive asset class. And therefore, expertise is required and which points to outsourcing, Stephen.

Great. The next question will be from Tony Paolone of JPMorgan.

Neil, appreciate the strategic overview. Would you be able to help us by taking maybe a down-the-fairway kind of example and put some dollars in sense on how the business works in terms of your typical fee structure. Is it pennies per square foot, length of the deal, the add-on services and how you just get to the overall economics of the business?

Yes. A nice easy one from you. Tony, thank you. There is -- the first point is there's no one-size-fits all, right? So we have a full spectrum of contract types in the business, and we talked to you about trends there. But what I can tell you is that, yes, we have some relationships that are based on square footage, and we have clear line of sight to maybe changing some of those relationships and how we think about it. Most of the fees, most of our contracts are -- there's an input cost, whether that be through a third-party supplier or around services then an accepted and negotiated fee level with our clients. And then there will be some elements of fees at risk based on achieving client goals or KPIs. Those KPIs can range from employee satisfaction with services. Sometimes in data center world or in a trading floor, it might be uptime. In some cases, there will be certain elements or inputs that they require to a certain standard, where we'll have performance indicators against and performance fees at risk or indeed upside available. There's -- generally speaking, the industry hasn't yet evolved to sort of full output -- outcome-based pricing. There are some examples, but we see a path to that. But right now, the downside is limited, but also the upside is limited at this moment in time in terms of overperformance to outcomes. Other questions you asked me, so fee structure, length of deal. Average length of deal at the moment in the business is about 3 to 7 years. I know that's a broad window, a 3-year deal and a complex outsource makes no sense anymore. So if it's 3 years, it's a 3 plus 2 where you meet certain criteria -- predetermined criteria, the contract gets extended. You will see, however, though, that -- I would say it's quite a sticky relationship that we develop with our clients in the sense that retention rates have been across the industry upwards of 90%, we'd be in the upper side of that. I think most recent declared numbers, I'm looking at Chris, 97%. It's those kind of order of magnitude retention rates. So the opportunity is to retain and grow and shift relationships. If we're not fully penetrated with the client in terms of providing that full suite of services, then data and technology allows you to produce compelling reasons why adjacent services should be provided together. And I think as an industry, Tony, we weren't very good at -- and I mean as an industry, not just JLL, at creating those compelling reasons to use the same company for all services in all geographies. And so the -- all the eggs in one basket kind of logic prevailed, and many corporations went to JLL and some of our competitors to provide services across all services and geographies. And I think those reasons are getting far more compelling, Tony, as I was referring to earlier in terms of the integration of that data in real time and helping with strategic decisions.

Got it. And then my other question, you mentioned that there are a few providers of this service at scale. And I think that's been something we've generally been aware of. But are there ways that clients can piece this together with either regional players in the space or to do it piecemeal, like -- and what I'm getting at is just trying to understand like what is really the competition when you have clients that are outsourcing.

Yes. I said that choices the clients have is, as you opened with, if you want to do this at scale across even one service line at scale, there are very few companies that can do that globally. If you don't see the financial or operational value benefits of doing that, then it is possible to piece together a supply chain in, for example, FM. You could have a regional player in EMEA, a different regional player in Asia Pac and one in the U.S., absolutely, and many clients do that. So you could indeed, Tony, contract with an EMEA-only provider, for example, for that geography. That said, I think the biggest most complex clients will start to see, if they're not already seeing, the value of consistent performance management of differentiated tools in technology and in, for example, sustainability. And it's up to us as a business and an industry to really present those compelling reasons why you shouldn't parse up and going back to the eggs in one basket analogy, making those eggs much easier to carry, right? And I think that we're seeing trends -- there will always be companies that move against those trends and think about passing things up regionally. But there are a lot of other dimensions at play here at the moment. Things like, as I said, resilience of supply chain, which is a big kind of post-pandemic focus. What sort of balance sheet does the company have that you're contracting with? What sort of runway do they have? What sort of access do they have to attract talent at scale, to move talent around, to develop their own talent? Because a lot of these required skills don't sit on the bench in the industry, right? We have to develop people. My leadership team, when I joined a couple of years ago, Tony, I did infuse it with what I thought was world-class talent from other industries. We need perspectives on industries that have been through this outsourcing journey. We need perspectives from the hospitality industry, for example. And so long story short, I see, as I had up in one of those slides, a desire to consolidate providers and an opportunity for us to do more and create more value for existing clients.

The next question will be from Jade Rahmani of KBW.

Appreciate you taking the time to do this.

Pleasure, Jade.

Just a couple of, hopefully, basic questions. Could you put around the business some financial details as some of your competitors have? For example, how much fee revenue and adjusted EBITDA does the Corporate Solutions business generate? Otherwise, you could answer it in terms of percentages. What percentage of JLL's total fee revenue and adjusted EBITDA does the business constitute? And finally, what is the target growth rate for the business?

Jade, I hate to let you down, but I -- it's difficult for us to talk about -- in the current construct of the business and how we report about financial details on that level. And that's why I try to point towards it. We do have it as our plan to be much more transparent about this business in the future. But right now, they're difficult questions to answer. What I can tell you is that I see line of sight to a double-digit CAGR for this business. I think it's a 10% predominantly organic growth business with the runway that we have ahead of us. I also see opportunities to expand margin in the ways I've just described. And that's as a direct result of increasing the value that we're providing to clients, right? Everything starts with client value and measured in client value, and I see real opportunity to do that. Now of course, when you expand margins and grow top line, there will be requirements to reinvest in technology and platforms in staying ahead with our differentiation. But I'm sorry, Jade, I can't give you more details on the financials. I think maybe another number that I could point to is that we've said externally, it's about 25% of our fee revenue of JLL globally to give you a feel for a scale with great kind of growth opportunities and margin expansion opportunities. Sorry, Jade.

And if you -- I appreciate that, and I know that there's a lot of nuance because some of the categories of financials, there's a penumbra, there's a gray area in which things don't purely fit into one category. There's probably a subset of Leasing and Capital Markets that has a Corporate Solutions component. But if you were going to break down, say, Property & Facility Management, the most basic services you provide to the most highly value-added services, things like workplace strategy and engineering, what would be the range of margins that exist in those business? Should we think of Property & Facilities Management as perhaps a 4% to 7% margin business and some of the higher value-add services as low double digits? Does that make sense?

Yes. The question makes sense. I think you just kind of framed your question another way, haven't you? I think that there is a range of margins in the services we provide. But that said, there's so many determining factors, the risk profile of the contract, the complexity that I think it's difficult to point to a blend of these are the high margin services and these are low margin services. I think that the annuity nature of some of the FM services are very important. I think there are, as I said, expansion opportunities in everything we do. You mentioned the gray area, Jade. I think the gray area, what's important there is this concept of what we refer to internally as One JLL. So what you don't see and what I don't talk about in my kind of purview of Corporate Solutions is, for example, brokerage fees or capital markets fees. But of course, there are brokerage fees associated with the renewals of the multitude of leases, thousands of leases for corporate clients. And of course, a lot of our clients still own real estate. So there are capital markets implications. It's a distinction that I want to make you aware of that we probably haven't articulated well in the past is PM and FM are 2 different things: property management and facilities management. So property management is an investor service, it's about managing a building on behalf of an investor that's typically a multi-tenanted building. So it's got dimensions of rent collection, for example, central amenities, which is very different than the FM business within the Corporate Solutions business that I'm responsible for, which is about running the real estate department or the facilities on behalf of the occupier as opposed to when we have of the landlord. I hope that makes sense to you. So even in PM/FM, there's a part of that currently reported business that actually sits adjacent to our agency leasing business and so on. I hope that makes sense.

Have you seen any realizable synergies from the HFF merger in terms of that sales team being able to pitch some of the Corporate Solutions services?

Absolutely. I mean it's been a fantastic partnership. We were delighted with the talent and expertise that's truly world-class. I worked closely with Mark Gibson, the CEO of the former HFF business, who now runs our Capital Markets business in the Americas. We see clients together. We look at intelligent ways of how to think about the owned estate. And as I said earlier, many of our clients still own large chunks of real estate, our corporate-occupier clients. And many of them had to think differently about liquidity, for example, through the pandemic. And we've been able to provide some really exciting solutions there. I think the other thing to note, and I know you'll be aware of this, is the sort of synergies between the 2 business. The value of real estate is often a large dimension to the valuation of real estate is the quality of tenant. And so it's based on occupier demand, right? And our business is about working closely with large-scale occupiers to help understand that demand in ways that, I think, companies that don't have, both investor and occupier businesses wouldn't truly understand. So probably a long way of saying, I think we provide insight to our capital markets colleagues that's a real value to them in terms of where the market is going.

And just last one, hopefully, a quick one. Just wanted to ask about inflation since that's top of mind for investors today. Do you see this business as being impervious to inflation, sensitive to inflation because you have some fixed costs that will be rising and you have a set/agreed-upon margin that -- or cost saving you have to deliver to the client? How do you think inflation affects the business?

Yes. Very welcome, Jade. Thank you. I feel confident about the impact of inflation in the business. In some cases, given our contract structures, it will -- our fees will inflate with them. In other cases, we'll have to think differently about how we work in partnership with our clients to mitigate any impact. But I've been in this industry now a long time in various ways, so was in this industry when inflation was a word that was used. And it's a -- while not being impervious I would say it's very resistant and resilient in an inflationary environment and, in fact, can be helpful to our revenue growth.

Next question is from Patrick O'Shaughnessy of Raymond James.

What are JLL's largest sources of competitive differentiation as compared to the other firms that you would generally come up against in RFPs, particularly the competitors who do have global scale like yourself?

Yes. [indiscernible] give you a sales pitch. No. Look, I think, Patrick, there's a few things. I think that technology, you'll have heard the story from Christian and then from Karen, we've invested in a very different way, I think, than the industry has in technology advancement. We thought about it differently. We've employed -- we started with the Spark fund and really understanding the emerging technologies. We then employed a team of not just sort of -- again, with the greatest respect to the IT industry, but there's a distinction between IT in corporations and true kind of digital natives, right, and so Silicon Valley-based teams competing for talent with household name tech companies. Looking at the CVs of the people around me in the technology business, they've come from the best in the technology business, not other corporations. And so I think technology will show itself over time to be an enormous differentiator between ourselves and the competitors. I don't say that lightly. Everyone might tell you their technology is great. This is different. It's better, it's real, and we're extremely excited about the prospect of taking market share and growth based on our technology offering. The second one, I would say, will be sustainability, Patrick. I think we are the first in the industry to come out and make aggressive commitments to net zero. You may have read, we're going to get there by 2040. We've been vocal about science-based targets. We've been vocal about our desire and ability, and indeed, responsibility to do something about this given the proportion of emissions that come from the built environment. And every one of our clients, without exception, is having conversations with us about sustainability. I'm comfortable to talk to you about this in open forum because we have made investments and broadened teams and capabilities that I believe are a step ahead of others in the world of sustainability and how to incorporate those services into everything we do. This is not about having a sustainability business line, right, and revenue stream. It's about having sustainability as a feature of our Capital Markets business, of our Leasing business, of our Corporate Solutions business and a sort of a ubiquitous dimension to everything we do. The final one I'll give you is a soft, but I've given you 2 hard ones, and you'll maybe indulge me and let me give you a third one, which I believe in, and it's a harder sell to you. But if you believe in the culture of organization as a differentiator, which I do, and if you don't believe the culture as a differentiator, you need to come and do my job for a while because we get to see from the outside in the differences in company cultures. And I promise you they are stark. And I think something over the 250-year history has evolved into something special here, an ability to attract and retain talent that has an ability to go and express themselves. And so we hear it all the time when we win that culturally who we are and what we do is appreciated. And so I want to call that out as something we're proud of and think we'll contribute to our continued growth.

That's very helpful. And then in your presentation, you mentioned that you're up to 500 clients now. How much of the business' growth in recent years has come from adding to the number of clients or accounts? And how much is doing more with your existing accounts?

That's a good question. I think, yes, we consider those sort of 3 major elements of our business in terms of its revenue growth, the starting point being retention of existing clients, existing relationships and the old adages of how hard it is to win and how expensive it is to win new relationships versus nurturing and making sure you don't lose existing ones, that's the starting point. The second, obviously, growth lever is about doing more with existing clients. And as I said to you earlier, I tried to point to, in a professional service environment, it's not about setting up kind of popcorn stands and trying to get clients to buy more from you. It's about increasing the sophistication of what you do and showing clients the ability to create more value. And I think that's one of our most important levers. New client acquisition is wonderful. New logo acquisition is wonderful. I think the runway in the industry -- I said earlier, it's very hard to put a number on -- if you guys analyze leasing markets or capital markets, you can get a pretty good number on JLL's market share in every market. Corporate Solutions is different because there isn't that transparency of data in the market. The best proxy we can use for the sort of market size is 2% to 3% of Fortune 2000 top line is typically real estate spend, right, categorized across capital, across rent and leasing and across the operations. And so if it's 2% to 3% on average, it leads you very quickly to a big number in -- more than $1 trillion of market, which is probably only about 30% penetrated, okay? Because there's still a lot of in-house resources, in-house real estate departments, in-house capital planning functions, in-house maintenance functions. So if you think of the sort of total addressable market, probably only 30% of it is fully outsourced. And so the -- that's something to go at, compelling value proposition. I said earlier that when markets become more complex, when more choice is introduced to an industry or a client type choice of technology, choice of location, then that's when advice is required. So I do think that there will be good growth in new logos in market share and doing more with existing. Can't really give you a percentage, Patrick. I'm sure you'd want it at this point. But I -- it's certainly something we can look at. I mean we talk about being more transparent about this business. I'd love to bring those sort of numbers to you.

Next questions are from Michael Funk of Bank of America Merrill Lynch.

A couple, if I could. So we've heard about competitive intensity picking up in some regions. Hoping you can maybe talk about some of the incentives being offered, what you're seeing in terms of competitive intensity for discounts, length of time?

Tell me -- bring that to life for me a little bit, Michael. You say competitive intensity, around what sort of things?

In terms of competing for deals, right? So if you're competing with another CRE broker for large outsourcing deal, I've heard that at times, the competitor or you might offer an upfront discount, other incentives trying to win the deal.

Yes. I think my personal view on that is if you've got to that point, then your value proposition and differentiation isn't strong enough in the first place. So -- and I say that in all honesty. I mean there's always -- competition goes through various cycles. And if a particular competitor needs to grow in a particular market, they may be willing to accept lower fees in a given market. I tried to spend the first sort of 45 minutes of this conversation telling you that I think this is about value creation and not cost anymore. I really believe that profoundly that the value we can create for our clients and our clients' people far outweighs the cost of our services, right? And that delta is growing. One of the ways I used to think about it, and they're old numbers now, but let me play it to you for a minute. If you think of the operating cost of being, I don't know, $3 a foot, say, then we think of the lease cost as $30 a foot, but the person in the space costing $300 a foot. And what I'm saying to you is the impact on the $300 is far greater than the -- than what you can gain in a competitive process on the $3. And so being able to kind of bring that to life when we're coming to client with a proposal is really important. So I don't feel that for our most sophisticated logos we're getting beaten by a race to the bottom on a nickel and dime on the $3 a foot, if that makes sense to you. I think those days are over in my world.

Understood. And you mentioned also there have been catalyzed decisions, right, and even more senior executives now are aware of the real estate footprint. And presumably, you're having more discussions. So first, what discussions are you having specifically around services and products? And how has that changed in the last 18 months?

Yes. I mean it's been a rollercoaster ride in the last 18 months ago. I got to be honest with you. I never, in my career, had more engagement with Chief Executives and -- seeing an evolution, all of our clients, depending on their industry, the profile of their workers, their geographic locations were in slightly different places. And you'll have been reading, we had the hysteria of we're never going back. We're going to do this remotely. And then maybe 3 months later, this isn't very exciting anymore. And so there's been an evolution in an ever kind of changing landscape of how people are feeling about this pandemic and how they feel about real estate post pandemic. Now I said to you too earlier, I think we have to look to sort of -- rather than hear all the noise and be distracted by the noise that the truths we are seeing. And we feel very confident about real estate in general post pandemic. And sure, some working powers will change. Sure, there are people that will adopt some sort of hybrid working, you want to spend more time at home. We think that will be offset by some clients wanting more space or to use space differently around creativity and collaboration. We think that also a lot of that -- those changes, if they exist, will be offset by growth companies, and we're seeing the beginnings of that all the time. So in trying to answer your question, Michael, about the conversations we've had, it started with, how do I reduce my number of rooftops? I don't need all the space anymore, right? That was the kind of conversation maybe a year ago. And the conversation is now is, how do I create an environment that's going to pull people into my buildings because I want them there, right, because I think that we serve our clients better from there. The researchers coined what they call the 4 Cs: the culture, creativity, sense of community and collaboration being the major things that are lacking when it comes to running of businesses. So Chief Executives how do we bring people in? So we've been doing a lot of work -- consulting work with clients on reentry protocols on active occupancy planning. One of the products we launched was called Experience Anywhere. How do you make sure that workers who are working remotely are not kind of working in a bean bag -- on a bean bag for 12 hours a day? And you are bringing that kind of culture to everybody no matter where they're working. So there's been a lot of effort. So with the sort of curated list of ergonomic furniture that you can send to workers. So what am I -- in summary, the last 18 months isn't a great indication of the conversations that were having other than -- because they're changing so quickly, other than saying it's front of mind for Chief Executives, thought has evolved. And the purpose of the office is at the very center of their thinking now, and I think we're very well positioned to input into that conversation.

And I asked that in part, Neil, because I wanted to link it to your Slide #7. And I realize it's not a time series, right, from left to right with the lower margin to the higher margin business. But thinking more about these collaborative conversations that you're having, how should we think about modeling that and the impact on margin, right? Presumably, you're having more conversations that are higher-margin services. So how are you thinking about margin growth in your business?

Yes. I mean the question is then, how does that affect the downstream? So there's obviously the strategic conversations, right? But if -- there's 2 ways of looking at those. Are they adjacent to your core services in addition to your core services? Or are they connected? Do they mean you provide your core services in a different way, right? And what I mean by that is, the reasons -- if you start with a portfolio strategy and think about where you want to be and how you want your brand and your culture manifested in a building, then you've got a downstream design conversation, okay? So the next step after kind of envisaging what you want is design, capital planning and then executing of those, the remodeling or whatever is required. Then you have, how do I want services delivered? And what I was trying to get across to you was that probably means if it's linked to the sort of upstream conversations around people strategy, then it's not procured in the same way anymore, right, because it's about strategy followed by design, followed by curation of experience on the ground whether the person is in the office or at home. And so look, it's not going to be across the board. The RFPs in Corporate Solutions are dead. Long live the consultative conversations. Of course, it's not going to be that. These things evolve over time. But again, the lessons we've learned from other industries, Michael, are that, the shift becomes real and noticeable over time, and that's what we're seeing.

I'd like to thank everybody for joining us. Thank you, Neil, for taking the time to speak with us about the Corporate Solutions business. This concludes our webcast. As a reminder, the slides are available on our website as is a replay of this event. They can be accessed at ir.jll.com. Goodbye, everybody, and have a nice afternoon.

Thanks for your time, everyone.