CBRE, JLL mauled by credit crunch

CB Richard Ellis and Jones Lang LaSalle, the top two global property services firms, have revealed dramatic declines in profit during the second quarter of 2008 as the credit crunch continues to slow transaction activity.

CBRE, the world's largest of the two, reported net income of $16.6mln, or $0.08 per share for the second quarter of 2008, compared with net income of $141.1mln, or $0.59 per share, for the same period in 2007 when property markets were booming.

Excluding one-off charges, CBRE said it would have earned net income of $33.2m, or $0.16 per share, compared with $157.3mln, or $0.66 in the second quarter of 2007.

The Los Angeles-based firm said the decrease was mainly driven by 'significantly lower sales' due to the continuing turmoil in the global credit markets. CEO Brett White commented: 'As we had anticipated, the leasing business turned down from the strong first quarter, especially in the Americas and the UK, reflecting weak economic activity and decreasing business confidence.'

'Investment sales activity remained quite soft due to a broadening of the credit market turmoil and a continuing gap between buyer and seller expectations of property values. Decreased investment volumes have now become evident in all parts of the world,' White added.

JLL, headquartered in Chicago, said its net income in the second quarter of this year shrank to $24.5mln, or $0.73 per share, from $77.9mln, or $2.32 per share, in the same period last year. On a year-on-year basis net income for 2008 was $27.4mln compared with $105mln in 2007.

JLL indicated it was not all bad news. It reported that revenues for the first half of 2008 increased 5% to $1.2bn over the previous year. 'Solid revenue performance from LaSalle Investment Management and our diverse business lines offset the continued impact of illiquid credit markets on revenue generated by our capital markets business,' CEO Colin Dyer said.

Operating expenses rose 8% to $621mln in the second quarter of 2008 largely due to the costs associated with 13 company acquisitions. 'We are focused on driving our expenses to appropriately reflect our current operating conditions, while maintaining leadership positions in capital markets and hotels to respond to the anticipated needs of the marketplace,' Dyer said.

In the EMEA region, the property services company posted second-quarter earnings of $236mln, an increase of 20% on the same period the year before. The corresponding figures for the first quarter of 2008 was $419mln, an increase of 12% over 2007. CBRE reported that its revenues for the EMEA region totalled $299.7mln in the second quarter of 2008 compared to $330.8mln in the same period of 2007.