Participants

Christian Ulbrich; Chief Executive Officer and President; Jones Lang LaSalle Inc

Karen Brennan; Chief Financial Officer; Jones Lang LaSalle Inc

Stephen Sheldon; Analyst; William Blair & Co.

Anthony Paolone; Analyst; JP Morgan

Peter Abramowitz; Analyst; Jefferies

Presentation

Operator

Good morning. My name is Audrey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter 2024 for Jones Lang LaSalle Incorporated earnings conference call. Today's conference is being recorded. (Operator instruction). At this time, I would like to turn the conference over to Brian Hogan, Investor Relations Officer. Please go ahead.

Thank you and good morning. Welcome to the Third Quarter 2024 earnings conference call for Jones Lang LaSalle Incorporated. Earlier this morning, we issued our earnings release along with this slide presentation an 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 for the company, an 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. We also reference resilient and transactional revenues, which we define in the footnotes of our earnings release.
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, 2023, and in our reports filed with the SEC. The Company disclaims any undertaking to publicly update or revise any forward-looking statements.
Finally, a reminder that percentage variances for or against the prior yar period in local currency, unless otherwise noted. I will turn the call over to Christian Ulbrich, our President and Chief Executive Officer, for opening remarks.

Christian Ulbrich

Thank you, Brian . Hello, and welcome to our third quarter of 2024 earnings call. In the third quarter, JLL delivered strong financial results, which demonstrated our ability to drive operating leverage across our platform and we announced strategic action that strengthen our position in our leasing, property management and lifestyle business lines.
Beginning with our financial results. Our three largest business lines, market advisory capital markets and work dynamics all delivered double digit revenue growth in the quarter. We saw growth acceleration in leasing and investment sales, debt and equity advisory and our what dynamics segment continues to exceed our expectations. These results reflect our strengths in transaction markets, but that's still in the early stages of recovery and our continued momentum in expanding our services to clients.
Importantly, we have demonstrated our ability to drive operating leverage across our platform for continued focus on process efficiency and cost management. The consolidated enterprise adjusted EBITDA increased by 37% and adjusted EPS delivered 60% goal.
During the quarter, we announced strategic actions to further improve our Leasings offering to clients and to enable our people to enhance platform tools to supplement our existing retail technology. We recently acquired race commercial real estate at San Francisco technology power brokerage that provides client solutions using a transformative digital real estate platform. Grace strengthens JLL's platform with market-leading technology season brokers and elite engineers to build innovative products for the full leasing lifecycle from transaction and lease management to workplace and portfolio analytics.
In addition, in 2025, we will bring together all building management groups and the one segment to better capitalize on synergies across platform operations, innovation and client experience. As a result of this realignment, the property management business will report to me marry our work dynamic CEO. Following this shift on January first, our Markets Advisory segment will be renamed leasing advisory and our what dynamics segment will be renamed real estate management services and include workplace management, property management, project management and portfolio services.
Finally, there's high demand for an innovative product offering within the lapse of U.S. open-ended core fund for high-net-worth investors Jll Income Property Trust. We have committed a $100 million incremental investment in that fund, which will be used to acquire assets to be syndicated to a 1031 exchange vehicle and recycled across multiple syndication offerings. These vehicles, I expect it to accelerate the growth of their flagship funds assets under management over time.
I will now turn the call over to Karen Brennen to provide more detail on our financial risk.

Karen Brennan

Thank you Christian. Our strong performance in the quarter reflects our focus on differentiating JLL services and improving platform operating efficiency. Our talented team and the investments we are making in our business are driving superior value for our clients and creating long-term stakeholder value. I will now review our operating performance by segment.
Beginning with marketed driving. The increase in revenue in the quarter was driven primarily by leasing, which generated double-digit growth across most geographies. Notably in the US and Europe and the U.K. And nearly all asset classes. The office sector forestar both increased deal size and transaction volumes flat, the acceleration with 34% growth globally. The industrial sector was flat to the prior year quarter, ending a multi-quarter trend of decline than a factor as deal size rebounded large transaction, where we've historically had a proportionately higher weighting continuing to increase store. It's still below the pre-pandemic average portfolio expansion and the Americas and Asia Pacific, including incremental pass-through expenses, led property management revenue growth.
We continue to see growth in active tenant requirements and demand for high-quality assets, combined with the general stability of the OECD business Confidence Index since earlier this year, we are optimistic for continued pickup in activity. Placing revenue growth, combined with our continued cost discipline, drove the 77% increase in market advisory adjusted EBITDA. The timing of prior year incentive compensation accruals also positively impacted year-over-year profitability. Shifting to our capital market segment, revenue grew as improved investor sentiment, along with interest rate reductions from many central banks, pent up demand, significant dry powder and improved debt availability all contributed to an 18% increase in investment sales, debt and equity advisory excluding that non-cash, and that's our activity.
Revenue increased across most geographies, led by the U.S. and Europe and nearly all asset classes with notable growth in hotels, office and industrial. Global investment sales revenue, which accounted for nearly 40% of segment revenue in the quarter grew 15%. The US and Europe performed notably better than their respective market activity required by JLL Research.
The capital markets adjusted EBITDA growth was predominantly driven by higher transactional revenue and continued cost discipline. Looking ahead, the global investments, our debt and equity advisory pipeline is up high single digits compared with this time last year, and client engagements continue to increase.
Moving next to work dynamics. Revenue growth was led by a 20% increase in workplace management, largely from continued U.S. mandate expansion. As Christian reference, project management revenue growth as shifts in business mix and a focus on higher margin projects led to lower pass through costs, which offset mid single digit growth in management fees. Portfolio services demonstrating growth, which was mostly overshadowed by the absence of fees associated with a large transaction in the prior year. The increase in work in an adjusted EBITDA was primarily attributable to the revenue growth, which more than offset the negative impacts from a timing of certain revenue related expense accrual.
We started to lap the and-or of large 2023 workplace management new client wins in the third quarter. Sustained growth of 29% on a two year stack basis has exceeded our expectations and project management. We remain focused on securing additional mandates.
However, the current level of corporate Capex spending may dampen near term growth rate. Turning to JLL Technologies. Continued growth in software revenue with more than offset by lower solutions bookings over the past few quarters, which drove the decline in revenue. Adjusted EBITDA declined from a year ago as benefits from cost discipline and incremental operating efficiency gains over the past 12 months for more than offset by lower revenue and a $5 million benefit from incentive compensation true-up in the prior year quarter.
In addition, there was a $2 million year over year increase in carried interest accruals associated with our Spark venture funds. We are progressing to sustain profitability within this segment as we balance investing to drive growth. Now to look at our revenue decreased on the impact of valuation declines within our assets under management over the past 12 months, as well as lower fees and Hira from and structural changes in our business mix we discussed in previous quarter.
Absent foreign currency exchange movements, assets under management were 7% lower than a year earlier. Valuation headwinds have moderated, but are likely to continue through the balance of 2024. The contraction of sales adjusted EBITDA in the quarter was driven by the lower revenue and the absence of an incentive compensation throughout that benefited the prior year quarter. Bill muted compared to normalized levels. Capital raising and deployment is up year over year, and we are seeing early indications of increased investor interest.
Turning to this quarter's free cash flow, higher cash from earnings from improved business performance with more than offset by the repurchase of the loan and Fannie Mae described last quarter. Higher cash taxes and working capital headwind from that reimbursables as a result of workplace management growth. We do not expect the year to date, higher cash taxes, the loan repurchase and growth related receivable and that reimbursable headwinds to reverse in the fourth quarter.
Shifting to our balance sheet and capital allocation, liquidity totaled $3.4 billion at the end of the third quarter, including $3 billion of undrawn credit facility capacity. We issued $800 million under our previously announced commercial paper program with proceeds used to reduce borrowings on our credit facility and provide interest expense savings.
As of September 30th, reported net leverage was 1.4 times, down from 1.9 times a year earlier due to both the reduction in that that and higher adjusted EBITDA over the trailing 12 months. Over the medium term, we intend to manage the business to a full year range.
During the quarter, we deployed capital towards growth initiatives and repurchased $20 million of shares are acquisitions that scale and the second quarter and raised in mid-October are reflective of our targeted M&A strategy within our overall capital allocation framework.
Regarding our 2024 for full year financial outlook, growth trends in our resilient business lines remain solid. File transaction activity is improving, although nuanced across geographies, together with our cost discipline, ongoing focus on improving operating efficiency and strong year-to-date performance, we are raising the bottom end of our full year 2024 for adjusted EBITDA target range by $150 million.
Our full year target range is now $1.15 billion to $1.2 billion, which reflects a 7% increase at the midpoint. We continue to see significant growth opportunities ahead, enhance the resiliency of our business, financial returns and cash flow.
Christian, back to you.

Christian Ulbrich

Thank you, Kelly. The increase in our full-year target adjusted EBITDA range reflects continued momentum across our three largest business segments, which we expect will continue through 2025. We are early stages of recovery for the real estate capital markets. According to JLL proprietary Global Bit Intensity Index FEED activity further improved in the third quarter from what we saw in the first half of the year, particularly for larger institutional transactions.
We believe we are very well positioned to grow revenues in our Capital Markets segment based on the quality of our people on the platform investments we have made over the last several years, which enables higher quality data that applies to clients. I would also like to again highlight the 20% organic growth in workplace management, which exceeded our expectations.
This is largely related to expanding the contract scope and achieving KPIs for existing clients, some of which were new 2023 mandates where we delivered strongly against our original commitments for one way in this business as powerful as we continue to win new mandates which scale, revenues and capitalized and our global full-service platform.
2024 marks the 25th anniversary of being lifted on the New York Stock Exchange under the JLL tick-up in to celebrate dislocation, we will be ringing the closing bell on November 13th for 25 years. As shown in the context of a nearly 250 year history, it is an important milestone to recognize our journey as a public company alongside delivering the best of JLL to our clients. We are driving to generate strong shareholder value.
I would like to thank our colleagues for all you do for JLL. I look forward to what we can achieve together. Operator, please explain the Q&A process.

Question and Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator instruction). We'll go first to Stephen Sheldon of William Blair.

Stephen Sheldon

Thanks, and really nice results here. Karen I think you may be mentioned the capital markets pipeline is up, if I heard it correctly, high single digits. So just curious how you guys are thinking about maybe the potential cadence of the capital market's recovery as we think about the next two to three years. What could that potentially look like?

Christian Ulbrich

It's Christian. A couple of markets. Environment has improved pretty steadily over the last couple of months. And so, call, we also haven't seen any pause, let's just because of the 10-year treasury going up again over the last couple of weeks. So, we expect that to continue. There will be no kind of a flood of new deals coming, but we will see a seasonal uptick now in the fourth quarter than we expected continuous improvement over the course of 2025

Stephen Sheldon

Got it. That's helpful. And then nice to see the acquisition of Radius. Maybe you talked about how you plan to leverage those capabilities across your existing leasing business. And then any detail on that? Does that come over with any material revenue or better and what the general profit implications there? Thank you.

Christian Ulbrich

Yes, raises primarily a tenant representation leasing brokerage from. And the uniqueness is that they have developed the technology platform for use by our own brokers as a workload to. But it also provides direct digital experience to clients. They are active in a couple of markets so far to fairly small business. So the amount of revenue which is coming over is a nice but not meaningful overall leasing platform.
But the attractiveness is that we are going to roll out that workflow to all our leasing progress across the U.S. over the course of the next 18 months, and that would make them much more productive. But it also changes the experience for our clients.

Stephen Sheldon

Great pressure to get there and congrats on those altogether.

Karen Brennan

Yes. Let me just add that on the yes. The second part of the question around sort of come with any revenue and how do we think about profitability. So, from a revenue perspective and relatively small amount is around 1% of our overall fee revenues and leasing. But how we're approaching that, given the delay direct to roll that out across our entire leasing platform is to focus on making room in our overall expense profile by cutting other investments that we were previously making and to focus on achieving attractive margins for this overall business as we absorb it into JLL.
So, we will generate a very attractive ROIC from our perspective within three years. And then with cost off that we're making our minimum ROIC hurdle to achieve from year to onwards.

Operator

We'll go next to Anthony Paolone of JPMorgan.

Anthony Paolone

Yes, thanks and nice quarter. Sir, just a question on margins. It just looks like just backing into your guidance for the year that you ran this year in the 40 rooms come in terms of margin, and it's shaking out to be a pretty good year, your long-term range of 16 to 19. And so I was wondering if you just one tell us if that still feels like the right level we should be thinking about over time into what do you think needs to happen in terms of just the broader market to get there?

Karen Brennan

First, maybe I start by commenting on a little bit more color on the full year in the range of providing. So, we have given a range the midpoint of our range is based on our transaction business pipelines at this point, which reflects typical seasonality and capital markets, slightly suppressed seasonality and leasing. And then a continuation of the trends that we've seen in our resilient business lines, just call it out that we're mindful of were laughing new client wins and workplace management can offer some really strong growth there.
But the midpoint, if you think about the low end of our range, that's contemplating a slowdown in terms of and that could result from many macroeconomic and geopolitical or interest rate risk that manifest in the market in the coming weeks. And then a high end of our range contemplates a more meaningful pickup in transaction activity, most notably in leasing.
So that's how we're thinking about full year 2024. We do expect continued momentum going into 2025 based on the trends we're seeing today. And we'll give more specifics on extra stations for overall 2025 and after the fourth quarter. And I will call out that the midterm margin range that we now have previously communicated did assume some level of recovery and the transactional business and overall.

Anthony Paolone

Okay. So that 16 to 19, you still need to be we should still think about that as needing a further recovery beyond kind of where we've been seeing recently and sort of leasing and capital markets.

Karen Brennan

Yes.

Anthony Paolone

And then can you maybe just talk about capital allocation where you see using your cash at this point?

Karen Brennan

Yes. So, from a capital allocation perspective, no change to what we've previously communicated on that process were focused on continuing to reduce our leverage to the midpoint of our overall target range to reinvest in our business organically. And then to pursue select M&A and share repurchases.

Anthony Paolone

Okay. Thank you.

Operator

We'll go next to Michael A. Griffin at Citi.

Just on the leasing numbers for this quarter. I wonder if you could give some more context, particularly around the office portion. Are you noticing is most of the demand is coming from the higher quality space? And has there been maybe incremental demand from? Yes, not top of the market on product and then have decision makers. You know, they've been kicking the can down the road to the office space needs for a couple of years now have a strong job. Their expectation for office footprints?

Karen Brennan

Yes. So, a few different questions in there. I guess the first one is what trends do we see an office property in this quarter So, it's certainly we still are seeing a focus on high the highest quality office assets. And that's a trend that has really process that over the last several quarters. one notable thing that we're continuing to see as the increase of larger transaction sizes overall, and that's something we've talked about that they've had been more muted.
They still remain and see if you look at the U.S office transactions over 100,000 square feet are still below pre-pandemic historical averages by about 50%. But we did see a meaningful uptick of around 45% in this quarter. So that's a notable trend overall. Second part of your question, which could you repeat it? I'm sorry, I forgot it on.

Yes, no problem. Just have you noticed if Hom Station tenants are more confident in signing leases that are pointing to kicking the can down the road?

Karen Brennan

Yes. So, we have seen some more signs of confidence, I guess a couple of different things we're looking at their sort of what has been signed. And then what is the overall outlook the on what had been signed? We look at the availability rate relative to the overall vacancy rate. So, the availability rate, we'll include it leases that have been signed but not yet commenced. So that will include both downsizing expansions, right, overall, net new leasing. Importantly, in the US, the availability rate has decreased for the first time since the pandemic that we find that to be really notable and encouraging.

Thanks Karen, I appreciate the color there on maybe just some more insight into U.S. capital markets activity. You called out that it was up about 30% year over year. That seems pretty strong to me. I mean, anything you're seeing in the US from a growth perspective or investor interest might have contributed about relative to the other regions.

Christian Ulbrich

Sure. I mean, first and foremost, the US market is usually the market is reacting that fosters on any kind of change in the market environment. And so it went down first and it will come up first, um, secondly, on if you look at the capital markets from a global perspective, the investable market, unfortunately, the shrinking in the world, there's a tremendous amount of capital out there from international investors, and they will look to invest into the US probably more so than invest into any other market at this point in time.
So, we see this significant demand coming from those type of investors into the U.S. market, and that will be a strong support into 2025. We still have this kind of bifurcation between the different asset classes. Multifamily is still by far the strongest, but we see now that the interest in office is starting to increase. The challenge there is that there's very little new product coming to the market. And so there is a focus on the super high quality products, and we see now a much more of a competitive environment for those type of products when they come to market.

Very good for me. Thanks for your time.

Operator

We'll move next to Alex Kramm of UBS.

Just say good morning, everyone. Just on work dynamics. I think you mentioned a couple of times that you've exceeded your expectations here so far this year. I know you're lapping some of the onboarding. And Christian, you made a comment about benefiting really from the things that you had put in place in 2023. So just wondering if you look forward here over the next year, if you are you think about the expectations in general and maybe you can talk about competition in that space as well. Thanks.

Christian Ulbrich

So, I mean the performance of an overall work Dynamics business and specifically the workplace management business has been very, very strong in the third quarter. Again, Frankly exceeding our own expectations. The underlying trend going forward is still very positive. You're asking about the competitive environment, the amount of companies who can really provide a global experience to our clients is very limited. And so we expect continuous strong demand from our services from existing clients. But as we have seen in the third quarter, again, from a lot of new clients coming to market. And so, we are just a very happy about the outlook and will continue to put a lot of focus and emphasis on that business going forward.

All right. Fair enough. And maybe a little bit of a nitty-gritty question here. On the margin side, in particular and capital markets, given the growth to be a little bit better year over year. Leasing was really strong. But in capital markets certainly softer. So, is that is there anything one-time is going on there? Should we what should we think about the incremental similarly in the fourth quarter, which obviously a very strong quarter for capital market's expectations?

Karen Brennan

Yes. So, from quarter to quarter, you can see some level of an anomaly and the longer-term average incremental margins that we experienced in certain business lines. And that's certainly holds true for capital markets. The things that can impact that are really a mix of business, both by geography and by service line and then certainly tiny expenses, which could impact the margin profile in a particular quarter. If you look at year to date for capital markets and you adjust out for the $18 million Fannie Mae loan expenses at around just over 40% year to date, which is really more in line with historical average incrementals of 35% to 40%.

Very good. Thank you.

Operator

We'll go next to Peter Abramowitz at Jefferies.

Peter Abramowitz

Thanks for the time. Yes, I just wanted to dive a little deeper into Karen's comments around the pipeline for investments in our own debt and equity advisory of high single digits. I guess just trying to frame how we should think about that. Is that kind of how you're thinking about revenue growth into the fourth quarter and then potentially those kind of what you're building on into 2025?

Christian Ulbrich

Well, as we said before, the overall environment is comps continues improving and our capital markets business. And that is true for the investment sales side as well as it is for the debt advisory side. So on, I'm not quite sure that I completely get your question where you want to have us to be more specific here. It's the outlook is very positive on all areas in our capital markets business, and we continue to win market share in that business.

Peter Abramowitz

Right. I guess I'm just trying to understand whether that sort of a proxy for what you expect your revenues to be up in that line in the fourth quarter when you say high single digit

Karen Brennan

No

Peter Abramowitz

And then one of the leasing side, what are the themes and office, I think from specialty earlier, in this year's pent-up demand coming off the sidelines from deals that were sort of put aside and 2023, whether it was recession fears of a regional banking peers. So that seems to help the market in 2024 for, I guess, just curious how you're thinking about sort of that segment of office leasing, whether that's something that's sustainable into 24 themes we should be thinking about the 25 as you sort of plan around for what you're expecting?

Karen Brennan

Yes. So, if we think we're largely through the initial pent-up demand and people are pushing to take decisions now, one of the things we look at is the OECD. confidence index because that tends to be and in leading indicator for the two to three-quarter period of time in terms of what will happen in terms of new decisions being taken, that's holding steady. So we feel good about that. And it has been positive for the last few quarters, and we're seeing that continue. And some of what we expect to see is continued and our TO impacts for the Fortune 100 companies.
The average return to office requirements have increased from a year ago at 2.2 days per week to 3.3 days per week. And so, we see expect to see some our positive momentum there as well. And so, we don't, at this stage, expect any major deviations from the trends we're seeing an office, but just fine right is different to what's happening in industrial leasing at the moment.

Peter Abramowitz

Got it. And I guess if I could ask one more turnover or expect to the expectations around industrial leasing, it has been a maybe a weaker spot on the leasing side, Joe. So just I know you mentioned in the slide deck declining delivery, so that should help on the supply side, but they've gotten to for and how we should think about industrial leasing in the 25?

Karen Brennan

Yes. Industrial leasing. It's an interesting one because we're saying it's flowing and there's a reduced growth levels, but it's off of an extremely high starting point. And so leasing volumes are down on demand has not had moderated and continues to moderate. Right now activity is in line with pre-pandemic averages, though, and the long-term outlook remains favorable as we work through some of the current and Scott current demand pull back for the US specifically, just to give a little bit more color. Leasing volumes are down 26% year over year, and the vacancy rose slightly, but it's still at 6.8%, So it's still a healthy vacancy rate there. And then we're seeing an uptick in pre-leasing of new construction. The pre-leasing rates in the quarter improved modestly at around 40% of space under construction are still positive rental growth in the US at just over a 3%. So, some softness relative to where, whereas then that we expect will process care for that. But no meaningful change in the medium to longer term in a strength that we expect in industrial markets.

Peter Abramowitz

My congrats on a great quarter.

Operator

Our next question comes from Jade J. Rahmani of KBW.

Based on what you're seeing so far. Would you characterize the outlook for commercial real estate recovery as modest or potentially in a very strong past cycles when spreads were lower, we did see a sharp recovery. So just wanted to get a sense for how do you think about things?

Christian Ulbrich

That's a pretty wide range between modest and very strong, I would place it exactly to the middle. It's certainly better than modest, but I wouldn't say it's very strong, but the outlook is positive for 2025.

And you commented that so far you haven't seen any impact from higher treasury rates on transaction pipeline. But do you expect higher treasury rates to dampen the outlook, particularly for multifamily?

Christian Ulbrich

At least for the probably next couple of quarters, I don't think that we will have any negative impact from higher treasury rates. I expect to see an increased demand across all asset classes for our capital markets business. Whatever the interest rates will do longer term, if it goes up two club and that may have an impact on multifamily because that is a sector which is still very much driven by domestic investors. But on the other hand, as I alluded to earlier, office industrial and large retail is also a very interesting for international investors and they are coming to the U.S. from an allocation point of view. And they are less impacted whether the interest rates up 50 basis points higher or lower.

In terms of the announcement to strengthen building operations and focus on digital leasing capabilities when do you think, could explain more about the strategic rationale?

Christian Ulbrich

So, you're talking about our property management realignment.

Yes,

Christian Ulbrich

We are constantly looking at our organizational design and any opportunities to capture further synergies and to drive a better experience for our clients and frankly, also to become more productive as a platform. And this is exactly what we are doing here.
The primary goal is to drive those synergies across our platform, innovation and client experience because our property management business provides a pretty similar expertise and has a pretty similar operating model as our workplace management business, which sits within work dynamics.
And so that's the reasoning why we are putting that under one leadership. And then we also believe that it makes JLL just easier to understand because these operations similar businesses are now grouped together under one P&L.

Lastly would be just around 2025, I know you haven't given any outlook you'll do that next quarter. But in terms of growth expectations, do you think something similar to what we saw this quarter is reasonable to extrapolate? I think most are assuming around 15%, 20% growth and in leasing and capital markets, at least for next year. Just wondering if you think the growth is sustainable?

Karen Brennan

Yes. Well, we prefer to see the full results and the year before we comment on growth rates to extrapolate into 2025. So, we're all clear on that baseline more starting from for that conversation. So stay tuned.

Peter Abramowitz

Thank you very much.

Operator

We'll move next to Patrick O'Shaughnessy at Raymond James.

Hi, good morning. Can you speak to the relative importance to the industry or the short end of the rate curve versus the long end of the curve? So yes, as we think about the long and moving up in recent weeks, but no expectation of the Fed to continue cutting the Fed funds rate, how does the net impact of that to impact the industry?

Christian Ulbrich

That's a great question. I'm not sure that anybody has scientific answer to that. On short-term interest rates are obviously very relevant for any kind of developments. They are relevant and more so on the high-end opportunistic market. So, the high yielding products versus the core assets, long-term holders are relating more to the long term. And so that makes it so difficult to translate that into to the amount of business we can expect from those interest rate movements and how relevant they are for us.
But I would go back to what I said earlier for all the trend line. We see around interest rates is favorable for the recovery of the capital markets environment. And we expect that to be the case, even though we see that uptick on the 10 year rates over the last couple of weeks. But I wouldn't get overly concerned about that looking forward.

Got it. Thank you. And then you took out about $800 million of commercial paper in the quarter and pay them most of your credit facility. Can you speak to the rationale of switching your borrowing methodology a little bit?

Karen Brennan

Sure. I'll take that really to reduce the overall interest rate on our outstanding borrowings was approximately 60 basis points differential benefit.

Great. Thank you.

Operator

And that concludes our Q&A session. I will now turn the conference back over to Christian Ulbrich for closing remarks.

Christian Ulbrich

Thank you for that. With no further questions, we will close today's call. On behalf of the entire JLL team, we thank you all for participating on the call today. Karen and I look forward to speaking with you again following the fourth quarter.

Operator

And this concludes today's conference call. Thank you for your participation. You may now disconnect.