Jones Lang LaSalle Inc (JLL) 2013 Q3 法說會逐字稿

Good day and welcome to the third-quarter 2013 earnings-release conference call for Jones Lang LaSalle Incorporated. Today's call is been recorded. Any statements made about future results and performance or about plans, expectations and objectives are forward-looking statements.

Actual results and performance may differ from those included in the forward-looking statements as a result of factors discussed in the Company's annual reports on form 10-K for the year ended December 31, 2012, and in our other reports filed with the SEC. The Company disclaims any undertaking to update or revise any forward-looking statement.

A transcript of this call will be posted and available on the Company's website. A web audio replay will also be available for download. Information and a link can be found on the Company's website.

At this time I would like to turn the call over to Mr. Colin Dyer, Chief Executive Officer for opening remarks. Please go ahead sir.

Thank you, Operator.

Good evening, everybody, and welcome to this review of our results for the third quarter and first nine months of 2013. Christie Kelly, our Chief Financial Officer joins me on today's call. Christie will review our performance in detail in a few minutes.

First however, I'd like to summarize the quarter where we delivered strong fee-revenue gains, increased adjusted net income and improved adjusted operating income margins year on year. Fee revenue totaled $889 million for the third quarter, and that's 15% above the third quarter of 2012. Year-to-date fee revenue reached $2.7 billion, which is 9% higher than the same period a year ago.

Adjusted net income was $67 million in the third quarter, a 22% increase from quarter three 2012. Year-to-date adjusted net income totaled $135 million, a 5.5% higher number than the first nine months of last year.

Our Board of Directors also declared a dividend of $0.22 per share and that's semi-annual dividend. And we renewed and increased the capacity of our long-term credit facility of more favorable pricing which, combined with our strong balance sheet, give us the financial power and flexibility to continue to invest robustly in the growth of our firm.

Let's turn to market conditions. We produced these results in an environment which is broadly similar to that which we've seen in recent quarters. Generally improving market conditions in most parts of the world. You will find additional information on the slides posted on our Investor Relations section at JLL.com.

We still see [world] economic growth accelerating from 2.4% this year to 3.3% next year. This sentiment is making its way through the markets around the world, as seen in growing confidence amongst investors and to a growing extent corporate occupiers.

As Slide 3 demonstrates, global capital markets continue to expand strongly during the quarter, with market volumes reaching $140 billion, which is 41% ahead of quarter three totals the year ago. Year-to-date market volumes totaled $366 billion, which is 21% ahead of last year. While still lagging in the capital markets, global leasing activity is now slowly improving due primarily to higher leasing turnover in the United States and selected Asian markets.

Leasing volumes for the quarter were up 5% compared to the third quarter of 2012. While year-to-date volumes were flat compared with the first nine months of 2012. So a continuation of the generally positive trends in real estate markets worldwide that we've seen in recent quarters.

So to give you a sense of how we performed under these conditions I will turn the call over to Christie.

Thank you, Colin and good afternoon and evening to everyone on our call.

As Colin mentioned, our consolidated results for the third quarter again reflect our ability to produce profitable revenue growth. While the economic backdrop this quarter was clouded by the recent US budget issues that had a modest impact on the global outlook, this has had no noticeable impact on our business to date. Our performance continues to reflect the contrasting market conditions between Capital Markets and Leasing, where strong capital markets are supported by low interest rates, while leasing is impacted by large corporate globally. Being financially cautious as well as focused on space optimization versus expansion. Although we are beginning to see leasing activity slowly improve, primarily due to higher activity in the US, it still lagging Capital Market's activity.

Our 15% fee revenue growth on a local currency basis over the third quarter of 2012 demonstrates the strength of our platform as well as the ability of our business to grow share profitably across varied markets globally. For perspective, we have grown our revenue at a 14% compounded rate for the past 10 years driven by improved share in our local and regional markets as well as International and Global Service clients. We have achieved this long-term success with a combination of M&A activity and organic growth, leveraging the expertise of our people and the strength of our JLL brand to win new clients and expand existing relationships.

For the third quarter specifically, we grew Capital Markets in Hotels revenue by 46% and the leasing by 8%, demonstrating our ability to continue to capture share. Additionally, we continue to grow our Annuity Real Estate Services businesses such as property and facility management for-fee revenue was up 17% in the quarter. Our LaSalle Investment Management business continued its momentum achieving $900 million in additional capital raised.

Overall, the ongoing investments we have made in our platform has bolstered our ability to increase revenue in key markets, while achieving profitable market share growth consistently year in and year out for our investors. We are focused on balancing top-line growth, platform investments, and productivity to achieve incremental margin and earnings per share growth.

Overall, adjusted operating margins was 9.4% for the quarter, an increase of 140 basis points from last quarter with contributions from all geographies, and an increase of 110 basis points from 8.3% last year driven by performance in EMEA and Asia-Pacific, which I will discuss in more detail in a moment. Bottom line, we increased adjusted earnings per share by 21% from third quarter last year to $1.49 per share.

In the Americas, 19% growth in Capital Markets and Hotels revenue for the quarter was driven by strength in investment sales, primarily for office and retail, as well as increased productivity by producer. Leasing revenue was up 9% for the quarter with secondary markets driving the majority of growth, followed by solid performance in most primary markets.

Property and Facility Management fee revenue growth of 18% was driven by the successful on-boarding of new Corporate Solutions clients. We also closed two acquisitions in the third quarter, Means Knaus Partners and Capital Realty, which add to our property management business and reflect our commitment to invest in the service line.

Overall, we delivered 11% fee-revenue growth across the Americas compared with last year. Operating income for the Americas calculated on a fee-revenue basis was 9.9%, compared with 8.7% last quarter, and 10.4% last year.

Solid growth and positive operating leverage across US business lines during the quarter were offset by continually challenging market conditions in Brazil and by delayed bill timing in Mexico. Excluding Latin America, the Americas operating income margin increased by 20 basis points compared with last year.

In EMEA, each business line produced substantial revenue growth contributing to an overall increase in fee revenue of 24% in the quarter led by capital markets in hotels with a 61% increase in revenue on a local currency basis from last year, with the most significant increases in the UK, France, the Netherlands and Poland. Property and Facility Management fee-revenue growth of 15% was driven primarily by the UK business.

Leasing revenue increased 10% despite declining market activity. Adjusted operating income grew to $18 million in the quarter, from $5 million a year ago. Adjusted operating income margin on a fee-revenue basis, excluding King Sturge amortization, nearly tripled to 7% from 2.4%. Our results -- our performance is a result of focusing on both strong top-line growth and margin expansion. We managed a significant increase in transaction activity with continued discipline management of the cost space.

In Asia-Pacific, fee-revenue growth of 19% came from performance that was generally strong across business lines. Capital Markets and Hotels lead with revenue growth of 56%, which was broad based across a number of different countries.

Property and Facility Management continued its steady delivery of annuity revenue, with a 16% increase. Leasing revenue was up 4% on a local currency basis from last year, with a higher volume of small deals reflecting greater transaction activity coming from local clients rather than multi nationals.

Operating income grew to $19 million in the quarter, up from $12 million a year ago. Again a result of both solid revenue growth and margin expansion. We continue to make selective, strategic investments to strengthen our long-term position in the region, while maintaining prudent cost discipline.

LaSalle Investment Management continued its capital raise momentum from the first half of the year, bringing its year-to-date capital rates to $3.3 billion. A critical driver of LaSalles's success is strong investment performance which has resulted in not only above benchmark track records in key markets over the years, but also the ability to retain long-term clients and attract new investors. During the quarter, we added approximate $2.1 billion to assets under management through acquisitions and net valuation increases. Offset by $1.7 billion of dispositions and net foreign currency movement.

Advisory fees of $55 million were consistent with the second quarter. Incentive fees added $9.3 million of revenue during the quarter, with the most significant contributions coming from North America. Disposition activity and positive fair-value adjustments drove healthy equity earnings of $6.6 million for the quarter.

With respect to our investment-grade balance sheet and the strength of our financial position, we renewed our long-term credit facility at the beginning of October, expanding capacity from $1.1 billion to $1.2 billion, extending the maturity to October 2018 and improving our pricing. This was all done with the cooperation and partnership of a great bank group that knows our firm well and continues to support our strategic focus on profitable growth. We are committed to maintaining our investment-grade rating, continuing to demonstrate financial strength and providing premium operational performance to our investors and our clients.

Our third-quarter financial results were strong. Our colleagues around the world continue to demonstrate our ability to drive profitable growth, increase margin performance, and build on our financial strength.

We earned these results by attracting top new clients to the firm, while continuing to provide great service to existing relationships. Our growing market position, solid annuity revenue growth, and focus on converting our pipeline puts us on track for a strong fourth-quarter finish to 2013.

I'll now turn the call back over to Colin.

Thank you, Christie.

Looking at some representative business wins for the quarter, slide 4 list a few recent wins from across our different service lines and geographies. In our Corporate Outsourcing business we've won 34 new assignments so far this year, expanded existing relationships with 17 other clients and renewed 13 contracts. While respecting client confidentiality, I can report we've recently been retained by two global financial services firms, one for transaction management and lease administration on its 15 million square-foot portfolio, and the second for facility management of its 27 million square-foot portfolio in the Americas and Asia-Pacific. And the global IT firm has chosen us for facility management for its 2.2 million square-foot portfolio worldwide.

We also continued to record positive results in our local market level corporate solutions business, which focuses on mid-market corporate occupiers. In the first nine months of this year we've won 39 assignments, totaling 92 million square feet of space.

Turning to investment sales transactions, in the US we completed the $300 million sale of an ownership interest in a portfolio on behalf of ECHO Realty. In Poland we advised [Eviance] on the EUR412 million of acquisition of Silesia City Center, the largest transaction in Central and Eastern Europe so far this year. And in Japan we saw the portfolio of seven Logistics properties on behalf of Global Logistics Properties for $277 million.

Third-quarter leasing tenant representation and property and asset management transactions included, in Midtown Manhattan and New York, helping Nordstrom secure a location for its first department store in the city, 285,000 square feet in a new development scheduled to open in 2018. And in Moscow we leased 90,000 square feet to open a new department store for International Retailer Dividends. Both transactions represent the strategic investments we've made to grow our retail business globally. In Shanghai we were selected to provide property management services for the 1.1 million square foot Aurora Plaza office tower in Pudong.

Finally, LaSalle Investment Managements. LaSalle's strong performance for its clients contributed to substantial capital allocations for investors. As Christie noted, LaSalle has raised $3.3 billion dollars in capital year to date, including $900 million in the third quarter. As institutional investors continue to allocate funds to investors who they trust.

Looking ahead, Slide 5 shows our full-year projections for global investment sales and leasing markets. Still planning on the fourth-quarter capital-markets volume being on a par with the strong quarter for 2012 totals. This will leave full-year global investment sales volumes up 10% to 15% on 2012, and probably exceeding $500 billion.

Looking ahead to 2014, our preliminary forecast indicates continued positive momentum in capital markets, with global volumes growing by 10% for the full year. Global leasing markets will be flat year on year in 2013 with increased activity in the US, offset by flat or negative gross absorption in Europe and Asia-Pacific. In 2014, however, we expect growth to revive as more corporate occupiers shift their sights from consolidation to growth and expansion. We see full-year gross absorption rising by 5% to 10% above 2013 levels.

In real estate investment management, we anticipate the capital inflows to managers will strengthen through the end of the year, as investors continue to allocate funds to real estate, and prove willing to take on additional risk in search of higher returns. We expect that trend also to continue into next year.

In terms of our own outlook for the full year, one month into our final and traditionally most profitable quarter, we are seeing continued positive momentum in all parts of the business. We also expect this trend to continue into next year with markets continuing to improve and momentum continuing to build. There is a strong sense of optimism and confidence in our staff worldwide and we will continue to take market share and grow profitable new business opportunities.

As we work to finish 2013 successfully and position the firm for continued growth next year, we are also focused on longer-term growth. As I said in my introductory remarks, our new credit facility and strong balance sheet give us the ability to invest strategically for the future. Whether that takes the form of M&A activity or capital investments or co-investments with clients of LaSalle, we can move quickly on growth opportunities when we identify them.

Over the past 18 months we have also developed a globally integrated strategic plan, which positions us for growth through to the end of this decade. This has had broad involvement for dozens of senior leadership and included an intense assessment of future client needs, changing market conditions and competitive dynamics. Using those insights, we've developed and are now implementing longer-term strategic plans for all of our core service lines.

We have also considered the resources which we will need to succeed with those strategies. Talented human capital for example, productivity measures to protect and expand margins, and investments and data into knowledge and tools to equip our professionals to serve clients and compete successfully. To leverage all the activities we are also continuing to connect our people and business operations even more effectively across service lines and geographies.

Finally, we've projected and secured, as I said, the financial resources we need to drive revenue and capital expenditure over this long time frame. The result as planned is broadly shared across the organization and we strive strong short-term performance, while at the same time planning and investing in future growth.

On final operational notes, as you know I recently step personally into the Americas business. This is a temporary move intended to ensure continuity in a management group that has seen several changes of people and rolls over the last year. We are also waiting the transfer of John Forrest into the Americas from Asia on the first of January, and he will be leading the Americas Corporate Solutions business. We have a very strong and successful competitive position in the Americas, clear long-term plans, continued investments in growth, and exceptionally strong leadership from which we will complete the Americas leadership changes early next year.

So before taking your questions I'd like to mention some of the independent honors we've received during the third quarter. Honors which illustrate the quality and dedication of our people, and our commitment to superior client service, and a reinforce our reputation as leader in real-estate services and investment management.

Selecting a few examples, Procter & Gamble has announced just today that we've won the P&G Supplier of the Year award, and that's the third time we've been awarded that honor. In the US we were recognized as one of the nation's most innovative users of information technology by being selected for the Information Week 500 list. Among the many awards we received at the Euromoney awards, we were named Best Global Agency and Lettings Advisor. And the head of our business in Thailand, Suphin Mechuchep, was named CEO of the Year of 2013 CEO Thailand awards. This honor -- this award honors the best CEO in the entire Thai business community, not just the real estate sector. So many congratulations to Suphin.

And finally, in closing, I want to recognize another winning colleague -- or ex colleague, Lauralee Martin. I would like to thank Lauralee one more time for all of her contributions and commitment to Jones Lang LaSalle over the last decade. We wish her great success in her new role as CEO at HCP, and we really look forward to maintaining our relationship with her there.

So with that, let's now take your questions. Operator, perhaps you'd explain the process for us?

(Operator Instructions)

Your first question comes from the line of Brandon Dobell with William Blair.

Good evening, Colin and Christie.

Hi, Brendan.

Wanted to know if we can focus on I guess, first the different cost lines this quarter? Great leverage in the comp and benefits line, but then the opposite thing happened on the OpEx line.

Is there anything particular I guess that drove either the out performance or under performance relative to what you thought would happen with this kind of new growth? And then I guess as a follow on, how should we think about those two lines acting as we move into 2014 given your outlook for the transaction businesses?

I think Brandon, just to jump in there first, if you take a look at the OpEx line and compare it year over year as a percentage of fee revenue, we actually went down 100 basis points. And probably one of the things just to think a little bit about is first of all, when you take a look at fixed costs, fixed costs are up on a facilities basis just minutely, 2%.

And the real growth driver there is in IT, which is up 8% year over year. As result of the investments that we are making in our platform specifically in IT to further drive our productivity and better our customer experience. If you take a look at variable. Variable is up slightly really to fund our pipelines here as we drive into the fourth quarter.

Okay. It doesn't some like there's anything in particular I guess comps and benefit wise on it a fee-revenue basis that was necessarily strange?

We're just on a better course than I think we've seen in several years as a percentage of sales base. So can you guys continue to do that or was there something in this quarter that was particularly strong for you guys?

No I think it really is the result of a number of investments and productivity initiatives and all of the work from the folks around the globe really executing on the plan.

Okay. And then can you give us some kind of market outlook for investment sales and capital markets, as well as leasing? Any thought on what a big picture would look like for Property and Facilities Management or the project management kind of industry or you're expected growth next year?

Project management broadly follows corporate investment confidence. And so as we've commented, corporates do feel as though they are moving ahead with more resolution than they have in recent years, actually the last two years, and we've seen that in the uptick in leasing activities. So I don't expect the project and development business to show stronger trends of next year than we've seen this year.

And you can see it picking up quarter by quarter during the year. Our Property Management business will continue to grow organically rapidly in Asia and we bundle a facility management in there as well. So, rapid organic growth in Asia.

The Europe and the US is a combination of market-share growth, and we mentioned the Means Knaus and Capital Partners acquisitions in the US. That's us driving share gains through selected acquisitions. And additionally in Europe we will see Facilities Management pickup on an organic basis because, as we mentioned in several calls, the European corporates are becoming more prone to outsourcing their real-estate management. So there are a number of drivers there which we would expect to see continued healthy growth in the Facility and Property Management area.

Okay. I will turn it over. Thanks a lot.

Thank you.

Your next question comes from the line of David Gold with Sidoti.

Hi, good evening.

Hi, David.

A couple of quick ones. First, I guess if we go back to the second quarter there was--one of the issues that we ran into was some delayed revenue from, I think if I remember right, some outsource or larger outsource contracts. Looks like presumably that revenue started to flow.

Can you give a sense for if those contracts turn -- if the revenue was sufficient to turn the contracts profitable just yet, A? And B, the timeline for the revenue to flow in its entirety?

Okay. First of all, congratulations on your new daughter.

Thank you so much, Colin. (laughter)

Secondly, you are right we have that -- the P&L was hit Q2 this year with a couple of--particular two big startups where we saw the cost coming in before the revenues and therefore effect profitability in a negative way. As you correctly observed, that's beginning to reverse itself. They are not profitable yet. But they are getting that way and they certainly will be from Q1 of next year. So that's the timeline really to turn those two major accounts profitable.

We have accounts coming in all the time so there is a constant flow of us front loading cost to put in structures in advance of revenues. It is just there were two particularly bulky ones in Q2 this year.

Sure, okay, perfect. And then part two, on the leasing side of the world, one can get a sense there, you're notably more optimistic there than you've been and obviously the results are improving as well, but curious if you can give us a sense for where the optimism is coming from? Is it just economic data, is it client increase, or third-quarter performance or a mix of all of that?

It is certainly the economic forecast as I mentioned in the preamble, are generally being revised on the upside. That's for the US, for Europe, I think Brazil and Argentina are the only places that feel like they are going the other way, India as well. But that accepted, China, the Southeast Asian countries are all showing increases in forecast for economic growth for next year. So those are the positive background material.

What we're seeing in more concrete terms is a steady increase in market activity in leasing across Europe and America in particular. And you've seen our own numbers. They are picking up as well from negative to neutral and now positive growth in leasing activity across major centers. And we just put it all together and listen to our talk from clients talking more about expansion, getting through that process is delay in short-term renewals and into back into business as usual as is the confidence goes back again. Put it all together and that's the reason for our optimism.

Perfect. That's helpful. Thank you for the color.

Pleasure.

(Operator Instructions)

Your next question comes from the line of David Lane with Bank of America/Merrill Lynch.

Sure. As we are modeling, thinking about 2014 it would be helpful to review if you could maybe the one-time cost that you had in 2013 related to the cost from the outsourcing contracts? And then maybe if you think it sizable to enough to call out some Brazil as well?

We talked think Brazil was an indication. If Brazil had been removed from our results in 2012 and 2013, our margins in the America's would actually have gone up. That may be an indicator to the scale -- gone up about to a positive margin expansion of about 0.2 or 20 basis points year on year.

Actually cost of startup of contracts we haven't split those out and I don't think we would want to start to do that now. But be aware they are significant enough for us to have mentioned them.

Got it.

I think though David, the only thing I'd say there though is just in comparison to the magnitude of our business overall, it is not material in the whole scheme of things. So as you are looking to second quarter, and if you're keying off year over year, just be aware that there was an impact there of a little over 50, 60 basis points.

Got it, okay. And then in the LaSalle business, is 2014 a bigger year or a smaller year for fund closures or asset sales than 2013? I'm just wondering if the headwinds for us under management growth eased next year? No, I think it is at the moment broadly neutral. You don't win mandates until you win them, and you don't close funds until you close them, and in the court market for fund raising, closing these funds is pretty hard work. What we would expect to see is in broad terms the funds raised would balance the funds outflow --lease funds outflow.

The other aspect of the equation which is worth taking into account in terms of what's the assets under management because that's the balance of runs in/funds out and then the investment for the pace of our actual investments. And there we are finding some interesting dynamics because the move that the investment committee has had into quality asset means that finding stable cash producing core assets is getting harder and harder. So we, in common with many other investors, are moving out to a long risk curve, to development work, to work [traffics] where more value needs to be added in order to produce interesting investment returns in the investment returns we are targeting.

So the investment pace is going to be a challenge in the course of 2014. You heard the numbers in terms of the total markets for investment sales. So far this year we'll cap, we'll top 500 billion for the year as a whole. That demand is only going to get stronger, so there'll be a lot of money-chasing assets in 2014. Got it. And then I do get this question occasionally from investors and I thought I'd give you an opportunity to respond. Do you think any of the recent, slow growth in leasing has anything to do with secular drag from corporate occupiers operating with less square footage per employee?

Yes, for sure. There is a trend equally secular--we'll see how long it remains a trend, but in the US, Europe, in particular this trend to densification which comes in various forms. Less square foot per person, smaller cubes if you want to put it that way is one version of it.

But so also is working in what's called alternative work styles where space is much less assigned to one individual and telling is more prevalent. Breakout spaces--huddle spaces become part of the total mix and it turns out that, that combination is actually more efficient in use of space than the traditional style office or cubing. All these trends tend to work together. To an extent they've been one of the reasons why the demand for leased-office space has been comparatively slow to pick up in this post recovery, post-recession recovery period. One of the aspects, not the only driver.

But we actually like that trend. We think it is a change which we can help to educate our corporate clients with. We certainly earn a lot of money advising them on just those trends. But it has another interesting effect which is that as -- demand for just gross group office space, crude office space tends to be attenuated by these densification strategies, so the demand for high-quality office space actually goes up. And what gets dropped is a lower grade in peripheral space and high-quality office space is just our sweet spot around the world. Sorry for the long answer, but it is very interesting area.

Thank you very much.

Your next question comes from the line of Michael Mueller with JPMorgan.

Hi, a couple questions. First of all I was wondering if you could talk a little bit about the process of rolling out into more the secondary markets that you touched on a little bit here but you talked about it more last call? Just how far through that process are you and is a predominately in the Americas where it is occurring?

We are not rolling out in a huge way beyond our traditional core of major-city centers. If anything we are turning to increase our presence and grow market share in the major centers.

Having said that, there are some areas of our business where we are expanding our footprint. We are looking at ways of servicing our corporate clients across Africa, because we just can't avoid the fact that there is a demand there for real-estate services in Africa and the big corporations and now moving into Africa with some resolution and they are our clients. So we are working out ways of servicing them very efficient, safe and cost-effective way.

We are also expanding our industrial footprint, that's to say the work we do for distribution companies worldwide. And there we do need to be in places like [Ruffa Down], Long Beach, and closer to the port areas than our traditional city center CBD office space. So those are some of the trends which have led us to what you might call the secondary centers.

Okay. But it is not if you're looking in the US opening new offices in say, middle of the country as opposed to the New York and San Fran's?

No, at some point in our future development we did talk about the long term, that is an opportunity for us. We see it as an opportunity but we've chosen not to focus on that area at this point.

Okay. And one last question, if we are thinking about the Capital Markets business, are you seeing at this point a greater mix of revenues coming in from non-core transactions generating revenues?

No, we are not, Michael. We are seeing core transactions driving our performance. And to that point we are seeing in terms of the number of transactions, year over year the size of those transactions increase, and we are also penetrating major markets around the world.

Okay. Thank you.

Your next question comes from the line of Whitney Stevenson with JMP Securities.

Hey, guys, it is Mitch here with Whitney. How are you?

Hey Mitch, Hi Whitney.

Hi.

Just back to the office efficiency discussion Colin, are we seeing--you mentioned US and Europe, are we seeing similar trends in secondary markets as well?

Office densification or of alternative work?

Yes, exactly. More collaborative work environment and less square footage per employee. Are we seeing something similar in the secondary markets?

You know, fresh-air space, you think of suburban office campuses, there's a lot of space in those typically in those places. So it is been traditionally less pressure in those areas. But there's also a --that's the sort of economic city centers -- London, Paris, yes, of course, people are very focused on just this year could cost of per square foot.

But as a generational thing at work here too. Where you are seeing the latest generation employees come into the workforce, so those between 25 and 35 are much more oriented towards this looser arrangement of working space, looser working so they can form teams and reform teams according to what they are actually working on. They like to be able to work in Starbucks. They like to be up to work in the coffee shop. They like to be able to work in the corridors so they've got a different approach to this space they require. And when you are talking about our corporate clients trying to attract those sorts of employees, they are paying attention to those trends and they are trying to organize their office space in such a way that is attractive to draw in and then retained those source of employees. That trend also has an overlay to the sort of pressure on the cost per square feet.

To it seems like it is pretty broad. When you look at initially renewal --

It is coming more broadly. This is a trend, not a massive impact at the moment, it is just a trend.

And Mitch, I would also say that would be for class A, secondary markets, suburban office space.

Understood. When you look at renewals possibly as a percentage of the leasing that you did in the quarter. I am curious about what that percentage is and maybe if you can compare that to historical levels? Seems like it is up, I know we were seeing a lot of cautiousness from occupiers, maybe with that level is versus historical and maybe the last peak and trough if you can give that comparison?

We don't track it systematically. What we can say is what we have noticed that the average size of lease transactions across the US has been increasing. And the term indicates to us that the logical -- getting on with taking space or renewing space they had significantly holding back (technical difficulties)

Think Whitney has one.

Hi, yes. I just wanted to ask, I think you mentioned in the prepared remarks that you saw more productivity from your domestic brokers. And I was wondering first, if that's across both leasing and sales?

And then also if you can give a little color around how you measure increasing productivity. If that's just bigger deal sizes and more revenue per transaction or if you are actually seeing more transactions?

Sure, Whitney, I will start and I know Colin will have some remarks in this regard. But first of all, we are seeing it across the board in terms of leasing as well as in our Capital Markets group. And we measure productivity based on production per head. And then we also baseline in terms of comp per revenue dollars and margin per head, as well.

Those trends have all been moving in the right direction.

Okay. Great, thank you.

(Operator Instructions)

Your next question comes from the line of Todd Lukasik with MorningStar.

Hi, good afternoon and thanks for taking my questions.

Hi, Todd.

Hi, just a question, you mentioned the acquisitions in the quarter. I don't know if I missed this or not but did you disclose the impact on growth either overall or in any of the specific business lines where they were?

We did not, Todd, and not that it was a big secret or anything. This is really just been going along with the strategic focus that Collin's been executing in terms of the smaller, more focused, bolt-on transactions by market.

Okay. And was the biggest impact of that in America's Property and Facility Management business?

Yes, it was, Todd.

Okay. And then I think you mentioned an expectation for 2014 positive absorption on the leasing side of 5% to 10%. I'm just curious if you expect it to kind of fallout the way did this year with the Americas? The strongest in Asia-Pacific, the weakest in EMEA, somewhere between. Or whether or not you expect those impacts to shift in 2014?

No, that's exactly what we are expecting. To starting to look very much like that this quarter and we're expecting that trend to continue. Reason Europe's still picking up growth -- you cannot call a spectacular yet but it is enough to drive some growth in leasing activity. Asia not so yet. The larger Asian economies are still trying to find a way out of the funk they've been in the last 12 months or so. China beginning to find some trends but India is still going backwards. And Asia, significantly to Australia has been a weak market -- rental rates are declined across all of the major cities and absorption has been negative, and absorption has been negative cost the major cities. A combination of the financial services pressure which we've seen across the world hitting Melbourne and then the whole minerals and prime resources sector impact is slowing growth across Asia.

You expect Asia to be positive on the leasing side next year or could it be negative again?

Yes, we expect it to be positive but only just.

Okay. And last question for me you mentioned the invest for future growth, I'm wondering about 2014. I don't know if you want to talk about this in detail or not yet, but just with regards to those investments in the context of potentially expanding margins. Or should we be thinking about them being large enough to be flat to down next year instead?

No, there are no margin differential margin impacts compared to 2013 because we will spend roughly the same percentage of revenue next year as we did this year, as we did your before, as we've done every year except in the midst of the recession. Continue to invest at the same rate in the redevelopment and growth of the business.

Okay. Great. Thanks for taking my questions.

Thank you, Todd.

There are no further questions at this time.

Okay. Thank you, everybody, since there are no further questions we will finish today's call. Thanks again for participating and we look forward to speaking to you all at the end of the fourth quarter. Have a good evening.

Thank you for participating in today's conference call. You may now disconnect.