Jones Lang LaSalle Inc (JLL) 2015 Q1 法說會逐字稿

Good day and welcome to the first-quarter 2015 earnings release conference call for Jones Lang LaSalle Incorporated.

Today's call is being recorded.

Any statements made about future results and performance, or about plans, expectations, or 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 fiscal year ended December 31, 2014, and in our other reports filed with the SEC. The Company disclaims any undertaking to publicly update or revise any forward-looking statements.

A transcript of this call will be posted and available on the Company's website. The 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, and welcome to everyone joining this review of our results for the first quarter of 2015.

I am in London today, and Christie Kelly, our CFO, is in Chicago. Christie will review our financial highlights in detail in a few minutes, but to summarize our results, we had a great first quarter, continuing to build on the momentum we gained throughout last year.

We saw strong revenue growth across all service lines and geography. In the US, for example, 13 of 16 markets recorded double-digit revenue increases, contributing to 25% overall revenue growth for the region. EMEA turned in 25% revenue growth in local currency, 8% in US dollars. Asia Pacific also had a very good quarter, particularly in India, where I was last week, and in Australia and Japan.

LaSalle Investment Management continued to deliver outstanding performances to its investor clients and raised $2 billion of equity commitments during the quarter. Our Corporate Solutions segment continued its solid win performance, reflecting disciplined decisions about the opportunities we chose to pursue.

These results continued the momentum of an equally strong fourth quarter of 2014. Adjusted earnings per share for the two quarters combined increased 44% above the prior period. It is worth noting that our five-year compound annual growth rate is 14% in fee revenue and 21% in EBITDA. This is the result of our consistent decade-long policy of capital and revenue investment to drive long-term growth and profitability.

Our balance sheet remains strong and we increased our dividend to $0.27 per share. So there is good momentum across our business, with our people driving broad market share gains and producing a very good start to the year.

Our results came in an environments of generally steady economic growth with global GDP expected to increase by 3.4% this year. There is a sense of calm confidence in most real estate markets worldwide, with further upside anticipated in many of them during the year. The slides that we posted in the Investor Relations section of JLL.com summarize current market conditions.

Slide 2 shows global capital markets continuing their five-year growth trend, increasing by 9% globally during the quarter, to $155 billion. The strongest growth came in the Americas, where US capital market volumes increased 25%. Transaction volumes rose 7% in Asia Pacific and 21% in local currencies in EMEA, but were flat in US dollar terms. Our investment sales revenue outperformed the market in all three regions.

Yields continued to compress during the quarter, with prime office at record lows, although the spreads remain healthy. VC markets were uneven in the first quarter, with gross absorption down marginally in total by 4%. Asia Pacific turned positive, with leasing volumes up 5% on a year ago.

The US had an unexpectedly flat quarter, probably an anomaly. Volumes in Europe fell by 3%, year-on-year, due to weakness in Paris and Moscow, which typically account for one-third of the region's activities. As with capital markets, our leasing revenue outperformed market volumes in all regions. The global office vacancy rate across 98 markets remains stable and rents on prime office across 24 markets grew 3%.

For details of our performance in this market environment, I will turn the call over to Christie.

Thank you, Colin, and welcome to everyone on our call.

I am pleased to report record financial performance for the first quarter. We delivered double-digit fee revenue growth in local currency across our business segments. We also drove margin expansion in all segments of the business, while continuing to invest for long-term profitable growth.

And we see reflected in our results, the benefits of investments in our platform, including by way of our acquisitions, coupled with productivity initiatives that have continued to improve the quality and scope of our services for our clients, while building the long-term value of our Company. We finished the first quarter with consolidated fee revenue of $1 billion, up 25% over last year, and record adjusted earnings per share of $0.94, up more than double over last year, despite a $0.07 negative impact due to currency translation.

Adjusted operating income margin calculated on a fee revenue basis increased 280 basis points to 5.2%, for the quarter. Adjusted EBITDA margin on a fee revenue basis also increased 280 basis points to 8.7% for the quarter. These increases in margin reflect many factors, including the strength of our diverse global platform, significant recurring profitable revenue, and the productivity focus of our people.

These results also reflect our investment discipline, including the contributions of our transaction professionals in whom we have invested through M&A activity and strategic hiring over the last several years. Additionally, LaSalle has continued to deliver for its investors, in turn generating incentive fees and equity earnings from transaction activity within spend life cycles.

Consistent with the approach we have outlined previously, we remain focused on balancing top-line growth, platform investments, and productivity to achieve incremental margin and earnings per share growth. With the support of our long-standing relationship banking group, we also bolstered our strong investment-grade financial position and flexibility, with a commitment increase to $2 billion, and extension of our credit facility to 2020, in alignment with our strategic plan.

Our 25% consolidated fee revenue growth on a local currency basis was broad-based across geographic and services segments. Our revenue increase of 64% in capital markets and hotels and 17% in leasing demonstrate our ability to serve both investors and occupiers in steadily improving markets, as transaction momentum continues to be supported by increasing cross-border capital allocations to real estate, low interest rates, and corporate occupier demand.

We also continued to grow our annuity real estate services businesses, such as property and facility management, where fee revenue was up 12% compared to last year, primarily as a result of securing new mandates and expansions over the last 12 months. LaSalle further strengthened its base of incentive fees, as certain of its funds approach the end of their life cycles, ending the quarter with $55.3 billion in asset under management.

During the first quarter, we continued to selectively increased revenue-generating hires in capital markets and leasing, executed through both hiring and acquisitions. We also increased revenue per producer compared to the first quarter of 2014. In alignment with our strategic plan and our investment discipline, we completed business acquisitions in Japan and Sweden during the quarter, while we continued to assess and build our pipeline of M&A opportunities. Transaction pipelines across our business also remain strong, as we look to the remainder of 2015.

We will begin our look at segment-specific results starting with the Americas, where fee revenue across the region grew $95 million, or 25% in local currency, over the first quarter of 2014. Leasing was up 23% for the quarter, which was particularly strong, given the increase was achieved despite declining [growth] absorption in the overall market during the period.

The rest of the Americas platform also made meaningful contributions to growth in the first quarter, with capital markets and hotels up 83%. Our US capital markets and hotels business, in particular, is benefiting from the strategic decisions made at the end of the global financial crisis, to recruit, develop, and retain top talent for this business to grow market share.

Property and facility management was up 10% and project and development services was up 21% from new client wins, as well as expanded projects with long-time clients. Operating income in the Americas grew to $35 million for the quarter, up from $17 million a year ago, and operating income margin improved by 290 basis points, to 7.1% on a fee revenue basis.

We achieved these results with double-digit growth in the majority of our markets. We continue to invest in future growth for the Americas, while also focusing on top-line productivity and cost discipline to drive long-term performance.

In EMEA, fee revenue across the region grew $19 million, or 25% in local currency over the first quarter of 2014. EMEA's fee revenue performance during the quarter was significantly higher in local currency than in US dollars when compared to 2014, as the US dollar strengthened over the last 12 months, primarily versus the euro. We expect currency fluctuations to continue to impact our US dollar performance through the remainder of 2015, through the impacts of currency fluctuations on operating income, EBITDA, and margins are moderated because revenue and expenses are generally incurred in the same currencies.

Capital markets and hotels revenue was up 59% in local currency for the quarter, reinforcing our leading market share and our reputation in EMEA real estate capital markets, with strong growth demonstrated in the UK, France, Spain, and Sweden. Property and facility management revenue was up 14% for the quarter, and project and development services fee revenue was up 27%, the result of international mandates from European multi-nationals and expansion of our Tetris Fit Out business.

Overall, performance was strong throughout the region, driven by the UK, Germany, and France, but also from Spain, Central and Eastern Europe, and MENA. Operating income in the margin increased 40% over the first quarter of 2014. Operating income margin improved by 100 basis points from the first quarter of last year, primarily from capital markets performance and our focus on driving operating efficiency and productivity, as we continued to leverage our shared services operation and technology enhancements. Our outlook for EMEA business remains positive, as we capitalize on our market position, invest in our people and platform, and seek M&A opportunities to supplement profitable long-term growth.

In Asia Pacific, fee revenue across the region grew $15 million, or 16% in local currency, over the first quarter of 2014, though muted by currency fluctuations when presented in US dollars. Asia Pacific's capital markets and hotels revenue was up 38% in local currency for the quarter, outperforming market volumes in the period.

Property and facility management revenue was up 13% for the quarter, with demand for these services continuing to grow steadily, with increases in both the quality of property inventory and the propensity of Asian companies to outsource. Geographically, Japan performed well, with low interest rates driving capital markets activity, while Australia and India took advantage of improving business environments.

Operating income grew to $4 million for the quarter, up from $1 million a year ago. Operating income margin improved by 170 basis points, to 2.4%, on a fee revenue basis. The outlook for the year in our Asia Pacific business remains positive, given improving market sentiment and our focus on investment for future growth and productivity.

LaSalle had a strong start to the year, delivering an operating revenue increase of 45% for the quarter, primarily from incentive fee performance, but also including increases in advisory fees, up 17% in the quarter. LaSalle continued to focus on productivity as it generated a year-over-year increase of 14% in assets under management per employee.

Further, as Colin mentioned, LaSalle raised $2 billion of new capital in the first quarter. Assets under management grew by $1.7 billion, during the quarter, to $55.3 billion. LaSalle's incentive fees of $19 million in the first quarter were driven by funds in Asia Pacific and the US, but took advantage of the strong capital markets environment. As the mature funds generating strong incentive fees near the end of their funds lives, we expect equity earnings and incentive fees to return to normalized levels, with remaining significant fees from these funds likely to materialize in the second half of 2015.

With respect to our balance sheet and the strength of our financial position, total net debt was $546 million at the end of the quarter, a reduction of $185 million, or 25%, from the first quarter of 2014, while we also continued to invest in the business. We benefited from the lower pricing on our credit facility, with $6 million in interest expense in the quarter, constituting a 9% reduction from the first quarter of 2014. In addition, we announced a semi-annual dividend of $0.27 per share, which is an 8% increase from the December 2014 dividend, and reflects our confidence in cash generation and profitable, long-term growth on behalf of our shareholders.

To sum it up, we had an excellent first quarter to start 2015. While the momentum created from 2014 has continued into 2015, it is worth noting that our second-quarter 2014 adjusted earnings per share performance was nearly 50% better than our second-quarter performance over the last few years. Additionally, we could see roughly a 5% negative currency translation impact compared with 2014, if the strength of the US dollar continues.

As we look forward, our pipelines are strong and outlook remains positive. Before turning the call back over to Colin, I would like to express my sincere appreciation to our people around the world for their values, collaboration, and focus on delivering our performance today and for the long-term on behalf of our clients and investors. A big thank you again to all of my JLL colleagues.

I will now turn the call back over to Colin.

Thanks, Christie.

Turning then to recent business wins, slide 3 in our deck shows a sample across service lines and geographies. In our Corporate Solutions business, we signed 18 new assignments during the quarter, expanded our relationship with six current clients, and renewed a further six contracts. These 30 wins totaled nearly 50 billion square feet across all three geographical regions.

In addition to a 4.4 million square foot multi-regional win from Westinghouse Electric, new clients who wish to remain confidential include major healthcare, consulting, high tech, entertainment, finance, and consumer products companies. Our integrated Project Services business, which serves corporates who purchase real estate services locally, grew further, with 13 assignments and 36 million square feet.

Turning to investment sales transactions, we represented Blackstone in the $1 billion sale of a US hotel portfolio. In the largest single asset real estate deal in Finland's history, we advised developer SRV on a joint venture to develop the $480 million REDI mall. And in Tokyo, we advised on the sale of a five-asset hotel B portfolio to the Japan Hotel REIT.

First quarter highlights in other service lines included securing a 320,000-square foot headquarters lease for the Capital Group Companies in downtown Los Angeles; a 320,000 square foot lease for Daimler-Benz near Stuttgart; in Bangalore, we recently completed a 2 million-square-foot lease for the Flipkart, India's equivalent to Amazon, and that was for a built-to-suit headquarters office; and in China, a valuation contract of 17 properties and 17 million square feet was completed for Alibaba.

As I mentioned in my opening remarks, LaSalle Investment Management continued to perform strongly throughout the first quarter in a healthy operating and capital raising environment. In addition to its $2 billion capital raise, which included a significant commitment from a major Chinese investor, LaSalle recorded substantial incentive fees and equity earnings during the quarter, as Christie explained.

As Christie also mentioned, we continue to invest in growth through two targeted acquisitions. We acquired Stockholm-based Nextport, a tenant representation and relocation management specialist. This extends our clear leadership position in Sweden, following last year's acquisition of investor services firm Tenzing.

In Japan, we acquired a 70% position in Tensei Mall Management, a leading retail property management company. Tensei's local experience will strengthen our position in Japan's retail sector. As with all potential acquisitions, we evaluated both firm's finances, operating risk, integration risk, strategic and cultural and client fit before completing the transactions, and we remain disciplined on pricing.

Looking to the rest of 2015, slide 2 shows our research team's projections to investment sales and leasing. They show solid demand for direct investment continuing through 2015, with full-year volumes up 5% to $750 billion globally. We expect those gross leasing volumes to be moderately higher than 2014 levels, showing up to 5% growth, with Asia Pacific up 15%, the US showing moderate growth, and Europe flat. We see notable shift in the composition of demand, as corporates focus now on expanding activities, rather than right-sizing their portfolios. The results will be a 20% increase in global net absorption.

In funds management, we see sustained strong capital flows and deal velocity, as low interest rates and low inflation attract global investors. Appetite for risk is increasing as investors seek yield in value-add and opportunistic plays. Strong performers like LaSalle are going to continue to attract investment capital in this healthy environment.

Our own outlook remains positive for the year. Our first-quarter performance puts us in a strong competitive position, with healthy pipelines and good momentum. The strength of our balance sheet supports our focus on long-term growth through continuous investment in our global platform, adding improvements to the range and quality of services we provide to clients.

Before Christie and I open the call for your questions, I would like to finish by mentioning a few of the awards we have earned from the industry groups and independent third parties this year. They illustrate our position as industry leader in real estate services and investment management, and reflect our core values of client service, teamwork, and integrity.

Real Capital Analytics named JLL the number one real estate investment advisory team in both EMEA and Asia Pacific for the fourth consecutive year. We have been selected as one of the world's most ethical companies by The Ethisphere Institute for the eighth straight year. Fortune Magazine named us one of the world's most admired companies.

And for the seventh consecutive year we were chosen for Global Outsourcing 100's list by the International Association of Outsourcing Professionals. And finally, we were selected as one of 2015's top 100 Corporate Citizens by CR Magazine, earning the 20th position on a list of prominent multi-national corporates.

With that review of the quarter, we will now take your questions. Operator, could you please explain the procedure?

(Operator Instructions)

David Gold, Sidoti.

Good morning. A little bit of a follow-up, particularly as we look at the capital markets and hotels business, your performance, particularly domestically, was outstanding. Can you give us a little bit of insight -- for the quarter, we saw 82% year-to-year growth. Your annual forecast, though, is 20%-ish, as we look at the Americas.

I know there was some comment there on market share and hiring, but can you bridge that for us a little bit? Are we expecting deceleration? And then, as to the 82%, say versus the annual forecast, give a sense, if you can, for if there is anything outstanding in a 82% as far as large fees or is it more of a function of the hires working out?

Dave, I thought maybe it was spillover from Q4 last year and that was not the case because we had strong Q4s in both the Americas and Europe. There was probably some spillover in the Asia Pacific numbers, but as it relates to the Americas, there is something of a disconnect between our actual performance in Q1, which was outstanding, in a relatively soft quarter. You've got to remember that a few big deals can lose the numbers in the first quarter, which is our slowest quarter in a seasonal business.

But our forecast is taking a slightly more sanguine view of the year as a whole. As to the overall market sentiment in the Americas, it is solid, it is not over exuberant, but we're seeing a lot of capital, both domestic and particularly international, trying to get into assets. As we mentioned, the result is that investors are moving out along the risk curve somewhat into B cities, Tier II cities, Tier II properties, to find deals, as well as a little extra return.

Got you. As it pertains though to market share versus -- essentially, that outperformance, as we think about that market share --?

We [keep] pushing, as we said continuously on the call, and as Christie mentioned specifically, we have been adding professionals in our capital markets business consistently over the last five years and this is the result of that historic growth. We have estimated, in our internal estimates, that two-thirds of the growth came from people who have been in the business for more than a year or one-third from more recent hires, but it is market share growth. It is what we have been investing for and it's pleasing to see it come through.

Perfect. Perfect. Then Christie, can you speak a little bit about -- we talk about incentive fees and equity earnings -- again, healthy performance first quarter, presumably there were decent sales in there, but if we go back a little bit ago, to the fourth-quarter call, the thinking was they were going to taper pretty dramatically from last year. Any update on the thinking there? It sounds like you are expecting some fees in the second half of the year as well, sizable ones?

David, that we are expecting, if things continue towards the end of this year, to see some sizable performance, in terms of incentive fees and equity earnings, as we said during the fourth quarter last year. We are thinking that it will be in that $40 million to $50 million range, as we said, maybe a bit more if funds accelerate some of their disposition activity. So overall, solid performance. LaSalle is delivering what they should be doing for investors, and even to the point of, again, accumulating and performing in that top quartile performance level. So great results.

Is that $40 million to $50 million, for the second half of the year or that is $40 million to $50 million, for the year including the first-quarter performance?

In aggregate.

In aggregate. Got you.

It's obviously particularly hard to expedite. It was the actual sales transactions are coming through consistently, about 10% above the expected deal size, the expected target pricing. So the incentive fees are coming through more strongly, even then [the salary] and estimating, even a quarter before they come through.

Got you. Got you. One last. Colin, also if we go back a quarter or so ago, you commented a little bit on seeing long legs for the market, and presumably it could be another three or so years left to the cycle. Curious if you have any -- looking at the first-quarter numbers and what you are seeing for the year -- any update on that thinking?

No, it is consistent this quarter and pretty much the same comments. The environment -- the global growth environment -- is sustained at this 3.4% level. There are no, at this point, apparent clouds on the horizon to cause us to think that number will drop anytime soon. There is significant corporate confidence coming through now, led by the Americas, but we can see in Europe too, and in even Asia, as Asia comes to terms a slower level of Chinese growth, but growth nevertheless.

The capital markets are strong with adequate, even plentiful equity available across all asset types, across all geographies. The debt markets are fully functioning; debt is freely available. Spreads are very fine, so the costing on that is very attractive. Underwriting remains in all countries, pretty well -- pretty conservative. So add it all up and it's a very positive environment, with no signs of anything at all disruptive at this time, and so I would say that at least two- and maybe three-year horizon is intact.

Perfect. That is helpful. Thank you both.

Thanks, David.

Brad Burke, Goldman Sachs.

Good morning, guys. Congratulations on the quarter.

Thanks, Brad.

Thanks, Christie. I wanted to ask a longer-term question and get your views on the sustainability of the growth that you are seeing in Corporate Solutions. Obviously, it has been very strong over the last few years. How are you thinking about it over the next few years? And maybe again remind us of the height of the barriers to entry for these businesses because we are obviously hearing a lot more about consolidation and real estate outsourcing?

It does indeed continue to be a very attractive growth market. We are bidding on something like 60% of the RFPs we receive globally. We are -- our success rate on the bids we do engage in is something like 65%, so we have a good performance in the RFP bidding process.

We are seeing, as far as developments are concerned, we are seeing the solid growth in the US markets continuing, but we are seeing a lot more momentum in Europe then we had seen, literally over the period up to 2002. It is the result of corporates in Europe picking up the productivity through outsourcing trend, which has been forced on them through the ravages of the great financial crisis.

But Europe now is also engaged more and more fully in this outsourcing trend, in particular, the three major economies of Germany, France, and the UK. Asia continues for us with solid performance. Long-term growth is there. The margins, if you're attentive to productivity, again, the margins remain good, but you do have to pay attention to productivity, because there is, over the long-term, inevitably, a level of pressure coming through competition.

Brad, too, the only thing I would add to that is that as we look over the long-term, in our performance, we would be pretty disappointed if we didn't see double-digit growth there.

Okay. So none of the developments that we have seen over the last six, 12 months, in terms of pretty aggressive consolidation and outsourcing would change your view on the growth outlook or JLL's competitive position within that growth potential, within the industry?

Nothing at all. In fact, in terms of major competitors in the integrated space, they just went down from three to two. So it gives a slightly better percentage shot at most deals.

Okay. I appreciate it. Then a second question on capital structure. I just wanted to get your general thoughts about leverage and the use of cash. On our estimates, if this year shapes up like last year, you could be negative net debt by the end of the year and your largest competitor has come out and said they are comfortable hitting about 1.7 times debt-to-EBITDA by the end of 2015. This seems like a pretty big disconnect, so I wanted to get an update on how you are thinking about leverage, what you think is appropriate at this point of the cycle and what you think is appropriate for your business in general?

We have been managing the business to have low leverage, Brad, and we are very comfortable with where we are right now. Just as a reminder, our business is pretty cyclical, point number one. Point number two, we have a strong M&A pipeline, together with investments that we are making in the business, and from a capital allocation percentage perspective, we have been putting $0.55 of every $1 into M&A. We have done that consistently and it has been really fueling our growth over the long term.

And then another $0.30, $0.35 into investments in technology, which again, is boding well to really drive productivity enhancements in smart tools, business intelligence, and the like in our business. We don't expect to change that. And further, we are saving dry powder for opportunities as we see them, while sticking to our tried-and-true investment discipline from a M&A perspective. So we are good with where we are.

And I shouldn't view the expansion of the credit facility as an indication that you might be inclined to increase your leverage in the near-term?

It is smart corporate finance. We took advantage of the market and we took advantage of the fact that we had been upgraded by S&P, got exceptional pricing, added three new banks to our relationship banking group, and then further to that, expanded our line in alignment with our 2020 plans. We are about growth. We're about profitable growth and so we took advantage of the opportunity to expand and work with our relationship banks in a very productive manner.

So to answer your question, we run our ship well from an investment grade perspective. We protect our balance sheet. And to the extent that we are operating, we will operate with under 2 times leverage, as an overall strategic goal.

Okay. And then, just a last one from me, just on the quarter. The real estate services margins were up a couple hundred basis points, year-over-year, and I realize the comp in Q1 last year was pretty -- relatively easy, and you also had a good quarter this time for capital markets, which can be choppy. So I was just trying to think, with all of those puts and takes, how should we think about your margins running this year versus last year? And to the extent that you are seeing a fundamental increase, how sustainable do you think that improvement is over the balance of this year?

We're focused on driving profitability for the long-term, Brad, together with investments that we are making in our platform. We have been doing that for well over a decade, in alignment with Colin's leadership. And as we look forward, this quarter we drove 21% incremental margin and we are very happy with that performance and we're focused on driving that going forward.

Okay. I appreciate it.

David Ridley-Lane, Bank of America Merrill Lynch.

Another solid quarter above market growth in leasing, JLL, up 14% in US dollars, the market down 4%. Can you break out the components of that outperformance, broker headcount, maybe get into some cross-selling from growth that you are seeing in outsourcing clients, per activity gains, anything else?

All of the above. We talked about the level of confidence amongst the corporates globally. If you go back to the period just after the crisis, when everyone was in cost-cutting mode, that period lasted about two to three years. Then we had a couple of years of consolidation where corporates were trying to drive productivity, not just cut costs, and so there was a different mindset coming through on that.

What we are now seeing is companies much more inclined to invest for growth in building their top lines. And so we have this ongoing portfolio rearrangement process still in place, but in addition to that, you have got companies of all sizes now, across all geographies, increasingly prepared to go out and take more space with growth in mind.

If you add to that the fact that in some critical markets around the world -- so London is one, Tokyo is another, the Chinese cities are a third set of examples -- you have a situation where the development pipeline has been relatively constrained. And so they are beginning to see, as they look forward, a situation where there could be supply constraints.

And so there is a level of enhanced activity amongst the corporates, to get space now while pricing is relatively attractive, space is available, and they not in a cycle where the landlords have control of the markets. Put all of that together and I think that is the reason we are seeing this healthy uptick in leasing. It's not an anomaly, it is not one quarter, we think it is part of a sustained process of building through the cycle.

Okay, great. And then, you went silent a bit in the script, on the explanation for the weaker US leasing market and trend in the first quarter. Can you just give us a little color on that?

Leasing revenue on our part was pretty healthy in the Americas --

This was the leasing for the market, US-only, down 6% in the quarter?

Yes, I wouldn't read too much into that. Our forecast for the full year in leasing for the Americas are up 5%, so that minus 6% in Q1, we're expecting in gross absorption, which is what drives our activity levels, we're expecting that to be up to a 5% growth over the full year. So it's just an anomalous first quarter, as I said. Anomaly was the word we used.

Got it. Okay. Perfect. Thank you very much.

Thanks, David.

Michael Mueller, JPMorgan.

Thanks. Colin, you mentioned acquisitions before. I was wondering if you can talk a little bit about investment CapEx spending and how you see that trending over the next few years?

In terms of the regular internal investments, they are likely to trend upwards. We have been putting, as we've said, consistently more money into technology, in particular. That is across the spectrum of infrastructure, systems, hardware, data and analytics, and that is a deliberate and aggressive internal strategy. So expect that number to go up.

We are relatively controlled and cautious on investment in new offices. Our footprint is pretty comprehensive globally so we will be driving the footprint to absorb a lot of investment capital. The third major area will be capital use in the M&A sphere. We mentioned a couple already in the first quarter, relatively small ones. Christie also mentioned we have a healthy pipeline of opportunities of all sizes, which we are pursuing, so expect that number to trend upwards, as well.

Okay. And what was that number, as a point of reference, in 2014? The M&A spending?

It was $85 million, Michael.

Okay. Thank you.

You're welcome.

Brad Burke, Goldman Sachs.

Thank you. Christie, I had a question on your comment on the FX headwinds going forward. You had said you are expecting about a 5% year-over-year headwind for the second quarter and I'm interested to know --?

Sorry, Brad. I just want to jump in there. I don't mean to interrupt you, but it is 5% for the year.

Oh, okay. So 5% for the year.

Yes. Looking -- and you can gauge that based on last year's performance.

Okay. So this quarter, it was 7%. Next quarter, the comps just on a FX basis probably get a little bit easier, but simultaneously the component and contribution from EMEA and Asia Pac also increases, so is there a way to think about, sequentially, how that would play out?

You can think about it that the comps get easier in the fourth quarter, Brad, because of the phasing of our business and the movement of currencies that were primarily driven during the fourth quarter. So when you take a look at the mix, you can see that building through to the fourth quarter.

Okay. And last quarter, you had spoken about the total of 2015 headwinds being about 5%, and in this quarter, that sound like it is the same, and over that three-month period, the currencies have not moved in your favor. Is there anything that would maybe be driving the flat guidance on FX headwinds?

No. Just for a point of reference, so folks know what is going on in terms of the mix of the business on the euro versus the US dollar, so simple as that.

Okay. I appreciate it, guys. Thanks very much.

Okay, Brad.

There are no further questions at this time. I would like to turn the conference over to Colin Dyer, for any closing remarks. Mr. Dyer?

Thank you, operator. We are having an issue with our London office so I'm just going to take over here on this section for Colin. With no further questions, we will end today's call. Thank you for participating and for your continued interest in JLL. Colin and I look forward to talking again following the second quarter. Goodbye, everybody, and have a great rest of the day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Have a wonderful day.