
4.	BUSINESS SEGMENTS

We manage and report our operations as four business segments:

The three geographic regions of RES including:

(1) Americas,

(2) Europe, Middle East and Africa ("EMEA"), and

(3) Asia Pacific;

and

(4) LaSalle, which offers investment management services on a global basis.

Each geographic region offers our full range of real estate services, including agency leasing and tenant representation, capital markets, property and facility management, project and development management, energy management and sustainability, construction management, and advisory, consulting and valuation services. LaSalle provides investment management services to institutional investors and high-net-worth individuals.

Operating income represents total revenue less direct and allocated indirect expenses. We allocate all indirect expenses to our segments, other than interest and income taxes, as nearly all expenses incurred benefit one or more of the segments. Allocated expenses primarily consist of corporate global overhead, which we allocate to the business segments based on the budgeted operating expenses of each segment.

For segment reporting, (a) gross contract costs and (b) net non-cash mortgage servicing rights ("MSR") and mortgage banking derivative activity are both excluded from revenue in determining "fee revenue". Gross contract costs are excluded from operating expenses in determining "fee-based operating expenses." Excluding these costs from revenue and expenses results in a net presentation which we believe more accurately reflects how we manage our expense base, operating margins, and performance. Refer to Results of Operations, included in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, for a full description of gross contract costs. In addition, our measure of segment results excludes Restructuring and acquisition charges.

Effective January 1, 2018, management expanded the types of costs we include within gross contract costs. Most notably, this refinement includes the compensation and benefits associated with client-dedicated employees. Comparative periods were recast for consistency. This change in gross contract costs resulted in a decrease to fee revenue and was prompted by (i) the increase in compensation and benefits associated with client-dedicated personnel presented on a gross basis as a result of the adoption of ASC Topic 606 and (ii) the continued changes in our business mix, reflecting expansion of businesses that most commonly incorporate client-dedicated employees in the delivery of services. The most significant impacts are within Property & Facility Management and Project & Development Services.

The Chief Operating Decision Maker of JLL measures and evaluates the segment results excluding (a) gross contract costs, (b) net non-cash MSR and mortgage banking derivative activity, and (c) Restructuring and acquisition charges. As of September 30, 2018, we define the Chief Operating Decision Maker collectively as our Global Executive Board, which comprises the following:



• Global Chief Executive Officer	• Global Chief Executive Officer of Corporate Solutions
• Global Chief Financial Officer	• Global Chief Executive Officer of Capital Markets
• Chief Executive Officers of each of our four business segments	• Global Chief Administrative Officer

Summarized financial information by business segment is as follows.



	Three Months Ended September 30,					Nine Months Ended September 30,
(in millions)	2018			2017		2018			2017
Americas - Real Estate Services
Leasing	$	424.0		370.1		$	1,151.4		1,057.5
Capital Markets	115.6			115.4		344.4			319.2
Property & Facility Management	1,271.5			1,077.0		3,713.4			3,230.7
Project & Development Services	304.7			288.2		848.8			843.7
Advisory, Consulting and Other	85.8			69.9		237.1			201.9
Revenue	2,201.6			1,920.6		6,295.1			5,653.0
Reimbursements	(1,251.5		)	(1,094.9	)	(3,659.6		)	(3,283.4	)
Revenue before reimbursements	950.1			825.7		2,635.5			2,369.6
Gross contract costs	(170.7		)	(124.9	)	(460.4		)	(387.1	)
Net non-cash MSR and mortgage banking derivative activity	(5.3		)	(7.1	)	(9.3		)	(11.1	)
Fee revenue	774.1			693.7		2,165.8			1,971.4
Operating expenses, excluding reimbursed expenses:
Compensation, operating and administrative expenses	821.2			710.2		2,306.8			2,078.2
Depreciation and amortization	24.5			24.2		77.1			71.4
Segment operating expenses, excluding reimbursed expenses	845.7			734.4		2,383.9			2,149.6
Gross contract costs	(170.7		)	(124.9	)	(460.4		)	(387.1	)
Fee-based segment operating expenses	675.0			609.5		1,923.5			1,762.5
Segment operating income	$	104.4		91.3		$	251.6		220.0
Equity earnings	0.1			0.1		0.6			0.5
Segment income	$	104.5		91.4		$	252.2		220.5

EMEA - Real Estate Services
Leasing	$	80.1		71.0		$	211.9		186.6
Capital Markets	108.9			107.2		288.1			263.7
Property & Facility Management	336.3			335.9		1,078.9			975.0
Project & Development Services	220.1			170.3		663.5			472.0
Advisory, Consulting and Other	60.2			65.6		193.4			177.1
Revenue	805.6			750.0		2,435.8			2,074.4
Reimbursements	(171.0		)	(108.5	)	(480.0		)	(335.9	)
Revenue before reimbursements	634.6			641.5		1,955.8			1,738.5
Gross contract costs	(237.9		)	(258.9	)	(820.4		)	(739.2	)
Fee revenue	396.7			382.6		1,135.4			999.3
Operating expenses, excluding reimbursed expenses:
Compensation, operating and administrative expenses	611.7			625.9		1,931.4			1,723.5
Depreciation and amortization	11.8			11.6		34.7			33.0
Segment operating expenses, excluding reimbursed expenses	623.5			637.5		1,966.1			1,756.5
Gross contract costs	(237.9		)	(258.9	)	(820.4		)	(739.2	)
Fee-based segment operating expenses	385.6			378.6		1,145.7			1,017.3
Segment operating income (loss)	$	11.1		4.0		$	(10.3	)	(18.0	)
Equity earnings	—			—		—			—
Segment income (loss)	$	11.1		4.0		$	(10.3	)	(18.0	)

Continued: Summarized financial information by business segment is as follows.



	Three Months Ended September 30,					Nine Months Ended September 30,
(in millions)	2018			2017		2018			2017
Asia Pacific - Real Estate Services
Leasing	$	69.3		51.9		$	165.2		133.7
Capital Markets	39.5			55.7		122.2			121.5
Property & Facility Management	529.2			490.0		1,590.6			1,449.4
Project & Development Services	108.7			109.5		309.8			297.4
Advisory, Consulting and Other	43.3			42.3		126.4			117.4
Revenue	790.0			749.4		2,314.2			2,119.4
Reimbursements	(330.0		)	(333.5	)	(1,007.8		)	(1,005.9	)
Revenue before reimbursements	460.0			415.9		1,306.4			1,113.5
Gross contract costs	(207.7		)	(169.1	)	(608.4		)	(462.5	)
Fee revenue	252.3			246.8		698.0			651.0
Operating expenses, excluding reimbursed expenses:
Compensation, operating and administrative expenses	432.6			386.5		1,245.1			1,047.2
Depreciation and amortization	5.6			5.2		17.0			15.7
Segment operating expenses, excluding reimbursed expenses	438.2			391.7		1,262.1			1,062.9
Gross contract costs	(207.7		)	(169.1	)	(608.4		)	(462.5	)
Fee-based segment operating expenses	230.5			222.6		653.7			600.4
Segment operating income	$	21.8		24.2		$	44.3		50.6
Equity earnings	1.0			0.9		2.0			2.3
Segment income	$	22.8		25.1		$	46.3		52.9

LaSalle
Advisory fees	$	68.0		63.4		$	205.0		190.0
Transaction fees & other	9.8			5.6		33.2			24.9
Incentive fees	94.8			33.2		145.4			48.5
Revenue	172.6			102.2		383.6			263.4
Reimbursements	(3.6		)	(4.6	)	(13.2		)	(13.5	)
Revenue before reimbursements	169.0			97.6		370.4			249.9
Gross contract costs	(0.7		)	(1.2	)	(3.2		)	(3.8	)
Fee revenue	168.3			96.4		367.2			246.1
Operating expenses, excluding reimbursed expenses:
Compensation, operating and administrative expenses	110.9			75.1		265.9			203.0
Depreciation and amortization	0.8			0.8		2.3			2.2
Segment operating expenses, excluding reimbursed expenses	111.7			75.9		268.2			205.2
Gross contract costs	(0.7		)	(1.2	)	(3.2		)	(3.8	)
Fee-based segment operating expenses	111.0			74.7		265.0			201.4
Segment operating income	$	57.3		21.7		$	102.2		44.7
Equity earnings	2.3			11.6		24.6			29.9
Segment income	$	59.6		33.3		$	126.8		74.6



	Three Months Ended September 30,			Nine Months Ended September 30,
(in millions)	2018		2017	2018			2017
Segment Reconciling Items
Fee revenue	$	1,591.4	1,419.5	$	4,366.4		3,867.8
Gross contract costs	617.0		554.1	1,892.4			1,592.6
Net non-cash MSR and mortgage banking derivative activity	5.3		7.1	9.3			11.1
Revenue before reimbursements	2,213.7		1,980.7	6,268.1			5,471.5
Reimbursements	1,756.1		1,541.5	5,160.6			4,638.7
Revenue	$	3,969.8	3,522.2	$	11,428.7		10,110.2
Total segment operating expenses, excluding reimbursed expenses & before restructuring and acquisition charges	$	2,019.1	1,839.5	$	5,880.3		5,174.2
Reimbursed expenses	1,756.1		1,541.5	5,160.6			4,638.7
Total segment operating expenses before restructuring and acquisition charges	$	3,775.2	3,381.0	$	11,040.9		9,812.9
Operating income before restructuring and acquisition charges	$	194.6	141.2	$	387.8		297.3
Restructuring and acquisition charges (credits)	3.7		3.4	(6.7		)	13.3
Operating income	$	190.9	137.8	$	394.5		284.0

The following table reconciles segment identifiable assets to consolidated amounts.



(in millions)	September 30, 2018		December 31, 2017
Real Estate Services:
Americas	$	5,292.8	4,745.4
EMEA	2,168.3		2,367.5
Asia Pacific	1,287.9		1,305.0
LaSalle	584.3		548.6
Corporate	285.8		287.9
Consolidated	$	9,619.1	9,254.4