Christian Ulbrich : There’s a very strong correlation between interest rates and cap rates. And at the moment, you clearly have the issue of negative leverage. And so that drives a certain type of buyers, and that’s why you see the best buildings, which are actually only trading at the moment, because those are very often bought by buyers who will buy all equity. And they are just waiting how debt markets and especially spreads are developing over the next couple of months. And they will probably put some debt on those assets much later in the year or even wait for next year. We have seen cap rates kind of growing quite significantly over the last couple of months, but any kind of noise coming from the fat and coming from the different data sets, which are relevant, are being taken in.
And so especially the last two weeks where we saw interest rates moving up again and spreads widening again, immediately create an additional kind of irritation to the market. And so we just have to be patient and let that go away. And as Karen alluded to, we are relatively kind of pragmatic that this year, we have to wait for the third and the fourth quarter before markets will really return and the first and the second quarter will be slow quarters and especially if you compare them to 2022 where the first and the second quarter were absolutely record quarters.
Karen Brennan : And I can — if you want to go into specifics on cap rates specific to the U.S. market, we can talk about that a bit for all the different property types at a high level. The sector that we’ve seen the most movement in from either their peak or from the — if you look at year-end 2019 would certainly be office, where if you say that approximately the range was 3.75% to 4.25%, now cap — going in cap rates there are 6% to 7%. And again, as Christian mentioned, these numbers can fluctuate depending on where you are and the quality of the property. But broadly speaking, that’s the band. We’ve seen — it was in industrial, right? If you say the range was between 2.75% and 3.25%, now the pricing around 4.5% to 5.75%.
Multifamily peak was similar to industrial and the range now is similar to industrial, although a bit tighter on the top end. And then finally, in retail, peak pricing was then 4.5% to 5.75% in the kind of most recent history and is moved out a little bit to 5.25% to 6.25%.
Operator: The next question comes from the line of Jade Rahmani with KBW.
Jade Rahmani : Wow, those cap rates, that’s quite a move, maybe a little bit wider than of a move than I was thinking and not just office but also multi and industrial. I wanted to ask you a bigger picture question just about JLL’s valuation and the earnings consensus. I think there’s still significant uncertainty valuing this company. And it relates to the margin profile. Also there’s a wide range of estimates in the consensus. But then also the high historical earnings contribution from equity income, incentive fees and most recently, over the last few years, the JLL Technologies proptech investments, through mark-to-market valuation gains in the equity income line. So when you’re making internal capital allocation decisions and prioritization setting, what valuation metrics are you benchmarking JLL to when you decide on share buybacks versus pursuing external growth opportunities?
Are you looking at the adjusted earnings and adjusted EBITDA metrics that you provide to folks like ourselves? Or is there an internal metric that excludes maybe nonrecurring items or items that are less recurring?
