Help Wanted! Why Commercial Real Estate Companies Continue to Aggressively Seek Out Talent-and Five Ways to Do It Right
In contrast with the residential sector, commercial property companies are doing well and will continue to face a challenge in finding good people.
ULI author Stan Ross and real estate recruiter Anthony J. LoPinto discuss the industry talent shortage-and explain how you can overcome it.
While the residential real estate sector has slowed, business remains strong in the commercial property sector, and hiring and compensation continue on an upswing. That’s good news for students going into real estate or professionals moving up the career ladder-but if you’re an employer, it’s a different story. There is a major shortage of qualified employees right now, and it’s only going to get worse. That’s why industry experts Stan Ross and Anthony J. LoPinto urge real estate companies to get proactive in finding and nurturing good candidates.
“There just isn’t enough talent available, whether in numbers of people or in the level of experience and skills required, to fill increasingly sophisticated and demanding positions, especially for seasoned professionals in finance, accounting, and development,” says Ross, Chairman of the Board of the University of Southern California’s Lusk Center for Real Estate and author (with James Carberry) of The Inside Track to Careers in Real Estate (Urban Land Institute, 2006, ISBN: 978-0-87420-954-9, $19.95). “The shortage will continue to affect all areas of commercial real estate-development, finance, asset, property or project management, and leasing.
“If the leaders with the real skin in the game don’t take action, who will?” he adds. “Now is the time to start seeking and developing the right people to fill critical positions and build a strong bench.”
“Demand for development and acquisition talent will continue unabated,” comments LoPinto, CEO of Equinox Partners, a New York-based executive recruitment firm serving the real estate industry. “In addition, demand for seasoned asset managers will continue to outstrip supply.” In a hot job market, LoPinto says he expects recruiting activity to remain strong.
A survey by SelectLeaders, an online job board for the commercial real estate industry, found that industry job postings increased 35 percent in the first quarter of 2007, and most employers and senior executives expected hiring and compensation to continue to increase at least through 2007. At the University of Southern California’s Lusk Center for Real Estate, students who graduated with MBA degrees in 2006 commanded average annual salaries of $76,700, and 2007 graduates should earn even more.
Understanding the Talent Shortage
The commercial property boom has spotlighted a vexing problem for employers: a growing shortage of talent. To be sure, the next cyclical downturn in commercial real estate, whenever it happens, could alleviate some of the pressure. Nevertheless, the long-term trend is that as the commercial real estate sector continues to grow, the supply of talent will not keep pace with demand.
“Real estate companies are competing not only with each other for talent, but with the service sector generally,” explains Ross. “A principal reason is that during the last big downturn in commercial real estate, roughly from the early to the late 1990s, fewer people went into real estate, and more went into then-booming technology and other industries. Along the way, the commercial property industry lost almost an entire decade of talent. Just look around most any large real estate company today.”
What this means is there is now a shortage of people in their 30s and early 40s in commercial real estate. That shortage has been aggravated by the fact that more and more senior professionals-the baby boomers-are reaching the end of highly successful careers, cashing in their chips, and moving on to other pursuits. Furthermore, some entrepreneurs have made their fortunes in commercial real estate at a very young age and turned the management of their companies over to others-or sold their businesses. Others are continuing to manage real estate portfolios, for themselves or others, but their primary interests now lie outside of real estate. The upshot is that, in these entrepreneurs, real estate has lost some of its best talent.
Meanwhile, commercial real estate companies are continuing to grow, and investors are putting more capital into commercial properties, which in turn is creating more demand for professionals with the skills to help manage increasingly large and complex companies and portfolios. Professionals with finance and accounting backgrounds, for example, are in particular demand. Talk to most any CEO or other senior person in real estate today, and the conversation soon moves to the talent shortage. This has not been lost on today’s students, who are beginning to give the same consideration to real estate careers as to those in law, engineering, medicine, or other professions.
So . . . How Can You Attract the Right People?
Ross and LoPinto offer the following tips:
– Don’t settle for warm bodies. So does the real estate talent shortage mean anybody can walk in the door of a commercial property company and instantly land a job? Absolutely not, says LoPinto. “Don’t fall prey to the temptation to fill positions with mediocre employees,” he says. “It’s important to hire the right people, with the right skills and experiences, and the ambition, drive, and street smarts, to grow and thrive in your organization. Remember, this industry is growing rapidly, and you have plenty of competition-so it’s more important than ever to hire people who will keep you in fighting shape.”
– Focus your search inside the industry. At the senior level, it might seem logical to look not only inside but outside the industry. But except for a few positions, such as CFO, real estate functions are so industry-specific that commercial real estate companies usually recruit from inside the industry.
– Make HR a strategic position. Companies traditionally have focused more on the transactions side-doing deals-than on managing human capital. But that is slowly changing. Increasingly, companies are elevating human resources to a strategic position, having HR executives report directly to the CEO, and expanding the HR function from recruiting to other issues such as succession planning.
– Build relationships with colleges and universities that are a prime source of talent. Plan for people in your organization, from top executives to young professionals, to regularly visit selected colleges and universities to meet with faculty and students and discuss career opportunities in real estate generally and your organization specifically. Set up a program to provide internships to college students. It’s an excellent way for you to decide whether you want to hire them when they graduate, and for them to decide whether they want to work for you. “Beyond internships, develop a plan for recruiting and bringing new graduates into your organization, training them, and promoting them,” adds Ross. “They are your future managers and successors, and you need to invest as much time and effort in them as in running your business.”
– Seek out seasoned industry players. “More than most industries, real estate is entrepreneurially driven, provides opportunities to build wealth, and offers meaningful career opportunities,” notes LoPinto. “This especially appeals to today’s mid-level managers, who started in real estate in the 1990s, succeeded through difficult times, and today are much in demand. And come the next downturn, real estate may need to invite back some of the gray hairs, women and men who have left the industry. Their talents and experience will be needed in managing the next round of workouts.”
Once you find and hire good employees, do everything within your power to keep them, advises Ross. It won’t be easy given the wealth of opportunity that currently exists in the industry, so make it a priority.
“It can be especially challenging to hold onto young, smart, talented people who work in the industry for a few years,” he notes. “They are often lured into positions with private equity funds, commercial banks, and other organizations that can utilize their real estate expertise. Be sure to pay them well, but even more important, create the kind of organizational culture that’s tough to leave. Your people are everything-treat them well and they’ll return the favor.”