Brokerages Push For Diverse Pipeline, But Old-School Pay Structures Slow Progress
Top brokerage firms spent much of 2020 touting efforts to diversify their overwhelmingly White workforces, but notable shifts at the C-suite level might be overshadowing more impactful measures — particularly at the lower ranks and within pay structures.
Minority real estate professionals who spoke to Bisnow in recent weeks are worried companies are focusing too much on diversifying top positions instead of recruiting a diverse new generation of entry-level brokers.
That may require modifying the traditional compensation structure, which has long forced new brokers to mostly subsist on commissions earned rather than full salaries.
That’s often a tough sell for working-class recruits, including many minorities, who say the prevailing commission pay structure effectively edges them out of what could be a lucrative brokerage career.
“At the producer level, on the commission sales force, it may not work until they stop the old-school practices,” a Black broker for Colliers International in an East Coast market told Bisnow. “It’s not overtly racist, and I’ve never felt like it was a hostile environment, but it is almost set up for people that come from wealthy families.”
Adopting a sink-or-swim attitude toward new recruits is a long-standing tradition in the industry, and change won't come easy, the broker added.
“That’s going to be a slap in the face to their senior brokers, so it’s going to be a tough conversation to have. It’s like moving a mountain.”
But recruiting and retaining more minorities and women brokers may now be necessary for companies to succeed, as many prospective corporate clients are working to diversify their own businesses, and demand more diversity from real estate providers, according to Ken McIntyre, CEO of the Real Estate Executive Council, a national trade organization of commercial real estate professionals of color.
“I can name 10 major companies where the heads of their real estate departments are minorities, and I can name 20 where they are women,” McIntyre said. “It is incredibly important for [commercial real estate] firms to support more diversity on their teams to get more business in the future.”
The big commercial brokerages have gotten that message.
In the past year JLL, CBRE and Cushman & Wakefield have brought chief diversity officers on board to coordinate efforts to hire more women and minorities, as well as increase the amount of business that flows through disadvantaged communities.
Other firms already had high-level CDOs, and most companies are also fostering internal employee groups, primarily led by minority and women professionals, to brainstorm ideas about how to recruit and retain a more diverse workforce.
“There obviously is some reaction to the socio-political tenor of last year's racial justice awakening in the aftermath of the triple murders of Arbery/Taylor/Floyd,” Lamont Blackstone, the chairman of Project REAP, a New York-based nonprofit that runs a real estate academy for multicultural professionals, told Bisnow in an email.
But whether major brokerage firms will take decisive actions on the issue of paying salaries to new brokers instead of commissions isn't clear.
Spokespersons from several companies said they had initiatives that provided financial support to new recruits, especially those from diverse backgrounds, but did not provide many details or make their new chief diversity officers available for interviews.
“Appreciate you following up, we’re going to pass on commenting on that at this time,” Cushman & Wakefield spokesperson Grace Wilk told Bisnow.
Without significant movement on that issue, it’s going to be difficult for the industry to bring diversity to the brokerage ranks, according to JC Griffin, a Chicago-based senior broker with Avison Young.
“If you come from an economically challenged [Chicago] community like Englewood, South Shore or North Lawndale, then the chances of you having the network needed to succeed as a new broker is very slim,” he said.
“That person is held to the same standard as the broker who was raised in [north suburban] Winnetka, went to New Trier High School, then to Notre Dame or Northwestern University, and has a father who works in private equity. Those are two totally different individuals in terms of the knowledge and human capital they have at their fingertips.”
JLL Senior Analyst Kenneth Gilkes graduated about 15 years ago from Fisk University, a historically black university in Nashville, and said although a career in brokerage could ultimately be quite lucrative, the thought of surviving on commissions sounded risky.
Some new brokers do decide to live on a “draw” from their firm, borrowing roughly $35K to $40K per year, until they can make it on their own, he added. But for Gilkes, that option was too large of a gamble, so he decided to become an analyst, a position that pays a full salary.
“Coming into the industry as a first-generation college student, your appetite for risk is extremely low due to a lack of generational wealth,” Gilkes said. “The goal is to find a job with a good salary and benefits.”
For decades, a lack of diversity has been a hallmark of commercial real estate.
Late last year, Bisnow analyzed the nation’s largest brokerage firms, and out of 17 companies, none had more than three top executives who were people of color. The analysis also found that of the brokerage industry’s top leadership ranks, only 11% were people of color, and although 25% were women, almost all were White. The companies’ boards were 12% non-White, and 22% were women, mostly White women.
The same firms also don’t have great records when it comes to recruiting non-Whites as brokers.
“I was the only minority producer in the entire office of probably 60 brokers,” the Colliers International broker said of his East Coast JLL office, which he recently left. “We had one Black intern the entire time I was in that office.”
The lack of diversity isn’t uniform, Gilkes said. Some divisions in his Chicago office, such as property management, have relatively diverse staffs. But less than 2% of employees in his section are minorities.
“There is no one out there doing a great job hiring diverse candidates,” according to Allison Weiss, principal of CRE Recruiting, a Los Angeles-based recruitment firm that specializes in commercial real estate.
“[Senior brokers] tend to reach out to their personal networks, and the people in those networks tend to live near them and look like them,” she said. “That can edge out more diverse candidates, ones who don’t live in their neighborhoods or went to their schools. Our industry is one of great nepotism.”
And once a diverse hire secures an industry foothold, it’s not easy to survive those early lean years. That was true for Griffin, even though he said he was better prepared than most.
The U.S. Air Force veteran spent several years working for Cook County and Congress before joining @properties, a Chicago-based brokerage, in early 2019, and that gave him contacts among government officials. Best of all, he had savings and never had to take a draw from the company.
“When I made the jump, I had $15K to survive on,” he said. “Granted, $15K isn’t going to take you far, but I also had a significant other who would pay the rent.”
He also had joined an @properties team that had several decades of experience, Griffin added, and as he learned the business, commission checks did arrive. But commissions were split, first with the company, and then amongst all the brokers on a deal, who individually might see a little more than $6K on a $50K commission check.
“It’s fabulous to get that payout, even if it took three to seven months to get that deal done,” he said.
But sometimes, those months-long deals fall through. That’s the big challenge for a rookie broker still putting together a network that ensures a steady stream of clients.
“Now you have no money, and who can survive three or six months of absolutely no income while you’re working every day, waking up at 6 a.m. and at the office until six or seven at night?” he said. “That happened to me several times, and if it wasn’t for my having a credit card I could live on, and a significant other I could rely on, there is no way I would have survived. Deals will fail. It doesn’t matter who you are, and you need to have the ability to survive that.”
After nearly two years with @properties, Griffin joined Avison Young in January.
Gilkes said even though nearly six years at JLL has taught him a great deal about the industry, he’s still reluctant to make a jump into full-time brokerage.
“I do work with a good team, and they score a lot of deals, but I have a family now, and working on commission provides no guarantee,” he said. “A lot of firms are losing out on talent, and that’s the No. 1 reason.”
In January, JLL brought on Ingrid Jacobs, the former chief diversity officer of Boston-based investment management firm Eaton Vance, as its chief diversity officer, and she stated the firm was at least open to some changes in compensation.
“We recognize there are barriers such as compensation structures that have prevented diverse candidates from entering the commercial real estate industry, and we know that if we’re going to be successful in improving the hiring, development and retention of diverse employees, we have to start with addressing these issues,” she told Bisnow in a written statement.
JLL did not make Jacobs available for an interview.
Company spokesperson Gayle Kantro later added in an email that in 2019 “we established a program that enhances base salaries for entry-level sales and leasing brokers and analysts for their first two years of employment, providing financial security until these brokers are able to generate greater commission compensation.”
CBRE likewise did not make Tim Dismond, a former division head promoted to chief diversity officer last June, available for an interview.
Company spokesperson Linh Le told Bisnow in an email that "CBRE continues to offer co-funding initiatives which provide salary support for diverse talent hired for brokerage roles.”
An Avison Young spokesperson told Bisnow in a written statement that the company has a seven-year-old program that allows new brokers to have a fixed salary for the first two years, but did not say how much it was, only that it varied from market to market.
“We believe our young people are going to be the future owners of our company, delivering solutions for our clients, so market-based salaries ensure our emerging leaders can learn the business and be comfortable during this learning period,” the spokesperson wrote.
The company could not provide data on how many of its brokers are minorities.
Savills provided some details on a small program launched last fall that may eventually change how the company recruits diverse brokers.
Led by New York-based Janet Woods, the firm’s vice chairman, director and Northeast region lead, the 15-month junior broker development program started late last year and brought a total of 10 new brokers aboard in New York and Washington, D.C., on full salaries. Ninety percent of the participants are diverse, and company officials say they will soon expand the program to other markets in North America.
“In an uncertain time, we are offering these young professionals with a passion for commercial real estate a realistic pathway to break into a notoriously challenging industry,” Wood said in a statement.
EnTrust Realty Advisors founding principal James Clark said that’s a sign of progress. He led Transwestern’s national investment services group before starting in 2002 his own Chicago-based boutique firm, where he recruited a workforce largely consisting of minorities and women.
“The reality is, and I’ve found that in the folks we’ve brought on, it takes time to build up a book of business, along with the relationships needed, that can support someone financially,” he said. “Rather than a sink-or-swim strategy, you pay people a salary. Yes, you’re taking a risk, but I think it’s worth it, and as they start to build their own client base, you can ratchet down the salary. It allows people to focus on learning the business.”
REEC’s McIntyre said he also sees commercial real estate firms making progress, even if the industry is not transforming as fast as many would prefer. He added that he expects change will accelerate as more prospective clients make demands that their real estate providers diversify.
“They will have to look at that and say, ‘Hey, maybe it’s worth our while to pay these people a salary,’” he said.
Clayco CEO Bob Clark agreed and said an increasing number of companies want to follow the lead of his St. Louis-based construction firm, which has required minority participation on its projects for decades.
“I’m hearing more and more from banks, other commercial real estate leaders and many others that they want to do business with diverse companies,” he said. “There has been a recognition, now greater than ever, of the disparity and inequality that exists between people of color and the majority. As clients become more diverse, and as clients require more diversity, that is going to put more pressure on real estate firms. Change will need to come from within and without.”