This Recession Could Be The Making Of You
Recessions are bad for countries, bad for sectors, bad for companies — but they don’t have to be bad for your career.
Times of turmoil throw up opportunities to shine that may not arise in a more benign economic environment, the more than 400 delegates who attended Bisnow’s Women Leading Real Estate event in London heard.
“Moments like this, moments of dislocation in the market create huge opportunities,” Canary Wharf Group Chief Financial Officer Becky Worthington told the audience at the Porchester Hall in London.
“The risk is not taking a risk. The downside is negligible — if something goes wrong, you lose your job, you go and get another one. Honestly, it's not that bad. There’s the old phrase, fortune favours the bold. And when it comes to your career, I'm absolutely sure that's the case.”
A survey of fund managers undertaken last week by Bank of America Merrill Lynch found a net 77% thought that a global recession is likely. And the sharp rise in interest rates introduced by central banks in the UK and U.S. means that real estate is particularly exposed: The Urban Land Institute and PwC’s Emerging Trends in Real Estate Europe report released last month found the sector has not been this illiquid since 2009.
In such markets, waiting for career advancement opportunities to just come up can mean waiting for a train that never arrives, speakers at the event said.
There can be a temptation during a downturn to take a lead on how to act and react from those above you, especially for those at the beginning and middle parts of their careers. But one speaker who has risen to the very top of the financial world warned it is important to be assertive even when your superiors are being cautious.
“I started my first job in a recession, and I remember, at the time, arriving and thinking they had completely slashed the graduate population, it felt massively constrained,” Abrdn Chief Financial Officer Stephanie Bruce said. “I could put the leaders above me into two camps; there was one lot that were panicking, and there was the other lot who said, 'You know what, we're going to rise to the occasion.'”
It is easy in difficult times to follow the group who is panicking and hunkering down, Bruce said. But the way to advance is to find some of the people who are focusing on what should be done quicker and accelerate.
“They're the people that you'll learn a huge amount from, and you'll get a huge extra series of experiences," she said. "I learned a huge amount by just taking some risks.”
Bruce pointed to one such opportunity where, at just a few days' notice, she was seconded to a team trying to work through complex financial issues that had been created through the use of derivatives.
“I remember thinking at the time, I don't quite remember how to spell derivatives,” she said. “But OK, I'll go on Monday morning. And it was brilliant, it just opened up a completely different world. Now, it required me to be brave. But they trusted me because I had the technical skill sets. They didn't expect me to know anything about it. But I was just encouraged to go and grab the opportunity.”
A market like the post-Lehman financial crisis or the current uncertainty can generally teach an individual more about how to forge a career in real estate than a calmer market.
“I think in terms of a personal journey, if it’s your first time in a more difficult market, you will gain muscles,” CBRE Investment Management Senior Director Sasha Noble said. “You will learn more from a tougher time. And I really believe that so you'll come out the other side stronger.”
Canary Wharf’s Worthington reached for a poker analogy to push home the point.
“I tell my team, for the last 10 years, every time they were playing cards, they got handed two aces and a king," Worthington said. "Anyone can win with two aces and a king, suddenly, they're being handed two twos and a three. And it's a real challenge. Honestly, whilst you may not want to live through it, I have to say, for me the global financial crisis was the best learning experience of my entire career.”
How will the current downturn play out? Worthington predicted a 50-75 basis point rise in yields for prime London offices as a result of the increased cost of debt for investors.
“Not a bloodbath, but a little bit of distress,” she said.
For Bruce, real estate is facing a repricing in the short term, but over the longer term, allocations to the sector from institutional investors should hold up.
“Demands from our clients are very focused in areas where they see structural growth in the future,” she said. “Real assets is absolutely one of them."
Abrdn has about £48B of funds under management in that space, focused on industrial, logistics, infrastructure and European residential, Bruce said.
"There's an element of subdued transaction activity at the moment whilst people get that new asset pricing correct in their own minds," she said. "But the longer term demand is there because of the underlying structural trends as well.”
For Bruce, there is one point to remember at a time of market difficulty, in terms of a portfolio and a career.
“The thing I would take away is not so much patience, but that these are cycles,” she said. “You will look back on this in five or six years, and we'll be in another cycle. And then you'll sort of think, oh yes, that distant recession. So you build resilience.”