Another Generation Of White CRE C-Suites: How Equal Opportunity Laws Are Holding Back Diversification
Want to get a jump-start on upcoming deals? Meet the major players at one of our upcoming national events!
The C-suites at the largest firms in commercial real estate are starkly white, but industry experts say federal hiring laws can cause even the most ambitious diversity campaigns to take generations to show results.
Legal experts say it is more complicated than that, and people of color in the industry argue little, if any, progress has been made in recent years.
Title VII of the Civil Rights Act of 1964 made it illegal to discriminate based on race in the hiring process, but it also means companies cannot hire people of a certain background just because they want more diversity in their workforce. It requires more foundational changes that take longer, but could see more lasting results.
“You cannot go and target an individual because of his or her race, religion, color, sex or national origin. It’s illegal,” Avison Young Chief Human Resources Officer Pamela Mazza said.
Commercial real estate firms have lagged behind because the industry does not have a long history in minority communities, executives say. Finding experienced, diverse executives without violating hiring laws is almost impossible. Instead, the industry is implementing programs to recruit and train students before they choose a different path.
But organizations beyond commercial real estate have found ways to advance diversity within the ranks in an efficient manner that does not mean starting young and waiting for potential talent to matriculate to the workforce.
“[Legal] challenges to private industry diversity initiatives are very, very rare. It’s not something you see very often," said Michael Selmi, a law professor at George Washington University who specializes in discrimination cases. “It’s true that, in general, you can’t justify hiring by quotas, but there are lots of companies that find ways to do diversity hiring that is perfectly lawful.”
African-Americans made up 2.18% of executive and senior-level positions in the U.S. real estate industry as of 2015, according to the Equal Employment Opportunity Commission’s most recent statistics, despite comprising over 13% of the U.S. population. And the statistics show African-Americans’ share of the top positions industry has actually shrunk; in 2010, African-Americans held 3.04% of executive and senior-level jobs.
Avison Young’s website shows only one African-American in a senior leadership role, as does Cushman & Wakefield’s. JLL, CBRE or Colliers International? Zero. C&W, CBRE and Colliers declined to comment for this story.
“CRE is a legacy industry, meaning most people go into it because they know someone who has been in it,” Mazza said. "People tend to hire people who look like them.”
“What’s sad is that it has always been the case,” Newmark Knight Frank CEO of Global Corporate Services Craig Robinson said. “I’ve been either the only one, or one of a few [African-Americans]. Unfortunately, that is normal to me.”
Finding A Needle In A Haystack
Even if the industry is looking to change its complexion, it could take years before African-American representation in commercial real estate reflects that of the larger U.S. population. Hiring laws, recruiters say, prevent hiring a diverse executive board at the flip of a switch.
“The EEOC says you can’t hire on the basis of race,” said Jeff Wittenberg, managing director at Dallas-based recruiting and search firm Kaye/Bassman. “Bottom line, you have to consider everyone, but, yes, absolutely, companies have said, ‘We want to hire the best, and we’d be really thrilled if they were ‘X.’ It is a needle in a haystack, unfortunately.”
Wittenberg heads Kaye/Bassman’s AEC and real estate practice and has worked at staffing companies in the industry for 25 years. While he does not rule out the possibility of companies shying away from diverse hires, Wittenberg said he had never experienced it personally when looking to match potential employees with companies.
“I haven’t seen prejudice,” Wittenberg said. “If anything, I’m seeing quite the opposite with a lot of companies, particularly the bigger ones. Larger organizations have HR initiatives to increase the number of minority hires, whether it’s African-American or female.”
Construction work with federal entities often comes with a certain level of minority participation, he added. Developers and construction companies would have to recognize their complexion should look different if they want a chance at successfully landing a contract.
But implementing change can be difficult. African-Americans accounted for only 4.6% of commercial real estate in 2017, according to the Bureau of Labor Statistics. Some say it will take more than well-intentioned diversity hiring initiatives to bring noticeable change.
“A token hero here or there neglects your critical mass engagement,” The Integral Group CEO Egbert Perry said. “It’s the big house and the field … the field has a whole lot of people, but only one or two people make it into the big house. I don’t think that works. You need more big houses that are going to have large numbers of African-Americans in it.”
The African-American C-Suite Barrier
“This is an industry that, if you don’t grow up with someone in your family or network who’s in it, you’re probably not thinking about it,” Robinson said. “People don’t grow up thinking ‘I want to be in commercial real estate.’ There isn’t a moment the average kid thinks about being a broker or a developer.”
Even when graduating from business school, students have such a wide range of choices for professional fields that those without family connections may never consider commercial real estate as an option, Accordia Partners Managing Director Kirk Sykes said.
For those that do enter into the industry, climbing the ladder can be an uphill battle. Rising from an entry-level position to becoming CEO is a tall task for any professional, but Robinson said it is more difficult for African-Americans because they have fewer relationships and mentors in the industry.
“Even as you began to progress and want to imagine yourself in seats and roles, you haven’t seen others who look like yourself,” Robinson said. “That becomes a challenge.”
Advancement is particularly difficult in commercial real estate, Robinson said, because firms do not have as clearly defined paths to leadership roles as other industries such as consulting or banking.
The difficulty of advancing can lead some to change firms or leave the industry all together. Real Estate Executive Council Executive Director Oscar Groves said not a year goes by when some of its members are not leaving companies to find new opportunities. The REEC was founded in 2003 to help African-Americans rise in commercial real estate, was later expanded to include Hispanics and now has over 80 members.
“It tends to seem that they are dissatisfied with the ceiling they hit and can’t go beyond that, so they move laterally to another company that might have either more diverse people there so they don’t feel they’re the only person of diversity in a firm,” Groves said.
Some of that turnover also includes members choosing to start their own firms. But that path can also present difficulties of its own. For black brokers running their own small firms, the challenge of convincing large corporations to work with them over big brokerages can be daunting.
Jarvis Commercial Real Estate CEO Ernie Jarvis, who led CBRE’s 150-person D.C. office before founding his own firm, said big companies make efforts to work with minority-owned businesses for technology services or buying products, but rarely think about diversity when making real estate decisions.
“Commercial real estate is behind all other services,” Jarvis said. “I have friends who represent IBM or Xerox, and they go through a diversity officer. If you call a diversity officer at a big company and talk about real estate, they’ll be lost.”
That companies have diversity officers shows the business community has taken positive steps forward, but Jarvis argues many are no longer paying as much attention to diversity as they did five or 10 years ago. “Diversity was hot for a while," he said, but wellness and sustainability became the areas millennial talent chose companies based on, not diversity.
Black developers also face their own unique challenges. Raising capital for real estate projects can be extremely difficult for people of color, Sykes said, especially in the post-recession environment when risk-averse investors have stuck with those they have worked with before.
“People do business with people they know, as opposed to saying, ‘Do we have any people of color we can get to do this skyscraper?’” Sykes said. “And that’s why you don’t have any skyscrapers developed by people of color in this country.”
Thinking Outside the CRE Box
Establishing a new pathway, and a more receptive terminus, requires a multifaceted approach.
“The first step is doing a better job of letting young people, whether it’s students or young professionals, consider a career in commercial real estate and introducing folks to different jobs in the field,” Trinity Financial Managing Director Kenan Bigby said.
Outreach to younger generations also means educating high school guidance counselors that real estate is just as viable a field as medicine or law, Bigby said. Exposing African-American students to the industry’s variety of career trajectories at an early age would ideally funnel higher numbers of potential talent to the field.
“Think outside the box you’ve lived in your whole career and recruit from different sources," Mazza said. "Go to community newspapers and go out to universities that have a higher diversification of the student body so you have a better variety of source candidates. That’s the way you can do it legally.”
The industry has recently begun working to implement master's programs in real estate, Mazza said, which could help create a more diverse talent pipeline. Georgetown University, New York University, Cornell University and the Massachusetts Institute of Technology each offer master’s degrees for students looking to enter the real estate industry.
These programs are less common at Historically Black Colleges and Universities, with none of the top 20 HBCUs offering real estate master's degrees, according to U.S. News & World Report.
Selmi points to other industries with diversity recruiting practices as ways to legally bring about change.
“Look at the NFL and the Rooney Rule,” he said. “They’re not exempt from the laws, and teams are expected to interview diverse candidates.”
The Rooney Rule is a policy enacted by the National Football League in 2003 requiring teams to interview at least one minority candidate for each coaching and senior-level operation positions. The rule was put into place after two of the only African-American coaches in the league were fired in 2002. Nobody has suggested its implementation is unlawful, and several firms have similar hiring practices with respect to gender, Selmi said.
While court cases have determined some targeted diversity hiring practices are illegal, Littler Mendelson partner Christine Hogan said the issue is not fully settled. She also said lawsuits in these types of cases are rare and companies can implement diversity initiatives with only moderate risk.
“All companies have different levels of risk taking,” Hogan said. “I do think that the law isn’t quite developed and there’s no hard-line rule, so that can make it difficult to proceed in this area.”
While it can be an opaque path to ascending the ranks of the industry, some argue a professional relationship that extends beyond mentorship is vital for African-Americans to earn a seat at the table.
Avison Young has an internal career path program to promote more diverse hires within the company. Other CRE firms like CBRE, Colliers International and Cushman & Wakefield have websites indicating they promote diversity.
JLL offers a targeted development program for senior and midlevel African-American talent through its Executive Leadership Council. From 2016 to 2017, the company saw a 22% increase in African-American leaders within senior-officer-level roles, according to a statement from JLL Americas Director of Diversity and Inclusion Grant Clarke.
The company declined to make anyone available to interview for this story.
Mentorship can be easier to come by, as it often consists of simple career advice. Sponsorship is more of a risk; it requires directly communicating to someone in leadership that you want to get ahead and view their voice as key in advancing your own career. Organizations like CREW increasingly emphasize the importance of sponsorship in advancing women in commercial real estate. It is no different for racial diversity.
“It’s a business transaction,” Sasaki landscape architect Diana Fernandez said. “It’s chemistry, doing something good and getting something in return. It’s an exchange, and it’s important for people to see it that way. This is good for the company, and it’s good for the bottom line.”
Fernandez works in the Boston office of the international design firm, and she recognizes architecture is no different than the rest of commercial real estate in facing the problem of underrepresentation. Only 2% of licensed architects in the U.S. are African-American, according to the National Association of Minority Architects. There are nearly 110,000 licensed architects in the U.S. Only 418 of those are African-American women, according to the University of Cincinnati's Directory of African American Architects.
The limited diversity means there are few role models for younger employees to look up to. While sponsors can be of any gender or race, Mazza said a challenge with Avison Young’s mentorship and career path program, as committed as the company says it is to advancing diverse employees, is there are not enough role models to go around.
“We had more women asking to be mentored than there were actual mentors,” she said. “That’s a challenge for us, and those are some of the challenges in the career path program. We don’t have enough role models to help guide the diverse workforce.”
Others simply forge their own path to get ahead, and that can sometimes mean giving up on knocking on the door. Instead, they create their own door to open.
Jeremiah Watson, principal at Memphis, Tennessee-based Innovative Engineering Services, worked in the engineering department at bigger companies and struggled through both the 2000 and 2008 economic downturns. Getting laid off in 2009, in the depths of the Great Recession, was the push Watson needed to start his own business.
The company he built provides design and consulting for construction projects like the modernization of Memphis International Airport and Crosstown Concourse, a 1.5M SF repurposed, mixed-use project at the site of a former Sears catalog distribution center.
“We’ve been able to get ourselves certified as a minority business, which has helped us get our foot in the door on occasion, but that’s not the only way we get business,” Watson said. “The whole point is to get your foot in the door, prove yourself, and do work not because you’re certified as a minority business, but because you do good work.”
Publicly traded companies may feel a push for increased diversity from shareholders. Federal construction contracts may come with diversity requirements, and even larger, privately held companies may begin to realize a need to change the largely white status quo. But a foundational change to commercial real estate’s employee makeup may have to come organically.
"Hopefully before I retire, the next generation will have a different experience,” Robinson said. “If they don’t, I haven’t done my job and my colleagues haven’t done theirs. I hope we’re not writing this story in five or 10 years."