‘The Ocean Is Made Up Of All These Drops’: Looking Back On Real Estate’s Year Of Racial Awakening
The national reckoning on race that began a year ago in the wake of George Floyd’s murder forced the commercial real estate industry to take a hard look in the mirror. The reflection wasn’t pretty.
The industry remains overwhelmingly White, from the C-suite to the rank-and-file employees, and the entry-level compensation structure at many companies still makes it harder for people from diverse backgrounds to succeed.
But the persistence and variety of the voices calling for change have kept the industry from turning its attention away from that hard reality. Many leaders realized that the time for talking was over, and they committed to taking real action.
“With the killing of George Floyd, it changed everything,” National Multifamily Housing Council CEO Doug Bibby said. “It was so raw, so real, that I said to myself, ‘I can’t just write another speech about this.’ Words right now are not going to matter. There are going to be plenty of words, but what we need to do is act."
Bisnow spoke to more than 20 high-level members of the real estate industry for this story. Many of the largest companies in the industry, including Tishman Speyer, Hines, Related Cos. and Brookfield, didn't make their leaders available for interviews, instead issuing brief statements.
The industry looks largely the same today as it did last year, as many of those first steps have been the hiring of diversity and inclusion heads, putting policies and training in place, and planning for longer-term efforts to build a pipeline of talent that will take years to materialize.
The last year has also revealed some disagreements about the way the industry should approach its push to diversify. Some executives Bisnow interviewed think companies should set specific, metric-based goals for the diversity of their workforce, while others believe that isn’t the right way to address the problem.
Still, many take heart that the conversation has taken on a new level of urgency, even if major change is yet to take place in the industry.
“I will never say the change isn't happening, because we don't want these firms to do what they're doing and have them feel like it's very little, it's one drop in the ocean,” said Ken McIntyre, the CEO of the Real Estate Executive Council, a trade association for executives of color in commercial real estate. "Well, the ocean is made up of all these drops."
The steps began one year ago this week. In the days after the video was released showing Derek Chauvin killing Floyd with his knee on Floyd's neck, the nation erupted into mass protests.
City streets were filled with demonstrators, and the issue of racial justice dominated the national conversation to an extent that commercial real estate leaders couldn’t ignore it.
A host of companies released statements in the first three weeks of June, some on their websites, some on social media, some on webinars, some during quarterly earnings calls and others in public forums. The statements varied in their length and level of specificity, but they all generally committed to fostering a more diverse and inclusive workplace environment.
“There certainly has been a lot more conversation around the lack of diversity in the commercial real estate industry than probably at any other time in my [27-year] career,” said Cushman & Wakefield Executive Vice Chair Darian LeBlanc, a Black broker who leads the firm’s government leasing team in D.C. “So the conversation is there. And there have been some very visible moves around it, but we have yet to move the needle.”
One of the most visible moves was a wave of large companies appointing diversity heads to spearhead their efforts on inclusion. CBRE, Cushman & Wakefield, JLL and Walker & Dunlop are among the firms that have appointed a person of color to lead their diversity efforts since last June.
Board appointments were also a common first step for large, publicly traded real estate companies. Since September, MAA, Empire State Realty Trust, JBG Smith, AvalonBay Communities and Apple Hospitality REIT have appointed Black board members.
Organizations that create diverse talent pipelines, such as Project Destined and REEX, have experienced a jump in interest over the past year from commercial real estate companies looking to partner with them.
The actions haven’t been limited to recruitment efforts. Several large firms have dedicated billions of dollars toward Black-owned businesses to create more opportunities for people of color to succeed in their own ventures.
CBRE increased its budget for working with diverse suppliers to $1B last year, and it said it aims to grow the budget to $3B by 2025. Bank of America in June committed $1B to improve economic mobility in communities of color. Citigroup in September launched an effort to invest $200M into five separate equity funds that will be co-managed by Black investment managers. LISC announced on May 25 it reached its goal to invest $250M in Black-led banks, businesses and real estate developers.
“What we have seen is there are institutions out there that are doing things to make sure that they’re putting money into hands of Black-owned real estate companies,” said Corey Powell, chief operating officer of Black-owned development firm Dantes Partners and chair of D.C.’s African American Real Estate Professionals group. “Things are happening to help Black-owned companies be in a position where they can also start to scale and do more hiring.”
These steps have not been uniform across commercial real estate. Some companies have remained quiet on the issue of diversity, satisfied to let others take the lead and answer the hard questions.
“One of the challenges that you know exists is that an incident like George Floyd’s murder is so dramatic and had such a strong call to action that, unless you’d been active prior to his murder and the uproar, then there’s a tendency to shy away because you’re somewhat embarrassed about what you haven’t done,” Walker & Dunlop CEO Willy Walker said. “So if you haven’t done anything and everyone’s saying, ‘What’s your plan?’ and you’re standing flat-footed, a lot of people decide just to ignore it.”
The Messiness Of Measuring Diversity
As executives have ramped up their efforts to increase the diversity of their workforce, disagreements have emerged about whether companies should set specific hiring targets, and CEOs have had to address anxiety among some of their existing employees. Some companies have set measurable targets for the diversity of their workforce that they aim to hit by a certain date.
Walker & Dunlop set specific goals for diversity among its 20% highest-paid employees. The multifamily finance firm set a goal to increase the percentage of women in its top earners bracket from 7% to 15%, and the percentage of minorities from 4% to 15% by 2025.
The company also has a goal for diversity among management positions, but Walker said that the highest earners bracket is an important metric that can’t be skewed by changing someone’s title.
“The thing that from my standpoint really moves the needle is pay,” Walker said. “Every single person in that top 20 cohort wants to stay in that top 20 cohort, which means that you need to bring in or you need to train really good women and minorities to move them into those jobs.”
Others have taken a similar approach in publicly setting goals aimed at driving diversity forward. Investor BentallGreenOak last year introduced a new target that declared two-thirds of all new hires should be women or people of color. BGO CEO Sonny Kalsi said he believes many companies in real estate with little diversity may be avoiding putting new formal targets in place for fear of disenfranchising the existing team.
“If you're one of those organizations, and if you're the same management team that built that organization to look that way over time, it might be a lot harder for you, without getting defensive, to say ‘We’re going to do a radical departure,’” said Kalsi, who is of Indian descent.
Four of BGO’s five most senior people are women or people of color, Kalsi said, adding that the junior side of the company has a higher representation of women and people of color than the industry average. Though it is in the early stage of analyzing the entire racial and gender makeup of BGO's 1,500 employees, the area that requires the most attention, he said, is in the middle and senior levels of the firm.
However, BGO has not set a clear metric of how the company should eventually look overall in terms of diversity. Firstly, the firm has not yet established its baseline numbers, but Kalsi said he is also wary of spreading unnecessary anxiety amongst the team.
“If you're a White male, you might be thinking, ‘Oh my God, is my job or career path in jeopardy? Are they going to get rid of me to replace me with someone?’ That's not what we're doing at all,” Kalsi said. “That would be the wrong thing to do.”
The new hiring will be coming amid normal attrition, he said, not from “chasing people” out of their jobs. The company turns over some 150 people each year, he said, which will help bring a new cohort of diverse employees into the fold.
However, he fully expects there will be a sense of skepticism from minorities and people of color at the company about the firm’s new hiring scheme.
“They’ve heard some of this before, historically, and then they never really saw the action behind it,” he said. “And that’s part of the reason that we’ve been kind of quiet about this broadly, since those statements, because we are really focused on actually being able to come back and say, ‘OK, look at all the shit we've done.’”
Not all company leaders believe in making a public declaration about hiring goals, however. Multiple diversity heads Bisnow spoke with said the companies are looking at their diversity numbers internally and are working to make progress, but aren’t publicly releasing hiring targets.
“The industry will fail if it sets targets, because you may or may not be doing things for the right reason. And what we want to do is be able to talk about this in a year and two years and show the transformation of our company and this business,” Avison Young CEO Mark Rose said. “They are probably at risk, if you ask them to then measure it next year … I think that a lot of things have been said that they can't deliver on.”
The privately owned, Toronto-based brokerage has in the last year established a Global Diversity and Inclusion Advisory Council with 20 individuals from all areas and levels of the business. It has produced a supplier diversity statement and a “Code of Conduct” that includes elements of diversity, and it has changed internal processes to make sure there are diverse interview panelists and candidates in every hiring process, according to Avison Young Chief Human Resources Officer Pamela Mazza.
It has also run unconscious bias training for 30% of its employees so far, she said, and put in place a mentoring scheme for people from underrepresented backgrounds.
“Every competitor who has picked a quota … We’re hoping and praying that they fulfill that. I think this is a longer game,” Rose said. “I think that you will find from the most experienced kind of sources of information, data and consulting, that there is a way to do it through education and development and adhering to a culture and a set of standards that you have set up for. “
Rose believes the main issue is shifting mindsets and behaviors, and while he said the company is measuring its levels of diversity, it wants to focus on building programs to make sustainable change.
The Talent War
Cedric Bobo, who runs Project Destined, a social impact platform that provides training in financial literacy, entrepreneurship and real estate, said the huge jump in interest in his organization since last summer indicates companies are eager to make lasting change.
“The conversations used to be based upon charity, and frankly empathy, maybe some pity, for young Brown people who were seeing a neighborhood change, and they weren't a part of it,” he said. “Now it's shifted to, ‘I've got to get the talent’ … And I'm all here for that conversation, but if they just want to do the right thing, I don't know how to scale that. I don't know how to scale your pity.”
In his first three years of setting up Project Destined, Bobo said he ran training for some 300 young people. This upcoming summer alone, he has funding for 400 students at real estate companies around the country.
JLL, for example, has formed a national partnership with Project Destined — a year ago, Bobo said he had no connection with the brokerage. In total, Project Destined has 50 corporate partners and 60 academic partners, triple what it was 18 months ago, which Bobo attributes to an urgency that did not exist before.
That urgency also extends to real estate companies partnering with Historically Black Colleges and Universities, as real estate firms lean on them to find diverse talent. Some firms that had never before recruited from HBCUs' talent base have since last year begun working closely with the universities, as Bisnow reported earlier this year.
And as demand for these recruits heats up, Walker told Bisnow his company is expanding the number of universities it is targeting in order to reach future employees.
“That competitive landscape has gotten so competitive, because — let’s just call a spade a spade — if you are graduating as a minority from a top university or a top HBCU this year, there has never been a better job market for you, ever,” he said. “The offers that are going out, the prices people are paying … we’ve had to go and find new universities to recruit from and new ways to recruit at those universities.”
Still, as the industry has worked to up its talent pipeline, there is increasing awareness since last summer that hiring beyond White males is just one step. Even after Black candidates are hired at commercial real estate firms, they still face hurdles at companies they may not face in other industries.
Especially in the brokerage sector, many firms have compensation structures that don’t offer full salaries to entry-level employees, instead making them live on commissions. This dynamic tends to favor those from wealthier backgrounds whose families can support them until they build up a reliable stream of income.
“I think the single greatest impediment toward participation in commercial real estate, regardless of race or ethnicity, remains compensation at the entry level,” LeBlanc said. “It is extraordinarily difficult to make a living as a young broker coming into the business, and it’s always been that way.”
JLL Head of Diversity and Inclusion Ingrid Jacobs, who previously led diversity efforts at Eaton Vance and Raytheon before JLL tapped her for the newly created role in January, said she has identified compensation as an issue the company will need to tackle as part of its diversity strategy.
“We recognize there are barriers such as compensation structures that have prevented diverse candidates from entering the commercial real estate industry,” Jacobs said. “And if we’re going to be successful in recruitment and hiring and retention of diverse employees, we have to start with addressing these types of issues.”
‘The Real Work Has Yet To Be Done’
While many companies have taken initial steps toward addressing their lack of diversity, several Black commercial real estate professionals agreed that the industry hasn’t made meaningful progress on increasing the percentage of people of color within the workforce.
“In terms of actual brokers joining, the landscape is not that different,” said Cresa Vice President LaMean Koroma, who was tapped in January to lead the firm’s diversity, inclusion and belonging council. “There have been a few hires here and there, sure, but for the most part, the industry still looks mostly the same. There hasn’t been a huge infusion of color into the brokerage industry that I’ve seen.”
Cushman & Wakefield’s LeBlanc said that he has been glad to see companies taking steps to create a foundation and chart a plan for improving their diversity, but he said the diverse hiring has yet to take place in a significant way.
“The real meaningful steps toward creating diversity still have yet to occur, and maybe that’s what comes next,” LeBlanc said. “The real work has yet to be done. We cannot say there has been any movement toward diversity in the brokerage arm of any of these companies.”
Companies have made a handful of high-profile hires of Black professionals, but in many cases, they moved from one commercial real estate firm to another, thus keeping the overall diversity of the industry the same.
CBRE in May hired former Transwestern executive Mike Watts as president of investor leasing in the Americas. Newmark in February hired former CBRE executive William Hill to lead its Federal Investor Services group.
“There have been people who have moved from firm to firm of color, like Bill Hill who went from CBRE to Newmark, there have been those types of moves, but net new hires of market-facing, revenue-producing brokers of color have been way too few,” said Jarvis Commercial Real Estate founder Ernie Jarvis, who previously led CBRE’s D.C. region.
Walker said his firm has had several diverse, senior-level professionals hired by other companies, making it more difficult to meet his goals for increasing the percentage of diversity among his top earners.
“Because we’ve been a leader and everyone wants the talent, we’ve had a number of very successful minorities recruited away from Walker & Dunlop,” Walker said. “So that has taken us back a step, because we lost a number of people in that top 20% cohort who went off to other firms who came in and, in every case, threw huge sums of money to recruit those people away from Walker & Dunlop because they needed to catch up.”
Poaching high-level people of color from other companies can be the only way to increase diversity in a company’s executive ranks in the short term, as many of the initiatives to create diverse talent pipelines are focusing on young people who will take years to advance to the upper levels of a company. But companies don’t have to only recruit executives from competing commercial real estate firms.
Jarvis said he wants to see more hiring managers look for successful Black professionals in other sales-related industries with skill sets that can be transferable to commercial real estate. This idea was part of a 10-point plan Jarvis released last June, but he said he hasn’t seen many companies pursuing it.
“If you can sell, you can sell; they can learn commercial real estate,” Jarvis said. “You can recruit from other industries. That happens all the time. People who are made market leaders or executives don’t necessarily need to come from commercial real estate. That’s what I’m not seeing. Focusing on college kids and HBCUs is great, but that is a training process for the future.”
Some companies are looking even further into the future by working with students before they enter college. Interstate Equities Director of ESG Bakari Adams said he is focusing on building a future pipeline by partnering with REEX, an organization that provides summer programs in real estate to juniors and seniors in high school.
“It has to start to get started now,” Adams said. “So I think if more companies sponsored these programs, in five years, the climate would be completely different. Because right now, people make excuses: ‘Oh, I can't find anybody. I can't find a diverse candidate.’”
While the efforts taken over the last year haven’t solved commercial real estate’s diversity problem, the industry has taken initial steps to create a foundation for change, and companies have come together around the issue more than ever before.
“In a silo, if each firm does their own thing, eventually you lose momentum, you lose enthusiasm because you feel like what you're doing is meaningless; because the ocean’s too vast and you're not a big enough part of it,” McIntyre said. “But, if we take each ship that's out there in the ocean, and put them all together, now you have an armada.”