CRE Firms Look To Reset Compensation, Recruitment Plans As Talent War Rages On
Pandemic-era disruptions have roiled the real estate industry, but when it comes to compensation, the impact has just begun to be felt.
With new leverage in an era of labor shortages and increasing concern about diversity, empowered workers have made it that much harder for firms and human resources departments to find and afford the talent they want, industry recruiters and researchers say. As a Deloitte CRE survey put it, ”the tight labor market is bringing workforce issues to the forefront.”
“Companies are adjusting to paying more,” said Jackson Lucas Managing Partner Chris Papa, whose CRE-focused recruiting firm is seeing shifts across different sectors and levels of experience. “Talent is at a premium and in a position of power. Some firms have very set compensation plans, and now have to reset them.”
More than 87% of real estate firms will offer merit increases in 2021, with an average raise of 3.4%, according to CEL & Associates CEO Christopher Lee, whose salary data and CRE compensation report are closely read by much of the industry. Amid a resurgent year for the industry, bonus realizations based on performance goals are projected at 90.5%, according to CEL, a big turnaround from last year, when they were expected to fall 20% to 30%.
“There is a growing talent shortage within the real estate industry that is resulting in significant changes to compensation and compensation programs,” Lee said. “Real estate firms have discovered that they need to make fundamental changes to their workplace environment to attract and retain next-generation stars.”
Competitiveness explains part of the shift. Everyone, it seems, is hiring at the same time. Per CEL data, 66% of private firms and 58% of public firms are hiring, and 78% of all firms expect to have a net increase in headcount when the year is done. That’s a sharp rebound from 2020, when 1 in 4 firms implemented a hiring freeze.
“Salaries haven't yet flattened out, but I am not sure how high they will go,” said Carly Glova, president of Building Careers, a commercial real estate talent firm. “Companies are slowly adjusting to the higher compensation packages, so there may be a continued adjustment period into 2022.”
But often the talent, and especially the diversity of talent requested, just isn’t there. Papa said he is seeing firms, pushed by investor interest in ESG, struggle to hit DEI goals.
“We can send a firm 100 fine, nondiverse associates, and they’ll say, ‘No, we need to hire for diversity,’” he said. “It’s all out in the open now, it’s not whispered. They’re just going to have to pay higher prices for it, most likely.”
Commercial real estate firms also stumble a bit when it comes to hiring young talent. CEL research finds that 48.3% of firms will likely change their talent management plans specifically to attract younger workers. Lee told Bisnow in September that leadership “lacks a compelling vision or pitch for potential recruits.”
“[What we call] 'High Potentials' and 'Next-Generation Stars' are asking for and receiving what they need to stay or need to join,” Lee said. “There is a growing challenge to pay for new hires without disrupting the compensation of existing employees/high performers.”
Leadership also commands a premium, and firms have placed high demand on C-suite positions that can help firms “pivot to the new normal,” Lee said.
Papa has seen a few challenges crop up during these types of executive hires. The biggest hurdle has become equity, as potential hires demand it in lieu of other comp packages. Employers weighing such demands find it can be a tricky situation since granting equity once leads to employees with similar ranks demanding the same thing.
Building Careers’ Glova said that despite the potential awkwardness of making equity part of new compensation discussions, opportunities for equity are becoming more readily available and tied to specific deal metrics, becoming a more prominent part of the compensation package.
Remote working, and the ability to do so, has also factored into the industry’s wide-ranging talent search. Not that many senior positions and hires have problems with receiving or demanding remote work privileges, especially in tech-related roles, while junior roles have a higher bar to clear to earn a similar schedule.
CEL data shows that just over 60% of real estate firms offer telecommuting, and 55.6% allow flexible working — Lee expects working remotely one to four days a week will “be the new normal” in commercial real estate.
Ultimately, the in-office issue is part of the larger, and immediate, need for talent in the industry, from life sciences to acquisitions managers. A worker shortage at a moment when the industry is pivoting and becoming more technologically complex means that experience is in even higher demand than usual.
“[Firms] are looking for people with specific skill sets that can ramp up quickly as most don't have time to train entry-level people,” Glova said. “Candidates with more experience are more sought after."
CORRECTION, DEC. 8, 2 P.M. ET: Chris Papa is a managing partner at Jackson Lucas. A previous version of this story misstated his firm and title. This story has been updated.