Real Estate Pay In 2020 And Beyond: Salaries Up, Bonuses Down And Don't Try To Hire On The Cheap
This has been a year of shutting down and staying put. But for commercial real estate executives, there’s fear that top talent is poised to make a move.
A wide-ranging analysis of industry salary and compensation trends by CEL & Associates taking into account nearly 400 firms found that, in a year when the industry struggled due to the coronavirus pandemic and resulting economic slowdown, there’s a palpable worry that leading employees may look elsewhere, leading to changes in compensation.
A survey by CEL found 71.4% of real estate firms are having trouble finding skilled talent to fill their positions, and almost 50% of real estate firms have concerns about losing their top talent in 2021.
"Bottom line here is talent still matters,” CEL & Associates CEO Christopher Lee said. “Despite the pandemic and everything else, talent is extremely important."
Salaries industrywide will improve, but at a slower pace than years past. Executive pay is forecast to rise by 2.6% in 2021, slower than in 2020 (3.7%) and 2019 (3.2%). Overall, salaries are predicted to increase between 2.4% and 2.7%.
Lee said he found that industrywide, annual bonuses this year will likely be down between 20% and 30% from the prior year, and performance goals aren’t being restructured to provide bonuses despite the downturn. The big exception is high performers, who may get bonus payments that basically serve as retention bonuses, and “first responders” (management and maintenance personnel who were in the field managing buildings throughout the crisis).
This look at salaries can perhaps best be seen as a sign of an industry in limbo, with too much fluidity in the market due to vaccine distribution, economic uncertainty and the beginnings of a new administration. Lee said that he found no major changes likely to compensation plans heading into 2021. Everyone is looking to see what happens in the first and second quarters before they make adjustments.
“Firms still have dry powder, they’ll use it next year,” new boutique executive search firm Jackson Lucas Managing Partner Chris Papa said. “Everyone is waiting on the vaccine.”
Others also foresee shake-ups among leadership and talent looking elsewhere. CRE Recruiting CEO Allison Weiss, CEO said in downturns and recessions, it is very common for leadership to retire, or be encouraged to do so; those at the helm may not want to wait for another upturn in the market, and they may not be up-to-date on tech and diversity initiatives, while a young up-and-comer can take the reins with half the salary cost.
Papa said firms that have tried to hire during the pandemic and obtain a “COVID discount,” expecting potential hires to be afraid of a downturn and take lower base pay, have been rebuffed and disappointed.
“Just like the real estate market, the discounts weren’t as steep as the buyers hoped,” he said. “Talent doesn’t want to get stuck at a lower compensation level.”
A big question mark is around returning to the office, and how soon that may take place on a broad scale. Lee said executives are looking at/considering restructuring bonuses for remote versus in-office work. His research suggests that around 35% of the workforce in real estate will not come back into the office full time in 2021. That’s why companies are increasingly shifting a number of their functions to automation, offshoring, AI and independent contractors. Anywhere from 70% to 80% of CEOs in other industries are looking at automation, freelancers or streamlining systems as a basis for fulfilling work requirements.
Weiss feels it will be hard to “get the toothpaste back in the tube” when it comes to working from home. She’s heard a lot of discussion about a “3-2-2” schedule, three days in the office, two at home and two off. She also believes the industry needs to focus on upskilling, diversity and changing the way it treats employees.
“Our business is about people and property, and property was always treated as the most important thing,” she said. “Companies ran through people like it was a renewable resource, and didn’t think about the downsides and impacts on revenue, reputation and office culture.”
Lee believes this is a time when companies should re-examine their compensation and talent recruitment. There’s still a long way to go to create a younger, more diverse talent pool. For instance, CEL’s survey found 39% of firms surveyed didn’t have a Diversity and Inclusion Policy, and 27% did but adopted it in 2020. When two-thirds of the industry is behind or just starting to catch up, that’s a signal to rethink how you operate.
"If a company hasn’t truly examined their compensation program, they’ll find themselves in an uncompetitive position,” Lee said. “During this crisis, comp plans are part of reinventing yourself. If you think it’s going back to the way it was in '19, you’re falling behind."