Economic Woes Play Out in CRE Job Picture
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LOS ANGELES-The news is filled daily with reports of deteriorating consumer confidence, Wall Street chaos and layoffs across the board. At best, earlier this year, the nation’s labor markets showed a slow and spotty recovery. At the time, Christopher Thornberg, a Los Angeles-based economist, pointed out that the post-recession jobs growth in the US left much to be desired. So has anything really changed in the past seven months? The answer is definitely yes in terms of economic concerns. But how will those concerns translate for commercial real estate specifically?
According to Plano, TX-based Sayres Dudley, a founding partner of executive search firm Dudley & Assoc., there is some hiring--no frenzy by any measure--from REITs. Brokerage shops are consolidating or expanding, and mortgage banking is also expanding as debt is becoming more available, he says. He cites Avison Young Commercial Real Estate, a Canadian-owned, principal-managed commercial real estate firm, as an example of a company that is opening up leadership positions.
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Dudley points out that uncertainty is the curse of expansion, especially as it relates to hiring. "Though the average potential hiring employer in the real estate industry probably does not have much of an informed grasp of the ramifications for America related to the European debt crisis, that person does understand that it is not good news, and thus it creates just one more level of angst," he says. "This is coupled with their current anxiety about the stock market and the downgrade of long term debt." That uncertainty, he says, more often than not, "will make them pause and possibly even delay hiring, until they have a better 'feel' for how the Euro crisis will affect long term interest rates, cap rates, and projections for occupancy increases."
But those points he says, are just one of the many reasons why the recovery for job growth in real estate has been slow. On the other hand, he says, for the more opportunistic employer, if their debt is under control and their cash flow is steady, it creates an opportunity for them to attract an exemplary player to leave another shop where this uncertainty may be clouding the vision and expectations for the future, he says. "Money talks, and does not have a limited vocabulary."
The picture is somewhat brighter for Anthony LoPinto, global sector leader of real estate and managing director of the New York regional office of Korn/Ferry International. LoPinto says that instead of slow and spotty, job growth is now slow and steady. Although the last 30 to 45 days—since the global markets have gyrated so much—is causing some players to be more cautious, overall, “There has been increased activity,” LoPinto tells GlobeSt.com. “I expect the hiring activity will get stronger over time, but it will be a slow-growth situation.”
LoPinto points out that the increased activity—especially in New York and London—has been relatively steady on the investment side. He cites platform investors, global life insurance companies, private equity firms and investment managers as the most active. Many of the firms making these bets, LoPinto says, are either significantly ramping up their real estate presence, didn’t have a real estate presence, or have navigated through the worst of the times relatively intact and are taking advantage of the market now.
Overall, the industry still has a long way to go, LoPinto says. “The reality is that our business has shrunk so we are still dealing with a net decline in the market, but there are signs of life, and there is activity.”
On the brokerage side, Los Angeles-based Chris Cooper, CEO of Charles Dunn Co., tells GlobeSt.com that his firm is growing its service capability and aggressively expanding its entrepreneurial brokerage operations in all product types. “We are in the midst of a trend as companies realize there is a new economy and new dynamic in the real estate industry,” he says.
Some companies, Cooper says, are either looking to expand and roll out a full-service global corporate service business or expand upon what they have. Others, he points out, are looking for people who can help them be an integrator, working to deliver holistic real estate solutions. Some companies, Cooper continues, are looking for people to run business verticals like tenant rep groups, or retail groups. Finally, he says, there is a growing market for real estate leaders who can develop business and strategy within business line verticals such as positions within healthcare, law, technology, entertainment, and media industries.
From a brokerage perspective, Cooper says that while investment sales have increased, firms have been cautious in the hiring of new brokers. “Hiring is strategic and slow, but it is increasing incrementally,” he says. “Mid-cap deals are getting done in good quantities, and brokers are looking for a better platform and better opportunities for their business.”
Although a lot of movement is occurring in the brokerage industry as a result of some instability in firms, Cooper says, it doesn’t necessarily create new jobs. But, he says, as the deal volume increases, there are new jobs being created to support the brokers—such as analysts, junior broker runners, client coordinators, marketing support, and administrative assistants. “Overall, the brokerage industry will see bumpy and uneven growth depending on service lines and market sectors,” Cooper says.
Rich Chichester, COO of Irvine, CA-based Faris Lee Investments, observes: “There are opportunities if one is ambitious, creative, innovative and willing to view the market today as different from the past. Within the real estate service sector, the opportunities transcend geography and focus on skills, discipline and accountability. Specialization and value are the strategic attributes.”
Compared to other industries, LoPinto says commercial real estate hiring is on the lagging side of the equation, while Dudley says it is most likely on par with others. “The healthcare/life sciences business is active,” says LoPinto. “Technology is hot too and there is a lot of recruiting activity in the industrial sector.”
But Cooper, on the other hand, says that hiring activity in the real estate industry is somewhat better than typical white collar service firms such as law firms, accounting firms, insurance, banking, etc. where the labor growth has been slow or has declined. In the area of corporate services, he says, “some strategic areas of real estate and investment sales consulting are starting to pick up,” however, he agrees that “we aren’t near the hiring spree in technology, healthcare, social media and government sectors.”
In his September 2011 report, UCLA Anderson Forecast senior economist David Shulman says that “Recession or not, the employment situation remains horrible. Job growth has stalled and we forecast that the unemployment rate will soon rise to 9.5%. Thus, even by the end of 2013 we will not be back to the unemployment levels of late 2007.”
And in an attempt to “get American working again” is the President’s proposal for an American Jobs Act. The centerpiece of that proposal calls for halving employers’ tax obligations on their first $5 million in payroll. But according to a recent blog by GlobeSt.com’s “Chief Economist” blogger, Dr. Sam Chandan, president and chief economist of Chandan Economics, “in the near term, the proposal could have a negative effect on hiring trends. “Some firms will postpone plans for payroll expansion until the timeframe and exact provisions of new measures become clear, and to maximize the likelihood of qualifying for benefits given uncertainties stemming from Congressional gridlock,” he says.
According to Dudley, “If the President can, as he stated, reduce spending on par with what he is proposing to spend in this Proposal, so there is zero addition towards the debt ceiling, then I don’t think it will have a negative effect.” In fact, he says, “because it will include construction work and infrastructure—which could improve roads and bridges into cities—it might actually have a positive effect. There is a big ‘if’ though, on whether he can reduce the spending to match the costs.”
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