Commercial Real Estate Hiring on Record Setting Pace
The¬†Cornell/Selectleaders' 3Q 2014 Job Barometer recent¬†release points to a robust market for commercial real estate¬†talent in the US. Job opportunities in commercial real estate enjoyed the best summer ever, exceeding previous highs set¬†in 2007, as hiring built on momentum from the first half of this year, according to the¬†Cornell/SelectLeaders Job Barometer. Analysis shows 3rd quarter opportunities up 23.3% over the same¬†period one year ago, and 43.5% more postings than in that quarter of 2012. July also saw the third highest¬†single month total so far this year, behind only the figures from May and June. ‚ÄúThis is no small¬†feat,‚Äù said Susan Phillips, CEO of SelectLeaders, adding ‚Äúconsidering that the number of jobs posted in¬†June was the highest it has been since the Job Barometer began tracking these numbers in 2006.‚Äù The Job Barometer, a joint research effort between Cornell University‚Äôs Baker Program in Real Estate and the¬†SelectLeaders Real Estate Job Network, has tracked job opportunities and career trends in commercial¬†real estate since 2006. ‚ÄúCommercial real estate is clearly now a seller‚Äôs market for talent,‚Äù said David Funk, director of the¬†Baker Program in Real Estate, adding ‚Äúwe‚Äôve witnessed a significant fall in the ratio of job seekers to¬†position openings, and not surprisingly compensation is starting to move accordingly.‚Äù While¬†opportunities are at an all-time high, the industry‚Äôs downturn in 2008 resulted in significant numbers of¬†professionals leaving the industry and a depleted pipeline of entering professionals from US graduate¬†schools. ‚ÄúThe average number of applications per job has declined by about 30% from 2009 to 2014,‚Äù¬†said Funk. This drop in average applicants is not due to a lack of interest, but rather a surge in the number of¬†available jobs. For the period from January through August, job opportunities were up by 26.28% over¬†2013, and 58.05% over 2012. It is also indicative of the increasingly broad skill set that employers are expecting from qualified¬†candidates. ‚ÄúThere is a clear increase in the variety of special skillsets real estate employers are seeking¬†in commercial real estate, which is reflective of an industry adding complexity, particularly in its¬†technology requirements,‚Äù said Funk, adding that requirements such as ARGUS and knowledge of¬†specific property management software may limit applicant pools. An analysis of data from jobs posted to SelectLeaders shows certain skills becoming increasingly¬†common qualifications. Familiarity with a variety of software products is much more in demand now¬†than even a few years ago. Areas of expertise that were found to be more prevalent in job postings¬†included accounting principles, knowledge of zoning, and familiarity with low income housing tax¬†credits. While the summer was remarkable for the opportunities that were presented, there are indications that¬†employment opportunities in commercial real estate are sustainable. ‚ÄúInstitutional allocations to real¬†estate are expected to again go up 49 bps this year, international capital continues to target US real¬†estate, and $2.5 trillion sits in money market funds,‚Äù said Funk, concluding that capital flows into real¬†estate should sustain the employment picture despite interest rate and valuation concerns. Large Firm Hiring: The Cornell 30 Many of the industry‚Äôs largest firms are substantially increasing their hiring this year, according to the¬†Cornell 30. The Cornell 30 is an index of job opportunities available with thirty of the most prominent¬†firms in commercial real estate. It is tracked each month, and indexed to September of 2012 for¬†comparison purposes. October 2014 was the best month on record for the Cornell 30 with overall¬†opportunities numbering 138% of those available in September 2012. ‚ÄúWe have seen a significant¬†uptick in job postings by large, full service companies looking to hire at all levels,‚Äù said Marc Torrey,¬†Global Director for SelectLeaders. Toll Brothers is just one example of a large real estate firm that is in¬†the market for talent. The firm expects that its hiring count for this year will reach more than 1,000¬†employees, according to Jon Downs, vice-president for human resources at Toll Brothers. According to the Cornell 30, the strongest performing segments of the industry have been construction,¬†brokerage, and investment management. At the beginning of the month, these areas had 273%, 176%,¬†and 158%, respectively, of the number of job openings available in September 2012. Applicant Interest: Tight Competition in New York, California Where you are job hunting in real estate matters as a geographic mismatch between opportunities and¬†applicants exists. The Job Barometer found that California, with 33.3% of all applications, and New York,¬†with 32.8%, were the most popular states for job candidates but makes for intense competition. Only¬†30.4% of job postings were in California and a mere 22.8% were in New York. At the other end of the¬†spectrum, Texas provides ample opportunities for candidates. 11.5% of all jobs posted to SelectLeaders in the third quarter were in the Lone Star State, yet positions in Texas only received 8.9% of all¬†applications. Massachusetts shows a similar opportunity, as its real estate firms posted 6.8% of¬†opportunities, only to receive 4.8% of applications. Employment Picture by Industry Sector: Retail Declines, Single Family Housing Strong The retail sector again commanded the largest share of job opportunities, a position that it has¬†maintained since taking that title from the multifamily sector in the first quarter of 2013. The¬†opportunities are largely in redevelopment, repositioning, and leasing, however. ‚ÄúMany opportunities¬†on the SelectLeaders Job Network reflect the challenges the retail sector is facing. A representative¬†recent job posting read, ‚ÄòWe buy troubled regional malls and shopping centers. We primarily focus on¬†REO‚Äôs and other troubled assets,‚Äù noted Phillips. Single family housing continued its strong year in the third quarter, representing 10.04% of hiring, the¬†second highest quarter on record for the sector, and is a sector poised to continue expanding its¬†opportunities. ‚ÄúHome builder confidence is significantly ahead of housing starts, and we‚Äôre seeing the¬†large homebuilders aggressively adding talent,‚Äù said Funk, adding ‚Äúthe job opportunities are broadly¬†distributed across sectors and job functions, but housing and capital flows are what argue that we¬†should see sustained hiring in CRE.‚Äù At the same time, multifamily hiring declined for the third consecutive quarter to 9.76%, its lowest mark¬†since hitting only 8.82% in the third quarter of 2012. ‚ÄúMultifamily has been on fire for the last three¬†years, and this slight downturn simply represents a slowing from the torrid development pace MF has¬†been on,‚Äù said Torrey. Despite being in a bit of a slump, multifamily hiring remains a strong force in the¬†industry, as it was the third most prevalent sector represented in third quarter hiring. Meanwhile, the office sector, with 5.79%, declined for the third consecutive quarter, but nevertheless¬†remains above its long-term average. At the same time, the industrial sector rebounded slightly to¬†2.53%, continuing a more than two year trend of being above its long-term average. Employment Picture by Job Function: Hiring Up for Accounting What jobs are available? Jobs in development and property management have skyrocketed in the last¬†two years, and are currently two of the most prevalent areas of opportunity. Development jobs account¬†for 12.4% of all postings, second only to property management, and has been so hot that employers are¬†often finding themselves in bidding wars for development talent. ‚ÄúLeadership on development¬†projects is critical, and when someone leaves for another opportunity it can create a chain reaction, with¬†employers bidding up recruiting packages in order to insure project continuity,‚Äù said Phillips. The most prevalent need among employers in commercial real estate remained in property management positions in the third quarter, which accounted for 14.5% of all postings.¬†Accounting/control is another hot job function, and it is closing the gap between property management¬†and all other functions. Accounting/control, which represented 13.9% of postings, overtook¬†development as the second most listed job function in the third quarter after three consecutive quarters¬†of lagging behind it. It was also an excellent quarter for accounting/control opportunities in that they¬†reached their highest mark since the second quarter of 2010, when they had represented 16% of all¬†postings. ‚ÄúThe rise we see is not as much in salaries but in total compensation with incentive and pay-for-performance bonuses. This helps to explain why hiring is being extended out later, as people stay¬†for their bonuses,‚Äù Phillips noted. Opportunities for financial analysts, representing 6.6% of postings declined for the third straight quarter,¬†after hitting its highest mark on record with the job barometer (11.8%) in the fourth quarter of 2013.¬†Despite the drop, this was the twelfth consecutive quarter in which financial analysis hiring was above¬†its long-term average of 6.40%. In addition, this job function has shown stronger results in the fourth¬†quarter than in the third for 2011 through 2013. Time will tell whether this trend will continue in 2014¬†as well. Interestingly, though they do not account for a large portion of the commercial real estate hiring¬†picture, job opportunities have been somewhat more prevalent than normal in human resources (1.6%¬†versus a long-term average of 0.8%). Ana Mossa, SelectLeaders Research Director said, ‚ÄúThis not only¬†signals that CRE hiring has returned with companies staffing up their in-house capabilities, but we note¬†an increase in the experience required as companies invest in winning the competition for talent.‚Äù Employment Picture by Business Field: Investments/Asset Management Firms Hiring Later into the¬†Year The rankings for the top primary functions of hiring firms remained unchanged in the third quarter.¬†Investments (asset management) took the top spot at 19.9%, followed by development, at 14.7%,¬†property management, also with 14.7%, and advisory services/consulting firms, which represented¬†11.5% of all postings. The investments field has enjoyed a long reign at the top of the list, having been¬†the most represented field in the job barometer for fourteen of the past fifteen quarters. This finding is¬†particularly interesting for investment firms, which have typically been less active in the Job Barometer¬†in the second half of the year than the first over the past three years. The fact that the third quarter¬†posted a higher figure than the first in this field goes against this trend. It will be interesting to see¬†whether the fourth quarter will see sustained momentum in this field or a reversion to more traditional¬†seasonal susceptibility. Hiring among development firms increased in the third quarter to 14.7%, from 13.4% in the second¬†quarter. Property management firms, which also represented 14.7% of the hiring for the third quarter,¬†declined to slightly below their long-term average of 15.9%. The advisory services/consulting field represents less of the hiring picture, at 11.5%, than it did at this¬†time last year, when it recorded 12.5%. Though advisory services/consulting firms are up for the second¬†consecutive quarter, they are still below their long-term average of 14.2% of job postings, and have only¬†surpassed that mark once in the past nine quarters. Though brokerage firms, at 7.2%, were only the fifth-most represented in the third quarter, they¬†showed an increase from a mark of 5.8% in the second quarter. Real Estate Investment Trusts (REITs)¬†also posted 7.2% of the jobs analyzed for the third quarter. Corporate real estate, a business field that¬†represents the hiring of real estate professionals into firms whose primary function is not real estate,¬†represented 5.3% of all jobs reviewed for the third quarter. This figure is below each of the prior four¬†quarters, but is still slightly above the field‚Äôs long-term average. Finance and Investment Managers Investments (asset management) remained the most prevalent business field in this quarter‚Äôs Job¬†Barometer, having been responsible for 19.98% of postings analyzed. The investments field has enjoyed¬†a long reign at the top of the list, having been the most represented field in the job barometer for¬†fourteen of the past fifteen quarters. The finding that investment positions are more prevalent than¬†they were in the first quarter of this year is particularly interesting, as investment firms have historically¬†tended to represent less of the hiring picture in the third and fourth quarters than in the first and¬†second. In 2011 through 2013, there was only one quarter in which a third or fourth quarter result beat¬†that of a first or second quarter for the same year, and in that case it was only by a fraction of one¬†percent. The fact that third quarter hiring in investments beat hiring in the first quarter by 3.00%, and¬†only declined from the second quarter by .51%, shows an inclination to hire later into the year that has¬†not been seen in recent years. The Federal Reserve‚Äôs decision to keep interest rates low may factor into¬†this phenomenon, but if history can be any guide, this hiring may taper off in the fourth quarter and¬†then rise again with the optimism of a new year in the first quarter of 2015.