Many real estate companies today don’t recognize that today’s millennials and generation Zers have different expectations and aspirations, and work/life balance priorities than prior generations.
The booming CRE industry during the last five years has been great for investors and sponsors but has created a shortage of C-suite experienced leaders and junior level employees. CRE is a $7 trillion business in the U.S. and it must do a better job of creating, enabling and training a more agile and engaged workforce. It must also allow for a new wave of leadership in the industry as many of the Baby Boomer founders of REITs, private equity firms and institutional investors are over the age of 75 and will retire in mass in the next few years. CRE companies need to increase efforts to groom senior level personnel to take over the reins of these firms and also attract next-generation talent. These efforts should concentrate on retraining existing talent, recruiting junior level employees right out of college and diversifying senior leadership along with advisory and corporate boards.
CRE companies have also been slow to use the power of social media and new technologies to change business operations, marketplace perceptions and attract this next-generation talent. Many real estate companies today don’t recognize that today’s millennials and generation Zers have different expectations and aspirations, and work/life balance priorities than prior generations. These include; mobility and flexibility in work, use of mobile devices and data analytics, advancement potential and incentive compensation in employer real estate investments. Very few real estate firms show up on college campuses to recruit college graduates for entry-level positions, which is a big mistake in securing this next generation of talent.
The executive suite of many CRE companies is comprised of Baby Boomers who want to exit the workforce and others who would like to continue to be in employment, but with more work flexibility. Many CRE firms do not have an established and formal knowledge-transfer program from Baby Boomers to the younger generations including Generation X, Millennials and Generation Z individuals. A culture and focus on lifelong learning from these highly skilled Baby Boomers are critical. One of the most important value-added skills of a CRE Baby Boomer is their judgment, decision making, and experience of working in the industry for 30 or more years and the various ups and downs of the business during this period. Most CRE Baby Boomers that have been in the industry since the 1970s have been through two secular mini-depressions from 1987 to 1992 and most recently, 2007-2012 and six normal recessions. The experiences gained in steering a real estate firm during these downturns and the effect on rents and property values is vital to running a successful real estate advisory, investment or development firm and this skill set must not leave the firm when these senior-level employees retire or move on.
Another area of concern for many real estate firms today is the incentive compensation structure. The compensation programs of a number of real estate investment and development firms do not include a portion of the general partner’s carried interest as incentive compensation to all the firm’s employees. Some of these firms pay generous salaries and bonuses, and that’s great, but do not allocate a portion of the firm’s real estate investments profits to employees. There’s an old saying in professional service type firms and that is; “If you don’t take care of your key employees, they will leave and become your competitor.” This is very true in the CRE industry and one of the primary reasons to provide an attractive incentive compensation program as well as a workplace environment. CRE is a major asset class that is in one of the greatest boom periods ever, however, much more needs to be done to recruit and train junior level employees, train senior-level employees for the C-suite and transfer the skill set of successful Baby Boomer founders and CEOs.
By: Joseph Ori (Globe St)
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