Don Miller is almost 57, but he is turning over the keys to the $2.5B REIT he runs to 43-year-old Brent Smith. At the start of the year, Colin Connolly, 42, took over as CEO at Cousins Properties from Larry Gellerstedt, who is in his early 60s. And at Newmark Knight Frank, Executive Vice President Sean Moynihan, 48, took over heading the Atlanta office from Brett Hunsaker, 59, who left the firm in February.
These are three of the latest examples of younger blood taking top roles at commercial real estate companies. And as C-suites grow younger, so too does the way business is conducted. “The changing of the guard happens in every generation. What you’re seeing now in Atlanta is the changing of the guard,” Hunsaker said. “It goes slow, but the new leaders are emerging.”
This will become even more common across not only commercial real estate, but across all industries as baby boomers enter their retirement years at an average of 10,000 people a day. That is causing aging boards of directors and executives at how they are planning to keep companies going long after they ride into the sunset.
“When you have somebody who is retiring, a lot of companies look at the competitors out there and they want to bring somebody on board who has a potential long runway,” said Kent Elliott, a principal at California-based commercial real estate executive recruitment firm RETS Associates.
Hunsaker, a fixture in Atlanta’s commercial real estate community, known as “Mr. Shmooze” for his ability at business development, Hunsaker spent more than 10 years with Newmark Knight Frank — when he started it was called Grubb & Ellis — as its executive vice president. He oversaw the offices in Atlanta, the Southeast and up through the Mid-Atlantic.
Ceding control of NKF made sense, Hunsaker said. The brokerage is being proactive in tapping a leader who represents and reflects the same transition taking place among the brokerage firm’s corporate clients.
“The clients, who you are trying to sell to, are millennials. You need someone who talks their talk and walks their walk,” he said. “The companies that are leading edge have leadership transition plans in place which are evolving, and that is bringing in the next wave. And you mimic your clients.”
Elliott said many commercial real estate firms are scrambling to infuse more millennials into the upper ranks as the industry grapples with the war for talent, just like the rest of corporate America. This has led to changes in tradition for real estate brokers.
Gone are the traditional cold calls, when a broker would walk the sidewalks of a city, enter a random building and knock on office doors. Now relationships and relationship-building rule the day, in part built upon a social media presence, Elliott said. What has also changed is the mindset that an employee can clock in and out at set hours.
“I think it’s a bit of Darwinism. You got to adapt to survive. The companies that are old school, back in the Dolly Parton era when you’re working 9-to-5 for a living and there’s no flexibility to that, those are difficult environments,” Elliott said. “At the end of the day, just treat [a millennial worker] like an adult. It doesn’t matter if I’m sitting in my office or sitting in a Starbucks a mile from my house. Just trust me to get my work done.”
Moynihan said many new commercial real estate executives better understand how to communicate with younger workers: what motivates them, what they prioritize about their careers. And for Moynihan, it’s not the old school, “Glengarry Glen Ross” mentality anymore.
“It’s conversation. It’s motivation 3.0 versus motivation 2.0. Motivation 2.0 it was carrot and stick,” he said. “I’m here to help you and guide you, but I’m not here to dangle a carrot in front of you and hit you with a stick. So I think that’s what they’re looking for. The freedom.”
Moynihan said many millennials grew up in a world where every child got a trophy just for participating in sports. While it may seem trite, that has an effect on their psyche. “The carrot doesn’t work anymore because everyone got a trophy,” he said. “It’s devalued. It’s thrown out with the Wendy’s bag on the way home.”
Kiser Group principal Lee Kiser and his partner, now in their early 50s, made huge alterations to their compensation and business model at their Chicago-based multifamily brokerage firm. “Although I’ve owned and operated Kiser Group since 2005, until recently didn’t prioritize the company culture and incentives that would create an environment where brokers would want to stay for their entire careers,” Kiser said. “My prior belief was, ‘We are a very successful firm, and if brokers don’t want to be here or want to go to a competitor, it’s their loss.’ That was the wrong way to think.”
The changes that Kiser took reflected the values of his younger employees: encouraging brokers to work together more for clients instead of competing for the business, weekly company outings to events like ax throwing, escape rooms and Cubs baseball games. But the compensation plan was revamped: Employees can now reinvest some of their earnings back into the company itself and become vested, Kiser said. Eventually, Kiser said, 20% of the company will be controlled by employees.
“There’s no such thing anymore as blind loyalty. There’s definitely loyalty, but it’s because of what we’re building together,” he said. “And I think that’s healthy. [Today’s workers] don’t mind sharing the risk, which is beautiful.”
Piedmont Office Realty Trust CEO Miller also said younger executives have a more intimate understanding of the modern real estate landscape, especially in Atlanta, which in the past decade has spawned new submarkets that didn’t exist when he entered the business.
“Not lost on me is the fact that the market is changing, the dynamics [with] space needs and locations,” Miller said. “Heck, I never even heard of West Midtown until a few years ago.”
Earlier this month, Miller announced his plans to retire on June 30, ceding the CEO role to Smith, the current president. Smith is a Midtown resident, which gives him an edge on knowing where to invest in the future, Miller said.
“That’s a small part of why we think it’s time to make that transition,” he said.
The future of the C-suite in commercial real estate may also be more diverse as more of the larger firms push to recruit more minorities and women to the ranks. Miller said Piedmont focused on that early on: Its former chief investment officer, who retired in 2017, is African-American and its current chief accounting officer is a woman.
That said, the transitions happening today are almost exclusively keeping the leadership roles with the group that has historically controlled them: white men.
The lack of diversity among commercial real estate leadership has been a growing issue across the country, especially since 78% of those working in it are white males. Many firms are pushing to address the issue, but some executives have said in the past that finding the best candidates who also happen to fit a diversity profile is similar to finding a “needle in a haystack.”
“I don’t think the real estate business has much to be proud of in that arena,” Miller said.