In this article, Kent Elliott, principal at RETS Associates, a leading national real estate recruiting firm, shares the top three myths about the current CRE market. Tina Prater, director of real estate at Fountainhead Development, shares how her experience from a recent search aimed at bolstering her team to meet an increased development pipeline debunks these myths.
Fountainhead is a Newport Beach, California-based retail developer with more than 25 years of experience in building neighborhood shopping centers and specialty single tenant buildouts.
Kent Elliott’s #1 Myth About the CRE Market: Development is Slowing Down.
According to Elliott, the opposite actually looks to be true. In fact, many companies still have capital that they need to place and are allocating money to the development side because acquisition prices are so high. There is evidence of this trend in RETS’ recent searches for development positions. In 2014, RETS placed 10 senior-level development positions. In 2015, the firm helped to fill nine of the same position, and by the end of the third quarter 2016, RETS has already conducted 11 senior-level development searches. Clearly, hiring continues to be very strong, which is an excellent indicator of the health of the CRE industry and its continued growth.
Tine Prater (TP): For us, development is not slowing down. We have an active development pipeline right now, with nearly 20 deals that we are working on. In the past, our “bread and butter” has been primarily single-tenant, net-lease development; however, we have grown more active in the development of anchored, neighborhood shopping centers over the last 18 months. This increase in activity has not only resulted in growth in our pipeline, but also in growth in our team. To keep up with demand, we conducted a recent search for a leasing-focused team member who could wear multiple hats depending on a deal’s progression and stage. Because we’re a mid-size entrepreneurial company, it was important for us to find someone who understood the development process..
This position is just one of the three or four more that we are looking to fill in the next six months. Things are ramping up for our development pipeline right now and we need to staff for it.
Elliott’s #2 Myth About the CRE Market: Working with a Talent Recruiter is Time‑Consuming.
TP: About six months ago, we hired someone the “old fashioned way” by putting out ads on ICSC’s website, Monster.com and others. We found ourselves sifting hundreds of resumes and conducting phone interviews to find a skillset fit for a first round of interviews. The tedious work continued as we went into second and third interviews. At that point, l felt like we were not attracting the right talent pool nor were we able to keep up with our development pipeline. It wasn’t a good use of our time.
We went a different route this time and partnered with RETS to conduct the search for our open leasing position. We aren’t experts in hiring, and we realized it was time that we brought on a partner that has that expertise. We were in need of a large database of contacts and a strong pulse on the market that could pinpoint the top two or three people that matched our needs in skills and compensation levels – and RETS was able to fill those needs. By partnering with RETS, we saved a tremendous amount of time because the interview step became our only focus. When the RETS team presented us with a panel of candidates, we had a difficult time deciding who to hire because all were so well qualified. Ultimately, hiring a recruiting firm saved us a lot of time and created a much more efficient and successful search process.
Elliott’s #3 Myth About the CRE Market: Compensation Levels are Trending at the Same Level as 2007.
According to Elliott, compensation packages have increased an average of 20 percent across major western cities since 2013. In fact, base salaries have surpassed pre‑Recession levels due to active development pipelines, a high demand for top talent and a shallow talent pool. For a specific function such as mid- to senior-level development positions, we have seen an increase in base salaries of 20-30 percent compared to 2007.
TP: Over the past few years, I have experienced the hiring market to be extremely competitive. There has undoubtedly been a departure from the base salaries that we were agreeing to before and during the Recession because of the increased demand for top talent. Candidate expectations on salaries in 2016 were definitely an eye opener, and we found that not only are they getting hired, but they’re getting multiple offers.
We have learned a lot about the market and tailored our compensation packages so we can accurately compete for top talent as we move forward with hiring to meet our pipeline demand.