With recruiting assignments now flowing steadily, many executive search firms serving the real estate sector are looking to expand.
In the years following the market crash, recruiters suffered from lackluster demand for professional searches. Even as the real estate industry began to recover, the large number of unemployed professionals made it easy for companies to find talent without enlisting search firms.
But that changed last year as demand for searches returned in a big way — and recruiters are cautiously optimistic that it will remain strong. “It’s definitely a healthier market than it was a year ago,” said Gregory Shultz, founder of Newbridge Search of New York. “Finding the best talent still requires, for most companies, running a professional and exhaustive process.”
That has prompted some search firms to explore adding staff, opening new offices and adding business lines. Among them are RETS Associates of Newport Beach, Calif., Chicago-based Ferguson Partners and Rhodes Associates of New York. They were among 46 search firms specializing in the commercial real estate industry that were identified in an annual review by Real Estate Alert.
RETS added three recruiters within the last year, bringing its total to 10. The hiring came in response to increased demand from a larger list of clients spanning a wider geographic area, said Kent Elliott, who co-founded the shop with Jana Turner in 2002. The firm has opened an office in San Francisco and a satellite office in Chicago while increasing its presence in the Los Angeles area. Another addition or two is likely this year, Elliott said.
Ferguson sees room for expansion overseas, due to growing demand for senior executives who can manage global platforms. That has led the firm to open an office in Singapore, and it’s contemplating adding a few more outside of the U.S. It also is eyeing opportunities for growth in niche areas, such as recruiting specialists in healthcare properties.
But with the downturn still fresh in mind, Ferguson is proceeding with caution. “One foot on the accelerator and one foot on the brake,” said William Ferguson, co-chief executive of the recruiting firm’s parent, FPL Advisory. “You have to grow a business, otherwise it is going to remain stagnant. But you have to be prudent, and you have to be careful.”
Search firms also have been branching out into new lines of work. For example, during the downturn, some recruiters began offering more comprehensive consulting work and advice to real estate companies that were reorganizing or rebuilding. That trend has continued. “There is more need for a search firm to be their consultant rather than just their recruiter,” said Steven Littman, managing partner at Rhodes Associates.
To that end, Rhodes this year launched a strategic alliance with two other companies to provide advisory services in three areas: investment and development; capital raising and financing; and mergers and acquisitions.
Growth in the recruiting business naturally follows growth in the industry it serves. Search firms are seeing a steady stream of assignments as real estate companies fill vacancies and add staff.
“We are finally seeing searches driven by growth,” said Andrew Fein, a director at CTPartners of New York. “We are not necessarily replacing someone, we are adding, and that is new.”
Even companies that aren’t ready to expand are restoring positions that were lost to downsizing during the recession. “There is a pent-up need to recruit or upgrade staff or talent,” said Jay Costley, a managing partner at Allium Partners of Chicago. Firms “just haven’t kept up with their own staffing needs over the years.”
Another upshot of the improved market: Companies hiring recruiters have less ability to bargain for discounted fees, translating into more revenue for recruiters. “There was more room to negotiate down fees in the last few years, but not so much now,” said Chris Papa, a managing director at Bachrach Group of New York.