The opportunity part of the equation has become more difficult to assess given the changing nature of analyst roles in real estate firms.
Commercial real estate fund managers are seeing strong competition for financial analysts, with this segment of the industry’s talent pool seeing salaries climb by 29% over the past six years, according to a survey by real estate executive search firm RETS Associates.
The opportunity part of the equation has become more difficult to assess given the changing nature of analyst roles in real estate firms, according to Kent Elliott, principal. Elliott mentioned one private equity firm in DC was looking for a more unconventional talent to differentiate themselves and was willing to pay for it.
“[The firm] wanted to hire the smartest guy in the room that understands real estate analytics to help [the firm] with a big data function for the overall portfolio,” Elliott said.
The firm ended up finding a mathematics PhD candidate from UCLA to fill that void. “He walked circles around the average analyst,” Elliott added.
Ultimately, the best real estate private equity firms will pay for differentiating talent levels but at a certain point it becomes not viable. “There’s always a cap for what these firms will pay,” Elliott said. “They have got to keep things in line with other analysts.”
Acquiring Talent Begins Early
Unemployment in the sector is at 3% and many firms are having to increase compensation packages to ensure they are attaining the best new talent in the industry.
“It’s created a frenzy,” Elliott said. “If you want to hire somebody good, they’re not sitting there, drinking coffee. They’re fully gainfully employed.”
Analysts are often the first or second rung on the hiring ladder, with RETS attempting to place the prospective talents after they have gained a little experience post-college. “Employers want to hire someone with at least a year of experience,” Elliott said.
The path from analyst usually takes four to seven years for talent to manifest into a specialty like acquisitions, operations or asset management. “[After that period] somebody is ready to graduate,” Elliott said. “They take their analytical skills and turn it into a big girl or big boy job.”
Acquiring and retaining commercial real estate talent begins early and offering a competitive compensation package can be more than just financial. “People move for one of four reasons,” Elliott said. “Geographic location, opportunity, compensation and the culture of the firm.”
In terms of location, that can be as simple as being located in a market with more real estate opportunities, like New York or San Francisco, or somewhere where cost of living is low, but quality of life is high, like the Southwest or Southeast, Elliott said.