December 14, 2023
As reality sets in over the delayed rebound in commercial real estate, predictions about the industry’s job market point to restrained hiring, stagnant salaries and challenges for job seekers for at least the next six months. Since 2023 wasn’t a great year for most firms, that means lower compensation, more miniscule raises and smaller bonuses.
In other words: less money.
But that doesn’t mean there won’t be activity in the near term. As CRE juggles a slow recovery and crowded market for talent — 85% of firms told consultancy RCLCO that they are having trouble finding the right candidates — a wave of retirement is expected in leadership and executives roles, potentially setting off significant rounds of succession planning and a game of management musical chairs.
“In 2023, we started seeing senior leaders basically saying, ‘Covid is in the rearview mirror. We recovered and did well in 2022, and now we’re in this period of interest rate challenges,’” RETS Associates principal Kent Elliott said. “They just don’t have the juice to get through it, and start looking at retirement.”
Analysts said most of the new jobs and hiring activity will be in asset and portfolio management. Brokers and development and transaction specialists will continue to see relatively dismal prospects, with muted deal volume expected for the foreseeable future. RCLCO found that hiring managers expected to hire 10% less of these types of roles next year.
“There are two people you don’t want to be,” Elliott said. “You don’t want to be an unemployed VP of acquisitions, and you also don’t want to be a college grad trying to enter the industry.”
News from the Federal Reserve about potential rate cuts doesn’t change the immediate hiring picture, but it may speed up the recovery.
“With the recent news of likely cuts in 2024 to the Fed interest rates, I’d expect that real estate companies in the second half of the year will begin rehiring and redeploying team members in development and acquisitions, specifically in preparation for the increased transaction volume that is likely to hit in early 2025,” RCLCO Management Consulting Practice Managing Director Ellen Klasson said.
Just a few niche sectors, like the booming data center market, will see explosive growth in the near and medium terms, but they tend to require specialized experience that makes it challenging to simply step into a new role.
“Jobs tend to follow where capital is,” said Spencer Burton, president of Stablewood Properties and co-founder of the Adventures in CRE blog.
Even if there were more deals to be had, many players also contend with a lack of equity. That has put chief financial officers, strategic finance, senior-level accountants and anyone with connections to fundraising in high demand, said Tyler Kastelberg, the founder and CEO of Bullpen, an online marketplace for freelancers in real estate.
Kastelberg said he also noticed a significant number of layoffs still taking place in CRE, just not at the bigger brokerages, which already went through a round of layoffs. Many smaller regional players, who overextended in markets like multifamily during the boom in 2022, now need to shrink their teams.
But as far as hiring, promotions and open roles atop many CRE firms, demographics may be destiny. In 2024, the population reaches what’s being called “peak 65,” when the peak of the baby boom generation hits retirement age. With the CRE workforce leaning older than most industries, this suggests significant leadership shifts ahead.
“We’re faced with peak 65 and people exiting, and we’re faced with younger generations not wanting to be in positions for long periods of time and wanting to be promoted,” Elliott said. “That’s what I see as being a big trend in 2024.”
With the current economic period likely becoming a “longer winter,” according to Allison Weiss, founder of CRE Recruiting, bigger firms are figuring out what is next for leadership. Since many will be tied to benefit packages and salaries, that may mean top talent looking at early retirement options or taking on advisory roles of special positions within the firm, in part to help pass down institutional knowledge.
Executives a generation younger than baby boomers may see substantial opportunity coming from this shift. With bonuses predicted to be small to potentially nonexistent due to poor performance across the board, many job seekers may feel less tethered to current roles and looking for the salary bump that potentially comes with a new gig.
On the other end of the age spectrum, the continued down market will also exacerbate the challenges facing young entrants into CRE and shrink an already-small talent pool of early 30s and under-30 talent. It will be especially rough for those who were hired in 2022, when the early pandemic drop-off reversed and businesses expanded, only to quickly be greeted by inflation, rising interest rates and an equally rapid downturn.
“If the first two years in the business coincide with a rocky economy, you may just not stick it out,” Weiss said. “Our industry isn’t replacing the junior talent like we are the retirees.”
This drop-off won’t be as bad as what happened during the Great Recession — Burton said the industry has matured and learned a lesson around making sharp cuts during a downturn and then lacking the manpower to seize the market upswing — but it will still mean challenges in a couple of years hiring junior associates or talent with a few years of experience.
Elliott said that while sentiment in the industry is changing due to recent Fed news, shifts won’t happen overnight.
RCLCO Managing Director Eric Willett said he doesn’t anticipate “a roaring return to economic growth.” Predictions about when the job market will return vary, but none suggest that things will get considerably better until at least late 2024. By that point, valuations will line up between buyers and sellers, many said.
“We’ve seen in the past that the investor community can be overly optimistic when responding to Fed signals,” Willett said. “But the increased prospect of a soft landing and telegraphing around rate hikes is winds in the sails for groups that are looking to amplify transaction volume and hiring in the year ahead.”
