As commercial property development and homebuilding practically came to a standstill last year, many real estate companies laid off employees. This year, amid signs that the U.S. economy is slowly recovering and property markets may be nearing the bottom of the cycle, companies are beginning to hire again. “We are beginning to see signs of life,” observes Tony LoPinto, head of the North America real estate practice at executive recruiting firm Korn Ferry International.
The hiring process is slow, however, and job searches protracted. “Graduates should expect to take six to 12 months to find the right job,” says Richard Peiser, Michael D. Spear Professor of Real Estate Development at Harvard’s Graduate School of Design. But persistence could pay off, he adds. “Those who are dedicated to real estate and persevere could find greater long-term rewards than in more normal economic times.”
Some companies are recruiting executives to implement strategic plans for investing in properties, portfolios of mortgage loans, distressed assets, and other investments. “Companies are making strategic hires to match up with their strategic plans,” LoPinto notes. These newly hired executives will start building teams, which will have a trickle-down effect in hiring within organizations and, in time, could result in the employment of analysts or associates, he says.
In a survey in late December 2009 by the SelectLeaders Real Estate Job Site, a career management and job listing network of professional real estate organizations, more than a third of respondents said they plan to increase hiring this year, while only 9 percent predicted layoffs; the rest expect hiring to remain the same. That is a sharp turnaround from 2009, when only 13 percent increased hiring, two-thirds of respondents said they slashed hiring, and the rest said hiring remained the same.
More employers are visiting college campuses, and they are posting more job openings. Sonia Savoulian, managing director of the University of Southern California Lusk Center for Real Estate, reports that employers have informed the center of more than 80 job openings this year—about double the number of a year ago—but still fewer than the 400 openings at the peak of the boom.
“Last year, there was so much uncertainty that employers found it virtually impossible to make hiring decisions,” says Savoulian. “Now, while some uncertainty remains, employers are moving forward with hiring plans.” Letters asking employers to meet with prospective or recent graduates of the Lusk Center to discuss career opportunities resulted in a 75 percent participation rate, a sharp increase from a year ago and an indication that the hiring outlook is improving, maintains Savoulian.
The gradual resumption of hiring is encouraging news for both graduates preparing to enter the job market and experienced professionals looking for work or planning to change jobs. At the same time, only a limited number of job openings exists, and competition is intense. “There is a deep pool of trained and experienced people in the industry to hire from, and at less compensation than a few years ago,” points out Dusan Miletich, managing principal of southern California– based Arenda Capital Management.
A few years ago, when real estate markets were booming, “it was not uncommon for our graduates to receive from three to six job offers,” points out Peiser. Now, “it is taking longer for them to find work, and they are more likely to take the first opportunity that comes up.” About a third of the school’s students are from outside the United States, and because of the weak U.S. job market, Peiser notes, some are more inclined to return home after graduation than to remain here.
In the highly competitive real estate job market, experienced professionals who have specific skills, such as in restructuring and sales of distressed assets, have an edge. But graduates who have acquired some real estate experience while in school through internships or part-time work and who are enthusiastic and demonstrate exemplary technical, communication, interpersonal, and other skills might have a better chance to get a foot in the door at a company. Miletich notes.
A number of real estate executives suggest that while there will be few job openings in development and construction this year—and perhaps next year, too—job seekers may find opportunities elsewhere in real estate. These areas include:
- Private equity firms. Many firms have been sitting on the sidelines, hoarding cash and waiting for the right opportunity. Now they are getting back into the game, acquiring portfolios of properties and distressed assets. New firms, started by entrepreneurs who left established firms, also are entering the market. Some of these private equity firms may need to hire professionals to assist with investments and asset management.
- Investment banks. Like private equity firms, investment banks are again starting to invest in real estate in order to take advantage of opportunities to acquire properties at the lowest prices in years, among other reasons. Ko Wang, chair of the department of real estate at New York City’s Baruch College, reports that many graduate students in real estate have found or are seeking jobs with investment banking and finance firms in New York City.
- Commercial banks. Commercial banks wound down their real estate lending and loan production staffs as the property market slump deepened, but as their real estate loan defaults and foreclosures have increased, so, too, has their need for workout staff. Some of this need has been met through the transfer of production people into workouts, and the rest through new hiring. “A young professional can benefit from workout experience regardless of where they go in an organization,” comments Michael Marino, executive vice president and manager of the real estate group in Wells Fargo’s Los Angeles office. While workouts could continue for some time, banks also may need to start up their real estate loan production staffs again as the economy recovers. Increased government oversight and regulation of banks could add to the need for people.
- Homebuilders. A number of builders see the current slump in housing construction and sales as an opportunity to capture market share. “A lot of the private builders are gone, and the public builders are shadows of their former selves,” notes Jeff Mezger, president and CEO of Los Angeles–based KB Home. In the short run, he adds, well-capitalized builders will finish building out lots that banks have acquired in foreclosure; then they will need to start acquiring more lots and rebuilding depleted staffs. “What has been lost in the housing crash is that the demographics are still there—the underlying demand is still for 1.2 million to 1.5 million starts annually,” maintains Mezger.
- Commercial real estate. Many commercial properties are underperforming: they are not generating sufficient cash flow to cover operating expenses and debt service. At the same time, an increasing number of mortgage loans on these properties are in default or in foreclosure, with more defaults likely as an increasing number of loans mature over the next few years. As a result, more opportunity funds are being formed—and established funds are raising more capital—to acquire distressed loans from banks and distressed properties from owners. These funds may need to hire analysts, workout specialists, asset and property managers, and other specialists to support their growing investment activities.
- Real estate investment trusts. Real estate investment trusts (REITs) raised billions of dollars in capital from initial public offerings or secondary stock sales in 2009 and now are starting to invest in property acquisitions, portfolios of performing and nonperforming loans, and distressed assets. Some are looking at new opportunities, for example, in the ownership and development of medical office buildings to meet an expected increase in demand for health care services resulting from the new health care reform law. All this could create a need for REITs to hire more people to manage growing investment portfolios.
- Small firms. Small private equity firms, consulting firms, boutique banks, and other small firms may be sources of employment. “In real estate, as in U.S. business generally, the growth will be in small firms,” says Richard Gilchrist, president of the Irvine Company Investment Properties Group, based in Newport Beach, California. Some of these firms could be providing consulting and other outsourcing services to large organizations like the Irvine Company that have downsized their staffs. “We have gone through a sea change in how we are staffed,” explains Gilchrist. The company traditionally had in-house staff for a variety of positions ranging from traffic engineers to development teams. It has more recently sharply reduced its staff size and plans to use more outside consultants, supervised by key company executives.
- Entrepreneurship. Byron Koste, executive director emeritus of the University of Colorado’s Leeds School of Business in Boulder, said some graduates who studied real estate have formed companies to acquire land in selected locations across the United States for the future development of wind farms, research into and development of solar energy for buildings, creation of small farms in urban areas, and other uses. “In school, they developed a solid understanding of finance, and they are applying that knowledge in addressing such questions as how to select alternative energy sites, how to raise and invest capital, or how to best sell power on the grid,” says Koste.
- Brokerage and property management. As the economy recovers and real estate sales and investment activity picks up, brokerage and property management firms may need to hire and train entry-level professionals. “Most of today’s hall-of-fame developers started in brokerage,” notes Steve Duffy, real estate managing director at Moss Adams Capital LLP, based in Irvine, California. “It forces you to understand the market, the competition, and the value of properties.” Likewise, working for a property management firm can teach novice real estate professionals about managing property cash flows and expenses, marketing, working with tenants, and other fundamentals.
Recent graduates and young professionals who have proven skills could find opportunities for faster advancement in organizations as they expand their businesses, rebuild management teams, and plan for the succession of senior executives nearing retirement.