The past two years have seen unprecedented growth and change for the CRE hiring scene. And sustained shortages in commercial real estate roles have created a talent war, leading to rising CRE compensation expectations. Candidates are expecting more. And firms are being forced to get creative in order to land top talent with the right qualifications.
Lingering Effects of the “Great Resignation”
In 2020, when literally one in four firms froze hiring and most jobs were either put on hiatus or changed to work-from-home status, the prospect of a labor shortage might have seemed silly. Yet within a year, what has come to be described as the “Great Resignation” rocked the workforce. As many preferred to go into early retirement or work a side hustle or just stay home, firms began noticing how challenging it was to find new hires.
Pair this was with a period of significant economic growth in the rebound from the COVID crisis, and you’ve got a major talent war. In 2021, a large segment of firms in commercial real estate began reporting difficulty in meeting their hiring needs. Since then, however, the problem has only worsened. And now, in 2022, firms are still feeling the lingering effects of this stark drop-off in talent.
Around 60-70% of all CRE firms are still challenged by the lack of supply. As a result, the cost of filling a new opening is mounting. This is especially true for roles in high-demand fields where competition is fierce. Anything requiring specialized or technical know-how are commanding top dollar right now. Analysts are in very high demand. This is also true of professionals with a more general proficiency in a variety of skills.
And because the cost of turnover or replacing existing staff is so high – as much as twice their annual salary in many cases – there is also an emphasis on retaining top talent as a cost-saving measure.
Facing the Rising Cost of CRE Talent
In response to these shortages, salaries and compensations packages are rising dramatically. Some executives are reporting upwards of 20% compensation increases when they switch companies. Most companies are hiring middle management in particular. And diversity candidates are among the most sought after. But firms are learning they will have to pay for them.
This has brought about a shift in compensation packages – a reset of sorts. The talent crunch has brought workplace issues back to the table for renegotiations. CRE professionals are expecting more flexibility and work-from-home options. In reality, there is still a gap between what they’re asking for and what firms are willing to pay. But many are offering telecommuting options up to four days a week. And bonus realizations based on performance goals were at about 90% last year.
In reality, there is a renewed push for reevaluating corporate culture as a whole. Today’s CRE professionals are empowered by these changes and can demand more for their investment in a firm. Thus, CRE businesses should carefully analyze what they offer these candidates and expect to significantly alter their compensation packages – not only the bottom line, but also in work-life considerations and cultural concessions.
With around 78% of CRE firms aiming to have an increased workforce in the near future, some are even offering equity to middle-to-lower management to sweeten the deal. CRE compensation is becoming especially negotiable around young and promising new talent capable of pivoting these companies into the “new norm.” As the commercial real estate landscape evolves, those leaders who can facilitate a transition are particularly valuable.
With talk of a recession mounting, it would seem that the era of rapidly rising salaries and compensation packages for commercial real estate is nearly over. There have been recent talks of layoffs for the first time since 2020. In June of this year, layoffs in the tech-related sector were announced.
While once thought invincible, CRE jobs in the tech space are now in question. But some believe this is only part of the cycle and that the overall trend will be for higher and higher demand, even in this space. Of course, no one can predict what the next year will hold. But the strong demand in commercial real estate, coupled with the historically low supply of talent, seem to spell continued growth in CRE compensation.
Now is an exciting time to be working in CRE. Those seeking to grow in their career have ample room for it. And those firms seeking to evolve and improve have an opportunity to address workplace norms and culture in new and unprecedented ways.