NEW YORK, NY. - Want to predict the next real estate correction? When more than a quarter of all commercial real estate job openings are in property and asset management and acquisitions and development decline to less than 10% of all real estate jobs, it is a sign that the foot is coming off the gas pedal. The third quarter saw overall commercial real estate jobs follow the U.S. job market and decline slightly, yet property and asset management jobs were up significantly, reports the SelectLeaders Job Barometer. "Real estate asset prices have surpassed their prior 2007 highs, and employers are pulling back on growth-oriented hiring and instead building out their property and asset management capacity," said Dr. David Funk, SelectLeaders Chief Economist, noting "our Employment Cycle model is not yet predicting a correction, and cautious optimism could continue to rule the day but clearly there is a move to property management and corporate real estate hiring."
The slight decline in real estate hiring was not as pronounced as that felt in the overall job market, and certain areas of the country are hiring hotbeds. Weather events in Texas and Florida hurt employment, yet resulted in real estate hiring spikes in that region and unexpected consequences elsewhere. "Manufactured housing plants as far north as Ohio and Indiana, for instance, have so many homes heading to Texas and Florida that their new order delivery dates are now as much as three months out," said Funk, adding that an already strained construction labor market is now a red-hot sellers' market.
The Job Barometer has tracked the commercial real estate job market for over a decade and developed the SelectLeaders Real Estate Employment Cycle as a predictor of where we are in the cycle based on hiring activity. When corporate real estate, real estate accounting, and property management opportunities begin to peak as a percentage of overall jobs it defines the cautious optimism stage. "Employers and candidates share an attitude of hunkering down and managing their existing jobs and existing portfolio to maximize value," said Susan Phillips, CEO of SelectLeaders. "The stability in the economy and market is in drastic contrast to the real and potential disasters witnessed in Q3. Everyone who can is staying still."
Unemployment today is at lows last experienced in the 2006 to early 2008 period, a period when the competitive real estate job market caused compensation to skyrocket with equity offers on top of salary and bonuses. Compensation has fully returned to that earlier period in real dollar terms, but the current challenges in attracting talent argue that real estate compensation is due for significant increases. One gauge of competition in real estate hiring tracked by the Job Barometer is how picky job seekers are during their search. In 2006 nearly 50 real estate professionals would view a job opportunity for every one application. In 2017 the ratio hovered around 30 professionals per application. Compare these to 2013, when financing and full real estate hiring still had not recovered from the Global Financial Crisis, and an application occurred after ten professionals clicked on a job.
"The talent pipeline into commercial real estate simply isn't that large, and we have experienced seven years of constant CRE job growth that absorbed the real estate professionals displaced by the global financial crisis with relatively few new entrants," said Funk. Applications to commercial real estate openings beginning in 2015 have fallen near to lows last seen in – you guessed it – 2007. The demand-supply gap in commercial real estate signals good news for job seekers and an increasingly heated battle for talent for commercial real estate employers.
"We are seeing job seekers being very selective in where they apply today," said Philips. One response by employers is to expand the responsibilities and compensation in roles in order to attract candidates looking for a stretch challenge.
The sellers' market is even more pronounced in selected real estate job fields such as property management, brokerage, accounting & control, and corporate real estate where the most significant mismatch between job and applicant exists. "Real estate fields broadly related to management of the underlying real estate still struggle to build the traditional pipelines, such as university programs, into their career paths," said Funk, pointing out that job seekers are in an enviable position.
Hiring in selected real estate fields has followed the SelectLeaders Real Estate Employment Cycle since 2007 as opportunities in development and acquisitions all but disappeared in 2008-2010 only to rebound by 2012 and now are in decline again as transaction volume has slowed down. Certain fields that did not even register in 2007, meanwhile, such as Real Estate Technology, have exploded as a real estate field and job opportunity.
Property management hiring activity presents an inverse correlation to transaction activity in commercial real estate. As companies focus on development and acquisitions during the growth cycle property management takes a back seat, but once the pace slows property management hiring coincides with stabilization and can be a harbinger of correction, according to Phillips.
"There has been a noticeable increase in opportunities that combine property and asset management responsibilities into one position," noted Funk, adding that the challenge in hiring for property management roles has led some employers to upgrade the position and focus on recruiting a new skill set. Dramatic increases in real estate technology has allowed property and asset managers to expand their activity. Roles that used to be exclusively the domain of asset managers, such as performance metrics, feasibility analysis, and acquisitions due diligence, to name a few, are increasingly merging what were formerly property management roles. It has always been the challenge to find property and asset managers that could work well together, and now we are starting to see a ratcheting up of roles into a single, more highly skilled and compensated position, said Funk.
California and New York remain the top magnets seeking real estate talent, with both states posting a higher percentage of overall jobs than a decade ago. Texas, meanwhile, will continue to grow as a destination for real estate talent while Florida is poised to surpass Illinois into fourth place
About the SelectLeaders Job Barometer: The SelectLeaders Job Barometer, published since 2006, is the foremost survey of employment opportunities, trends, and hiring practices in the commercial real estate industry.
About the SelectLeaders Real Estate Job Network: SelectLeaders powers the Career Centers for 12 premier real estate industry Associations (whose members control or direct 90% of commercial real estate). Jobs are from all sectors and all levels with 29% paying over $100,000. SelectLeaders Job Network offers unequalled access to the Real Estate community. To learn more visit http://www.selectleaders.com or visit our Job Network Career Centers: BOMA - CCIM - CoreNet Global - CREW Network - GlobeST.com - NAIOP - NAREIM - NAREIT - NMHC - PREA - ULI