Tuesday, January 12, 2010

Global Real Estate Executive - Q1/2010 Employment Status Survey

Q1/2010 Global Real Estate Executive Employment Status Survey
Rutherford International (http://www.rutherfordinternational.com/) analyzed approximately 170,000 commercial real estate and construction/design executives within its data base to determine what percentage had undergone some sort of material change in their status over the last 18 months. This data base analysis spanned four major English speaking countries: United States, Canada, United Kingdom and Australia.The analysis did not include staff and middle-management positions, nor real estate professionals in financial services or investment management. We discovered that approximately 42 percent of this analyzed executive grouping had undergone some degree of change in their current status. A “change in material status” means that they are no longer in their current position; however one should not necessarily construe from this change in status that the executive is not gainfully employed elsewhere. Even taking into account normal data base attrition, the percentage of changes reported would suggest that at a global level, no quarter or safe haven within the real estate executive community was to be had – the job loss within this sector exceeds that of countrywide averages.

The percentage changes (all in the negative) are quite astounding; and frustratingly annoying to behold when one considers that the “echo” cohort of our post-war baby boom generation is at an age where they are choosing life long careers. The Canadian commercial real estate industry lost a generation of youth after the early nineties real estate recession; is it feasible the global industry could loose a large segment of its echo cohort this time around as well?

I’ve been involved in real estate executive search since 1986; prior to the search profession, I practiced real estate development in Canada and property investment overseas. Rutherford International has experienced all the market cycles, and is intimately aware of the economic machinations associated with oil price shocks, double digit interest rates, “loan to own” commercial lending, tax driven priming of industry sectors, economic recessions and industry specific depressions. Real estate is the first industry sector to be cooled by a country’s monetary policy; and the last to be warmed by it.

As a passionate observer of the industry, and given the reported percentages; Rutherford International humbly imparts a bit of advice to individuals concerned over their security, and/or their choice of real estate as a career. We also offer firms contemplating future organizational plans and pursuit of opportunities some advice as well.

Advice to Individuals:
Real estate is cyclical and dynamic; to choose a career in real estate, or resolve to remain in it, one should be comfortable with the concept of living with uncertainty. A fundamental consideration for choosing a career in real estate is to understand its structure and economic role in our lives. In business theoretical terms, commercial real estate is a “complex adaptive system;” meaning it can move to the brink of chaos before new patterns emerge and new forms of organizations take place. The framework for doing business today may not exist tomorrow; uncertainty is part of the natural order of a market economy in which real estate is a firm adherent.There is little doubt that at a global level, the industry is undergoing a purging of phantom wealth and a systemic “Resetting” of values. One might relate it to a metaphorical fiscal neutron bomb that has wiped away real and perceived investment values but left the physical assets standing. Short of one’s own entrepreneurial and deal-driven optimism – traits that true real estate executives are in no short supply of; practitioners need to take comfort in knowing that although ownership positions melt away, the assets remain and require management; tenants contract and shift to lower cost facilities but need service and amenities; vacancy needs to be leased, projects completed – asset and project value erosion must be mitigated. To that end, you can choose to become collateral damage or be part of a creative response in preparation for a recovery.

Advice to Companies:
There are few times in business history where a single sector is able to deliver up a smorgasbord of talent across all functional roles in multi-national markets. Now is the time to identify competency gaps within your organization through the lens of performance and psychometric based assessments, and put in place a strategy to upgrade your team; and/or align the firm with joint venture expertise outside of your company’s traditional boundaries.

It’s a simple analysis, however if one subscribes to the 80/20 rule meaning 80% percent of your corporate wealth is generated by 20% or your organization; then one might assume an industry undergoing dislocation of talent for no other reason than “macro economic” implosion should have a substantial ‘selection ratio’ of talent available to you that would immediately benefit any hiring organization.All real estate is local – but the reach of associations, the make-up of trans-border acquisition, development and lending teams, the seamlessness of technology platforms can ease one’s efforts to go global. The cost-of-entry, and the potential for non-parochial SME’s to play in the same markets as the larger yet less nimble sovereign and institutional capital pools will constantly improve as real estate professionals rebound from this global recession.

Nimble companies should use this time to improve the quality of their management and executive teams; and/or explore strategic alliances with competent market savvy yet under-employed entrepreneurial executives outside of their traditional geographical boundaries.

Download the Survey