“Economic uncertainty” are the watchwords as we move into 2023, a circumstance that presents both challenges and opportunities for commercial real estate firms and investors. The debate over whether the global economy is in a recession is being shaped by geographic realities that include inflation, rising interest rates and an ongoing war in Ukraine that continues to impact global trade and supply chains. Industry observers are seeing signs that Europe could hit its lowest point relatively early in 2023, compared to North America and Asia-Pacific and could, therefore, recover more quickly.
While recognizing the impact of macroeconomic trends is critical, commercial real estate firms and investors need to make decisions based on the facts on the ground. How the economy and industry evolve this year is likely to differ by geographic region and on a country-by-country basis. This year’s Hiring Forecast is designed to help firms understand the current and emerging forces shaping how much and what kind of talent they will need to thrive in 2023 and where to find that talent. Included are key issues that firms are likely to face and which Ferguson Partners will continue to monitor.
Below are macrotrends across regions; for a full and detailed picture of trends by region, including Asia Pacific, Europe and North America, please visit the complete publication.
A snapshot of 2023:
As the global market has changed so have firms’ priorities when it comes to seeking talent. Many firms that admit to hiring aggressively and paying up for talent may need to restructure in 2023—particularly those on the advisory side of transactions or origination professionals within platforms that are pausing many activities. The resulting whiplash will likely lead to greater caution when increasing headcount.
Firms will be operating in a new market in 2023. Talent management will focus on finding different skill sets. Senior professionals who have led and worked through a market contraction or reset in the past and have the skills to lead and mentor teams that have not experienced this type of event during their careers will see high demand.
There will be new opportunities for firms that are able to turn change and uncertainty to their advantage. For example, there are likely to be opportunities for alternative lending to fill some of the void created as core lenders retreat from certain deals. Firms with access to capital across the risk/return spectrum and across private markets (private equity, infrastructure and real estate) are well positioned to take advantage of opportunistic deals.
Given its importance, C-suite succession planning will continue regardless of the economic environment. The challenge will be to find the right talent able to make the most of current and near future opportunities and position firms to thrive in an uncertain future. This will not be easy. The real estate industry lost a generation of talent that was cut during the global financial crisis. As a result, there is a dearth of talent at the 20 to 25 years’ experience level who have worked through a market correction and still have significant runway left in their careers.
Some firms, rather than talent, will gain the upper hand in the talent market for the first time in several years. The resulting leverage will ease pressure on the rapid salary growth many firms experienced, while also allowing firms to bring employees back into the office more regularly. For some firms, there is a growing sentiment that a strong company culture can best be nurtured when people are working together on site. For their part, an increasing number of employees and job candidates feel a clear relationship between office visibility and career growth opportunities.
Diversity, equity and inclusion (DEI) are now firmly entrenched. The normal process of refreshing a board will eventually lead to a truly diverse structure. Firms are expanding their pools of diverse candidates beyond race, gender, ethnicity, and LBGTQ to include socioeconomic, cognitive and neuro diversity. However, there are stark regional differences in DEI success and acceptance, making DEI more challenging for some firms. Our research found that, while the vast majority of firms with formal DEI programs set qualitative and/or quantitative DEI goals, only 41% operationalize those goals by training managers on anti-bias hiring.
Environmental, social and governance (ESG) objectives dominate the conversation among commercial real estate firms, with many announcing goals to reach net-zero by a certain date. These firms are looking for the talent and expertise necessary to achieve those goals—either a single senior leader for all ESG or multiple hires to work on specific ESG goals. ESG talent is particularly important in asset management where impact investing funds focused on net-zero investments are growing in number. As ESG becomes more prominent, firms will need to find new ways to measure performance that balance net-zero goals with maximizing performance and profitability. Facing a dearth of ESG talent, firms may need to focus on passion rather than experience, then provide new hires with the tools and support necessary to succeed.
Base salaries are likely to remain steady while bonus opportunities could be restricted if firms underperform. If talent sees fewer opportunities, those individuals may be willing to accept less to move to a new role, tipping the balance in the talent market back toward the employer. Star performers will continue to be well rewarded, but lower performers could have their bonuses significantly trimmed. There will be outliers to these trends, particularly firms operating in pockets expecting continued growth, such as non-bank lending, and roles involved in raising capital and asset management. Firms remain committed to improving pay equity practices and results.