Reprinted from Green Street's Real Estate Alert:
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Commercial real estate companies are signaling a more bearish stance on hiring following a year of muted property sales, according to executive-search firm Ferguson Partners.
A survey of public and private investment shops and brokerages by the Chicago-based operation found that half of respondents plan to keep their staffing levels steady this year, with 14% anticipating decreases in their workforces.
At 64%, the combined no-growth projection reflects a dramatic drop-off in hiring over a two-year span — as is typical with a plunge in sales. In 2022, when most real estate firms were still well in growth mode, just 39% reduced their headcounts or kept them the same. That figure then jumped to 58% in 2023 as a hostile debt market and economic uncertainty drove down property sales of $25 million or more by 52%, according to Green Street’s Sales Comps Database.
For this year, just 36% of survey respondents said they expect to increase staffing. That’s despite widespread expectations that deal volume will improve amid a projected decline in interest rates and increased capital availability. “Irrespective of people’s projections, especially with inflation far from under control, we expect at least the first half of 2024 to be an equally challenging year, akin to 2023,” said William Ferguson, co-chair and chief executive of the global talent-management firm.
The reality, Ferguson noted, is that many real estate firms are under increasing fee pressure due to declining property values. This, coupled with lower acquisition activity and weaker-capitalraising efforts, will force more consolidation in the real estate sector. “There will undoubtedly be more pressure on profitability, and scale will matter even more going forward,” he said.