Reprinted from Green Street's Real Estate Alert:
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After hiring at a rapid clip last year, commercial real estate firms are poised for a more conservative pace in the months ahead, according to executive search firm Ferguson Partners.
In 2022, 61% of employers increased their workforces by an average of 10.5%, up from the 53% who added to their headcounts by a similar average in 2021. That’s according to Ferguson’s 15th annual survey, which drew responses from nearly 300 real estate firms.
But much of 2022’s hiring activity was concentrated in the first half of the year, Ferguson chief executive Gemma Burgess said. By July, a confluence of rising borrowing costs and mounting economic uncertainty had stifled investment-sales activity, slowing search assignments.
Now, more firms are aiming either to keep staffing levels flat or to increase them by smaller margins, according to the survey. Some 38% of respondents anticipate no change in total workforce in 2023, up from 27% in 2022, while 57% foresee headcount growing by a more tempered average of 7.1%.
And those projections, gathered in early November, may be optimistic given what has occurred in the 75 days since, noted William Ferguson, chairman of Ferguson Partners.
Most recruitment efforts today are more narrowly focused on filling vacant positions or supporting succession planning or strategic shifts. Positions deemed to be essential “are still moving full-steam ahead … regardless of what is happening in the economy,” Burgess said. But firms “are being smart and strategic as to where they are growing headcount.”
To be sure, firms still are working to plug staffing gaps in the wake of a yearslong hiring frenzy. Just over a third of companies reported a year-over-year increase in departures last year. Staffers who jumped ship listed a lack of career mobility and development, insufficient compensation and a lack of job flexibility as their top three motivating factors.
Companies also have shifted their recruitment efforts to focus on “people who can drive cashflow and value,” Ferguson said. “What we’ve seen is more of a pivot to defense, which you typically will see in a downturn.”
To that end, the functions in greatest demand among surveyed firms are finance and accounting, asset management and property management, all of which ranked ahead of transactions and capital-raising specialists.
It remains to be seen whether a softening in the pace of hiring will cool a red-hot candidate’s market that produced fewer candidate options, abbreviated search processes, and left firms little room to negotiate salaries.
“It will depend on the role and function,” Burgess said. “There will still be some skill sets in greater demand, such as capital formation and portfolio management, and there’s a thin candidate base.” That’s especially true of succession mandates, where the pool of candidates with 20 to 25 years of experience is already shallow due to the financial crisis.
But there could be some relief at the junior level, where rapid job-hopping among younger staffers has been driving salaries higher in recent years. “Hopefully, those crazy days are now over,” Burgess said. “It is not healthy to have a market on fire for too long.”
Looking ahead, employers are hopeful they will have more leeway to negotiate compensation, request workers to return to the office and differentiate compensation for high performers. “A lot of companies are hopeful that it is becoming more of an employer’s market and that things will calm down, allowing them to be more patient in the hiring process,” Ferguson said. “That seems to be the mood. It remains to be seen if that will be the case.”