Approximately two-thirds of commercial real estate firms are currently experiencing a labor shortage. This problem extends to every sector of the commercial real estate industry, from construction companies to consultancies.
In fact, the labor shortage has touched most industries in the US and many across Europe. Market watchers and politicians have attributed these shortages to three primary sources in the US and abroad:
- An increase in unemployment benefits
- A decrease in available childcare
- Prolonged border closures between countries
Commercial real estate’s labor shortage is more likely due to the industry’s unique history and structure in addition to the issues outlined above. Below, we outline several potential reasons for the labor shortage in CRE and explain how companies can leverage emerging technologies to attract and retain employees.
The Industry is Growing Quickly
Though many industries have struggled to reach pre-COVID profit margins, the commercial real estate industry boomed in the last year.
According to Lynn Pollack in a September 2021 article for GlobeSt.com, CRE deal volume was 74% higher in July 2021 than it was last year at the same time. Historically low interest rates and exciting emerging asset classes have spread these gains across the commercial real estate industry.
However, rapidly increasing deal volume means even more employees are needed in the CRE space. Because these gains have been so widespread, everyone is hiring at the same time.
Competition for talent in tech, property management, sales, and all other departments is fierce, and adapting operations to attract industry newcomers and younger cohorts will be an essential piece of growing CRE companies.
Workers Want Higher Entry Level Wages
Over the last decade, advancements in technology have done away with many entry-level jobs across industries. At the same time, wages for many mid and low-level employees have stagnated and the cost of living has skyrocketed.
According to Megan Leonhardt in a December 2020 article for CNBC, “median wages, when adjusted for inflation, actually declined 8.8% since 2006.” Similarly, note Jordyn Holman, Leslie Patton, and Peyton Forte in their article for Fortune, “consumer prices surged 5.4% in June from a year ago, the fastest pace since 2008.”
An increase in the number of multigenerational households across the US, enhanced unemployment benefits, and newly published data regarding wage inequality altered how American workers were willing and able to respond to a market that had not supported them. With markets coming back, American workers find themselves with the upper hand in a labor market where employers have traditionally held all the cards.
Today, companies across industries are struggling to fill entry-level positions without extending incentives to workers fielding dozens of offers. In commercial real estate, however, the number of entry-level jobs available has actually increased due to structural changes, resulting in an even more dramatic labor shortage. Writing for Bisnow National, Patrick Sisson notes that there are “a lot more early career and entry-level opportunities this year than there are candidates to fill them.”
Higher salaries and attractive benefit incentives will go a long way to help CRE businesses attract interest as they compete for entry-level employees,
Embracing Cultural Changes in Response to Digital Transformation
As companies across the CRE industry digitize their operations, a culture that supports employees is even more critical because a successful transition requires cooperation across all levels.
In their article “Why Every Executive Should Be Focusing on Culture Change Now” for MIT Sloan Management Review, Rose Hollister, Kathryn Tecosky, Michael Watkins, and Cindy Wolpert explain that “companies cannot realize the true potential of digital transformation, embrace new business models, or implement new ways of working without supporting changes in organizational behaviors and norms.”
Referencing a study by BCG, Hollister, Tecosky, Watkins, and Wolpert note that 90% of companies focused on digital culture achieved breakthrough performance while only 17% of those who neglected digital culture achieved similar results.
According to Hollister et al., “having the wrong culture undermines the best-laid strategy and organizational development plans.” In general, the democratization of the workplace is what makes a digital transformation work. Active engagement in culture-building from all levels of the organization is vital to the successful maintenance and evolution of a positive, supportive corporate culture. While the commercial real estate industry has always prioritized mentorship, integrating new technologies will help simultaneously attract new talent and enhance the success of existing employees.
Employees Want Flexible Schedules
Writing for Entrepreneur in March 2021, Marc Boscher notes that “for the first time, workers value work-life balance more than a high salary,” with 72% prioritizing flexibility and 69% prioritizing salary.
In their September 2020 article “Preparing for the future of commercial real estate” for Deloitte, Jim Berry and John D’Angelo write that “[before] the pandemic, most CRE firms offered limited flexibility in work hours or work-from-home options.”
However, a growing focus on digitization across CRE has made “location flexibility the new standard.” This has also coincided with an increase in the popularity of coworking spaces and companies acquiring smaller satellite offices in suburban areas.
For those who prefer workers returning to the office, Berry and D’Angelo suggest offering “a combination of monetary and nonmonetary programs to incentivize employees.” Berry and D’Angelo point to CRE services firm HPI, which gave employees “who had to be onsite to manage its properties” an extra $1,000 bonus during the pandemic.
Embracing Existing and Emerging Technologies will Attract Younger Demographics
The commercial real estate industry has only started to embrace technologies, which will create new jobs, attract younger workers, and support existing positions.
As Jim Berry notes in his article “Four Technology Trends Impacting The 2021 Commercial Real Estate Market” for Deloitte, “a CRE company’s competitiveness in the post-COVID-19 world could hinge significantly on the extent to which their people can succeed in a digital work environment.”
While the industry once shied away from integrating technology, those doing so can increase their potential candidate pools with whole new demographics of employees. Technologies could open CRE roles to caregivers, people with disabilities, students still enrolled in university, and others whom former operational norms may have previously kept out of the industry.
According to Jim Berry and John D’Angelo in their article “Preparing for the future of commercial real estate” for Deloitte, embracing existing and emerging technologies will allow commercial real estate companies to “streamline existing talent systems and processes, drive efficiencies, and make more informed and effective decisions.”
The Bottom Line in the Commercial Real Estate Labor Shortage
Though the commercial real estate industry currently faces a labor shortage, firms across the US have already identified and begun to address many of the shortage’s root causes.
Thankfully, a significant contribution to the CRE labor shortage is an unprecedented increase in productivity across the industry. As mentioned above, CRE deal volume was 74% higher in July of this year than it was in July 2020. Improved cybersecurity and enhanced data collection have streamlined CRE operations and closed deals quickly and profitably worldwide.
Many CRE firms have responded favorably to applicant demands — raising entry-level salaries, offering bonuses, and making flexible schedules available. Commercial real estate firms have also embraced diversity initiatives over the last year, making positions more accessible amongst people with disabilities, young people, women, and people of color.
And after years of gradual adoption, most CRE companies have also shifted their operations online, committing to a true digital transformation. While some firms may still struggle to fill roles, the industry is confidently headed in the right direction.