And Its Effects on Brokerage
In the fall of 2021, 12 million Americans quit their jobs, according to The Washington Post. “America’s quitting rate is historically high and exceptionally visible,” reported The New York Times in December. Employers across the U.S. are worried. But commercial real estate isn’t like most other industries. Just how, if at all, is “The Great Resignation” trend affecting recruitment and retention at brokerages?
WHAT EMPLOYEES WANTFinancial compensation is still a top priority for talent across industries. Street Jones, SIOR, principal of Rich Commercial Realty in Raleigh, N.C., finds that higher salaries have become the main driver for both existing employees and new hires. He observes: “The thought amongst employees seems to be, ‘If I am going to work from home and not be as engrained in a culture, then I want to make the most money that I can.’”
Yet many employees prefer to work remotely, at least part of the time. Warren White, an HR director and president of an HR association, says that “compensation is certainly a factor—especially so in entry-level and more junior roles,” but that by and large “employees and candidates are prioritizing flexibility—remote work, flexible schedules, and other benefits that promote greater balance.” According to Jones, one such benefit is the ability to bring pets to the workplace. He reports that people who became pet owners during the pandemic consider pet-unfriendly workplaces a dealbreaker.
Demands vary from person to person, of course, but as White points out, people are no longer trying to fit their personal lives around their work lives. Instead, “people are choosing to place their personal lives at the center and looking for employment that allows them that flexibility.”
DIFFERENTIATORS FOR BROKERAGEBecause many brokers are independent contractors who can determine their own schedules, brokerages have a competitive advantage on the flexibility front. But expectations of robust financial compensation can be a sticking point, especially among newcomers to the industry: Commission-based remuneration can be daunting to people who seek a stable, guaranteed income. As Kyle Hagerty of Propmodo explains:
“Living on a ‘draw’ off future commission isn’t feasible for a generation already saddled with tens of thousands in debt from student loans. The result is high-level compensation packages with variable pay that can end up bringing in multiples of a base yearly salary for senior employees while young bloods take on a second job and get roommates just to get by on making referral bonuses. If we are serious about attracting young talent into commercial real estate brokerage, a thorough examination of entry-level compensation is likely required, especially if you want to attract diverse talent. Outside of brokerages, pay structures can be more forgiving, where compensation can be more closely tied to performance metrics.”
To minimize the financial challenges for candidates, some brokerages offer more competitive split structures and other benefits. These apply not only to newcomers, but also to more established professionals.
Brokerages should be prepared to “pay-to-play,” says Grafton Milne, SIOR, designated broker at Menlo Group in Tempe, Ariz. Split structures are only one component of that effort. Signing bonuses and certain titles or designations also play a role. Menlo Group offers tools and resources that its competitors do not, such as a transaction manager for every agent. The transaction managers prepare paperwork, assist in communications with all parties involved in a deal, and help manage each broker’s pipeline and associated tasks in the firm’s CRM.
Allan Riorda, SIOR, president of Lee & Associates in Columbia, Md., recognizes that when a person moves from one firm to another, “there’s a transition period where their income will dip a little bit. What we’ll do is discuss a preferred split during that time to make the transition a bit easier.” In some instances, Lee & Associates also helps to pick up some of the cost of a broker’s health insurance.
Culture is another differentiator. Milne credits quarterly teambuilding activities and other social events at Menlo Group with building camaraderie and collaboration. Similar initiatives at Lee & Associates appeal to successful brokers, as does the firm’s “anti-bureaucracy” stance. Riorda notes: “We don’t micromanage. We want to bring in the best people we can, give them the specific tools they need to be successful, and let them go.”
THE FUTURENot all recruitment and retention challenges can be blamed on The Great Resignation: Brokerages were already facing them before the trend arose. Hagerty highlights a pre-pandemic labor shortage in commercial real estate, noting that “as the labor market heats up and employers struggle to fill roles, the looming problem of the commercial real estate workforce is brought to the forefront.”
It is reassuring that in addressing these challenges, some brokerages are taking active steps to recruit and retain talent. Worriers may also take comfort in the probable waning of the empowerment trend. “When you study labor economics, you tend to see that these things go in cycles,” says White. “You might see what is referred to as an ‘employer’s market,’ where for a period of years employers seem to have their pick of top talent available, and then things shift to more of an ‘employee’s market,’ where candidates receive multiple offers and compensation exceeds that of the local market.” He expects employee empowerment to be somewhat cyclical, but he warns that certain characteristics of an employee’s market may stick around.
Jones also sees permanent change taking root. “I think the days of employees starting and retiring with the same company are over,” he says, pointing out that the shift had already started but that the pandemic “has put the nail in that coffin.”
"Just like their clients, brokers want something simple: a good deal."
Whether or not employee empowerment is permanent or temporary, the prescription for successful recruitment and retention at brokerages remains largely the same as in pre-pandemic times. The “winners” in the coming years will be those that offer alternatives to the traditional split structure and provide nurturing environments to brokers at all stages of their careers. Just like their clients, brokers want something simple: a good deal.
This article was sponsored by the SIOR Foundation - Promoting and sponsoring initiatives that educate, enhance, and expand the commercial real estate community. The SIOR Foundation is a 501(c)(3) not-forprofit organization. All contributions are tax deductible to the extent of the law.
CONTRIBUTING MEMBERS
Street Jones, SIOR
Grafton Milne, SIOR
Allan Riorda, SIOR