Today's commercial property manager is a modern-day jack-of-all-trades. In addition to overseeing building maintenance and rent collection, managers are completing financial analyses of their properties, learning new technologies and working directly with investors.
“Owners want their property managers to be responsible for the asset these days, and that means that the property manager has to act as both an economist and a marketer,” explains Charles Achilles, vice president of the legislative and research services division at the Institute of Real Estate Management (IREM).
“Now that you have REITs and pension funds owning so much real estate, these Wall Street-types base everything on performance,” adds Achilles.
The good news is the added responsibilities have led to higher salaries throughout the industry. A new compensation survey compiled by the Institute of Real Estate Management (IREM) confirms that certified property managers (CPMs) have experienced robust growth in their median compensation level — which includes salary and other real estate-related income, plus sales and leasing commissions.
The survey examined profile and compensation trends among CPMs and CPM candidates. Data collected for the current survey included responses from 1,375 CPM members and an additional 429 CPM candidates.
According to the survey, the average CPM is 49 years old, holds a college degree and has 21.5 years of experience. It also shows that the jump in compensation for property managers has been substantial over the past decade. In 1997, the average salary for a CPM was $53,714. Only four years later, that average had climbed to $67,714, marking a $14,000 increase. In the most recent survey, the median annual compensation for a CPM was $95,000 — a significant leap in earning power over a relatively short period of time.
That increase isn't likely to flatten out, either. “While it's hard to predict, there should be continued salary growth here as long as owners demand more sophisticated property managers,” says IREM's Achilles.
Wanted: Fresh Talent
While property management has become a much more financially rewarding career path, the research also shows that the profession has struggled over the past decade to draw a steady stream of younger people into the business. Only 0.2% of all CPMs were in the 20-29 age group at the end of 2003 compared with 40% who were in their 50s [Figure 1].
Salaries for the youngest property managers have outpaced those of older managers, suggesting that the industry recognizes the need to offer better salaries as a way to lure younger talent. The 20-to-29 group posted the biggest gain in average salary base between 1993 and 2001. Over that period, the average salary for the youngest CPM rose by almost $20,000 to reach $54,000 [Figure 2].
“People who come into real estate by starting out in property management generally see rapid salary growth during their first five years,” says John Santora, executive vice president of property management at Cushman & Wakefield. Why do salaries tend to grow so much during this period? Santora believes it's a function of high demand from property management firms — his included — to lure new faces into the business.
The career path at Cushman & Wakefield typically begins with an assistant property manager working on one property. The next step up the job ladder is the portfolio manager who oversees a number of properties. Santora has made similar moves over the course of his career — he now manages Cushman & Wakefield's massive 300 million sq. ft. office portfolio.
One Skilled Workforce
Not only have CPMs benefited from steady compensation growth over the past decade, but as a group they have also become more seasoned. The median number of years of experience for CPMs increased from 15 in 1993 to 20 by 2001. That experience has been vital for CPMs being asked to undertake more complex tasks these days.
One Washington, D.C.-based property manager attests to the new demands being made on her peer group. Regina Mullins became a senior portfolio manager for Cushman & Wakefield in 1997. She previously managed one property before her promotion — Mullins now manages 12 properties in the Washington, D.C. area.
“I do a lot of financial studies, budgeting and forecasting for the owners of these properties,” says Mullins. As she puts it, her business has become a mélange of disciplines: “It's now law, accounting, engineering and technology”.
Mullins is pleased with the evolution of her career. Property managers no longer bridle under the label of “sophisticated janitors,” she says, thanks to their expanded responsibilities and added importance in the property market.
However, Mullins was less sanguine when asked about her profession's ability to attract younger talent. “If younger people are exposed to [property management], I think they'd like what they see. We really have to get out there and communicate this message,” she says.
According to Mullins, Cushman & Wakefield recruiters occasionally visit colleges and universities to cull young talent. Virginia Tech, for example, even offers an academic degree in property management.
While the IREM study revealed the average age of a property manager to be 49, Laura Eriksen, who works directly for Mullins, is nearly half that age. Ericksen, 25, entered the business three years ago after graduating from a Northern Virginia-area college. She is now a tenant services coordinator at 2001 K Street, a 239,562 sq. ft. office property in Washington, D.C.
“I got into this business by chance,” says Eriksen, who studied Middle Eastern history as an undergraduate. While she encounters a few young people working in the business at her level, she admits that the industry demographic is chiefly older.
“I spend a lot of time working with property managers who are much older than me,” says Eriksen, who is interested in earning a CPM designation.
Far from feeling awkward, Eriksen finds that the chance to work with so many experienced and learned managers enables her to get the best training. She also believes that property management is a field where young people are given a lot of responsibility and the opportunity to learn the business in a hands-on fashion.
A License To Poach
Aside from recruiting younger workers like Eriksen, most management companies lure experienced people from rival firms. In many cases, says one source, managers will even leave a company for a meager pay raise at a rival firm.
“There's a shortage of talent here, and that means higher turnover as people will change firms for very little extra money,” says Chris Lee, president of Los Angeles-based real estate consulting firm CEL & Associates.
This is especially true for the older and more experienced workers. By measure of average total compensation CPMs age 60 and above experienced the biggest average salary gains between 1997 and 2001, according to IREM. During that time, their compensation increased by more than $24,000 to reach an average of $117,417.
According to Lee, 86% of top-level management hires today come directly from a rival firm. That has driven turnover at the highest staffing levels up to 30%. By comparison, Lee says that turnover at a typical service firm is around 11%.
Higher turnover ultimately means higher costs for the employer. Lee, who has worked in the real estate business for a decade, says that the cost of employee turnover can range from 30% to 300% of the employee's annual cash compensation. The impact of an employee loss can also reduce the efficiency and morale of the existing staff.
According to the research, in 1997 CPMs ages 30 to 39 represented 21% of the CPM workforce. That percentage waned by 2001, when it accounted for only 13% of the workforce. Conversely, IREM has tracked a noticeable increase in the number of CPMs ages 50 to 59. In 1997, this age group represented only 25% of all CPMs but by 2001 they represented 36% of the workforce.
“This is the first time in the history of this profession that the average age is well over 40. Still, there are some great opportunities out there for those young people willing to seek them out,” adds Lee.
One thing that hasn't helped attract younger talent is nomenclature, says Lee, who believes that the word “manager” has a blue-collar connotation to it. “The industry just has a lot of work to do in reshaping its image of a property manager, and getting rid of the title of ‘manager’ would be a good start.”
He believes the stakes are high since young people bring certain intangible strengths to any business, among them “innovation, passion and excitement.” Such qualities are essential to the long-term success of any business, he believes, because there is no substitute for a fresh crop of talent to replace retiring workers.
The quest for young talent has even driven some firms to tap other industries as opposed to hiring newly minted college grads.
“We just weren't that successful hiring people right out of college,” says Mike Smith, CEO of Georgia-based apartment management firm Signature Management Inc. “So, we look to hire people from outside industries like sales and construction,” says Smith.
Former leasing brokers often gravitate toward property management, says one veteran property manager based in Little Rock, Ark. Ronald Goss, senior vice president of RPM Management Inc., says that former leasing brokers in their mid- to late-20s are increasingly moving to the management side of the business.
Goss, whose firm manages roughly 5,000 properties that include a variety of property types throughout Arkansas, believes that rising interest rates will limit the number of sales transactions and thereby help attract younger sales brokers to the profession. In short, a lull in deal flow would be enough to convince a sales broker to take on a salary-based, property management role, he says.
But there's another added perk to entering the property management field, according to Goss. It's an excellent way to partner with real estate investors in completely new ways. Goss notes that as investors have grown more sophisticated over the past decade, that status has been conferred on property managers as well.
“Our personal relationships with investors used to be limited,” says Goss, a 24-year property management veteran. “Now there are more distressed properties, and that has led owners to place greater demands on their managers.”
What is A CPM?
A Certified Property Manager (CPM) is certified by the Institute of Real Estate Management (IREM), a national organization devoted to the development of professional real estate management. The organization is also a division of the National Association of Realtors (NAR).
There are roughly 217,000 U.S property managers. About 8,800 are CPMs.
Candidates for the CPM designation are required to have a minimum of five years of full-time decision-making activity in real estate management before earning the designation.
CPMs manage more than $848 billion in real estate assets.
They manage roughly 11.2 million residential units and 6.5 billion net sq. ft. of commercial space.
Figure 3: Certified Property Managers who primarily manage apartments earn the highest average salary.
|Type of Property||Salary||Total Compensation|
|Apartments (Coventionally Financed)||$97,711||$125,133|
|Federally Assisted or Public Housing||$88,160||$108,794|
|Shopping Centers/Retail Properties||$79,975||$97,230|
|Source: Institute of Real Estate Management|