Two research reports in this month's issue, one focusing on property management compensation and the other concerning the corporate real estate exec's role in 2010, confirm what we've suspected for some time — both professions are in the midst of truly dynamic change and those who adapt will survive. Our analysis of data, supplied by the Institute of Real Estate Management and CoreNet Global, will likely spark lively water-cooler discussions.
Let's start with property managers. This group has traditionally been associated with the mundane tasks of collecting rents and overseeing maintenance. Today, property managers also are performing asset management duties. Why? Investors want to maximize their return on capital, and so they are leveraging property managers' local market knowledge and leasing expertise to help pump up revenues. The good news is that the added responsibilities have resulted in substantially higher compensation. The average salary for a Certified Property Manager (CPM) has increased from $53,714 in 1997 to $67,714 today.
It used to be common practice for investors to buy a piece of property and send out RFPs to evaluate management and leasing companies. “That paradigm is out the window,” says Brian Ross, president of office and leasing management for Jones Lang LaSalle in Denver. Now, investors utilize property managers to help identify and underwrite potential investments and to assess the leasing rollover risk. “If you can't look at a real estate asset as both a physical asset and a financial asset, you're not going to be successful,” says Ross.
The average age of a CPM is 49. Only 0.2% of CPMs are ages 20 to 29. Most experts say the industry struggles to attract people in their 20s because that age group has a misperception that the position's primary responsibility is the management of maintenance. “A major downtown office building can be a $50 to $100 million asset,” says Ross. “Where can you go to manage a $50 million to $100 million business? When you start to talk to people in those terms, you get a very different reception.”
The challenge corporate real estate execs face is quite different, but no less compelling. Many of their responsibilities have been outsourced over the past decade, freeing up the corporate real estate exec to focus on strategic planning. By 2010, the expectation is that real estate will be highly integrated with the information technology and human resources divisions, according to CoreNet. In fact, the corporate real estate exec of the future may not even have a background in real estate.
But Ross, who has 23 years of real estate experience, understands the cyclical nature of the industry. “I think this idea that everything will be outsourced … the pendulum will swing back a bit and there will be a settling out. When the pendulum swings, how far is it going to swing back?”
Ultimately, the tipping point will come, Ross believes, when a public company runs into financial problems and cites outsourcing as a reason for its troubles. But at the moment, the pendulum shows no sign of swinging in that direction.