Jobs Forecast for Autumn Decline

MBA (10/8/2008 ) Murray, Michael
Fewer job postings will likely lead to a drop in commercial real estate employment this fall and additional pain for the remainder of this year, according to a monthly research study conducted by New York-based Cornell Program in Real Estate and SelectLeaders.com.

Anthony LoPinto, CEO of Equinox Partners, a New York-based real estate industry search firm, and founder of Select Leaders, said prospects don't appear to improve until next year.

“While hiring trends are down somewhat, the worst is yet to come. We won’t hit bottom, until the jobs disappear,” LoPinto said.

David Funk, director of the Cornell University Program in Real Estate, said commercial real estate’s job market showed “surprising resilience” from negative news across all economic sectors during the first half of the year, but experienced a 46 percent decline in job postings since June.

The fall Select Leaders/Cornell Job Barometer showed strong job growth in commercial real estate until July, but managers now forecast steep cuts by the end of the year.

“The pace of the decline into August and September points to almost non-existent transaction activity and a shutdown of new development that is showing up in the lack of job postings,” Funk said.

David Jacobstein, senior advisor of real estate at Deloitte LLP, New York, said national job posting numbers fell dramatically from June to August—down 6 percent in New York—based on real estate finance-related job losses.

Cornell/Select Leaders research showed nearly 40 percent of all real estate jobs were in multifamily as real estate finance and homebuilding job losses were disproportionate in New York and California. With 43 percent of applicants looking for commercial real estate jobs in New York—74 resumes for each job posting—jobs in New York fell from 18 percent last year to 11 percent this year.
"The impact in New York City will get worse as a result of the bloodbath in September and beyond. Finance was very hard hit," Jacobstein said.

Job postings in real estate finance fell from 132 in May to 62 in August; Jacobstein said he expects further decline in the months ahead.

"Only 11 of the 62 postings were in New York, which is dramatic given that New York is the real estate finance capital of the world," Jacobstein noted. "Interestingly enough, the number of resumes submitted went down only marginally from 2007 to 2008, but a drop nonetheless."

New York, California , Texas and Illinois still held 68 percent of all national job postings and, in Texas, job postings increased from 8 percent to 10 percent of total national share.

Multifamily increased its job posting share from 6 percent to 19 percent while banking fell from 15 percent to 8 percent. By job function, the big winner was accounting/control and property management with 21 percent and 15 percent of job postings, respectively.

"This is not surprising given the times we are in," Jacobstein said. "In down markets, real estate companies emphasize expense control at the corporate and property levels. Job postings for development and acquisitions were down because of the lack of debt needed to fund new projects and to acquire assets."

The southern United States and Midwest provided most opportunities for jobs in accounting and controls, property management and leasing.

“The return to credit-based debt products with rigorous underwriting, based on conservative real estate fundamentals, low loan-to-value structures and the “R” word—recourse—requires a different breed of lender with deep real estate knowledge and credit skills,” LoPinto said. “Unless they can retool, many of the professionals who grew up in the high-flying debt capital markets era of the 90's will not find a home in the age of restructure.”

Jacobstein noted that “best of breed” firms would take advantage of market conditions to improve their standing—and workforce—after market conditions eventually return to a normal state.

“Hiring in a difficult environment is challenging,” Jacobstein said. “Although traditional wisdom would indicate that there should be more players to choose from, the truth is that many people seeking employment or thinking about changing jobs are prone to shy away from industries that are most impacted by the poorly performing economy.”

Funk said graduate students could look in other financial-related sectors as banking jobs drop, and experienced executives would also be in demand.

“The increasing need to squeeze every ounce of performance from commercial portfolios highlights the growing need for asset, portfolio and property managers with a deep range of real estate experience coupled with sophisticated financial skills,” Funk said.

LoPinto said middle management jobs were hit hardest with a minor impact on executive level jobs, but a deepening financial crisis would likely take a toll on the more senior ranks. He added that while job losses occur this year, opportunities could exist next year for some seasoned players.

“In general, there is a six-to-nine month lag between a fall in real estate market activity and resulting job layoffs and hiring freezes,” LoPinto said. “On the other hand, with billions of dollars of commercial real estate loans maturing over the next 12-36 months, there will be a growing demand for seasoned and proven talent that knows how to play the restructure game.”