Could the global commercial real estate (CRE) market in 2023 be like Schrödinger’s cat - simultaneously alive and dead? Until we open the box, all future scenarios are possible. While there are undoubted challenges ahead, there are also exciting opportunities. And the key to realizing a positive outcome in 2023 and beyond could lie in how you manage your workforce.
real estate markets in transition
According to JP Morgan, 55% of commercial real estate leaders believe a recession is likely in 2023. And the combination of high inflation, rising interest rates, fewer refinancing options and a pessimistic outlook for office occupancy paint a gloomy picture right now. Major firms such as CBRE, JLL and Cushman & Wakefield have already announced major cost cutting plans, and others are likely to follow.
Furthermore, structural changes in the post-pandemic world, such as the continuing migration of retail to e-commerce and more hybrid working, mean the CRE sector needs to think differently about how it marries supply with demand. McKinsey’s recent report into the lasting impact of the pandemic on real estate estimates that property values in the world’s top nine cities could drop by up to $800bn by 2030. Their recommendations to mitigate this include more mixed-use neighborhoods, more adaptable buildings and designing better multiuse spaces in offices and retail.
Despite the warnings, there are encouraging developments in the sector too, which could balance out the need to rush to layoffs or other cost saving measures.
The move to smaller, more flexible or higher quality properties creates opportunities to think creatively about how to repurpose or refurbish vacant units. The focus on Environmental, Social and Governance (ESG) considerations is driving increased sustainability and use of AI to reduce energy consumption, waste and carbon emissions. And the growth of property technology, or proptech, is generating new efficiencies in areas such as occupancy management, rent payments and maintenance.
These shifts call for new ways of thinking, new ways of operating and new skills to fully realize the benefits.
the changing CRE workforce
All these changes require firms to rethink how they meet their resourcing and skilling needs so as not to be left behind as the market evolves. The CRE sector has historically lagged behind others in technology adoption and been slower to innovate, but now there are powerful forces driving change. For example, the growth in proptech and the use of AI creates greater need for data analysts (to uncover the value in masses of new building data), 3-D modelers (to create ‘digital twins’ - virtual replicas of buildings to model utility and energy consumption) and cybersecurity specialists (to mitigate the increased risk of hacking from this expanded use of technology).
Equally, technology and shrinking deal volume is driving a reduction in other roles, such as transaction coordinators, assistants and administrative staff.
In short, CRE firms need a more agile and fluid talent pool, both to rein in costs where possible and remain poised to take advantage of new opportunities for growth as they emerge and clarify.
how to pivot successfully
Any shift in the size and shape of the workforce requires careful planning - particularly if the goal is to bring about change quickly. The skills the sector needs in key areas are in short supply and competition for talent is fierce. The CRE industry has previously favored rapid hiring and firing, especially in administrative and back office positions, as previous boom-bust cycles have dictated, but that approach will no longer work with the talent that firms need now.
Since the pandemic, employees - especially younger people with cutting-edge digital skills - expect their employers to embrace more diversity, equity and inclusion (DEI) in their talent management and offer more wellness benefits, remote working options and career development. Deloitte’s most recent survey of CRE leaders revealed that less than a third of firms are prioritizing implementing flexible work options or offering more career growth and skill development. Those companies that are slow to respond to what talent wants will struggle to compete in the new landscape.
One of the ways organizations can help their employees manage change and develop their careers within the firm is to provide coaching. New models of coaching support are now democratizing this benefit, which was previously only offered to senior leaders or high potential groups. Our own research in this area shows that 85% of employees believe coaching helps them navigate challenges in the workplace, move forward with their careers and that providing it shows that the employer cares about its employees.
If it does come to implementing organizational change, there is a valuable lesson to be learned from the numerous tech layoffs recently: get it wrong and everyone will be talking about you. Reputation management is key. The market will rebound at some point and, when it does, your employer brand will be vital to retaining and attracting talent in future.
There are many ways to improve agility and resilience in your workforce, such as offshoring, outsourcing, using more contractors, or reskilling and upskilling existing employees. Any change needs to be well managed and well communicated.
Here are our top tips for how to communicate and implement organizational change:
- Be as transparent as you can regarding the reasons for the change
- Explain the business case for the change and present the options you considered and the thinking behind the decision
- Leaders need to be visible: hosting all-hands or team meetings rather than sending emails
- Provide support for all employees - whether displaced, redeploying or continuing in their roles - possibly with increased workloads or new processes to contend with in the short-term
- Solicit feedback, respond and continue to communicate progress updates throughout the change process
planning for the future
In the face of such change, there is another factor that could affect the future health of the industry: introducing more automation or eliminating roles adjacent to brokerage reduces entry-level paths into the industry and limits development opportunities for the talent of the future.
This is where having a long-term talent management strategy really pays off. Having clear career paths to progress through the organization, on-demand learning and skill development resources and internal mobility mechanisms in place all support attracting new talent to the industry and retaining and engaging existing employees.
What is clear is that the industry is at a defining moment in its evolution. A combination of interacting forces are reshaping it like never before and only the most agile firms will emerge in a position of strength. That agility comes from the resourcefulness and adaptability of the people in the organization, and now is the time to invest in them.
Working with a total talent partner such as Randstad Enterprise can help you rise to the challenges and seize these opportunities. In addition to having a ready supply of qualified talent across professional, IT and construction roles, we also provide advisory services around talent strategy, talent attraction, talent management and transition.
For more insights into managing organizational change, our e-book on helping your people through transitions provides advice on managing downsizing compassionately.
For our latest research on how democratized coaching can drive greater retention and engagement, our worklife coaching report highlights how you can stay ahead of the competition amidst ongoing talent scarcity.