The 20 Rising Stars of Real Estate 2008 - (Page 8) Hang On to Your Wallets Despite being a haven last year, the outlook for hiring and compensation in commercial real estate is hazy as observers see tougher times ahead By Jon Jacobs, Staff Writer, eFinancialCareers.com and property companies in office, industrial and hospitality as promising areas to watch. "The key to the continued strength across most sectors is the continued availability of equity capital and a balance of supply and demand,” the report stated. “As a result, demand for equity-related roles remains robust.” Some 67% of the 275 real estate industry leaders surveyed by FPL expected their company's workforce to expand in 2008. Hiring expectations were greatest for mid- and junior level employees – 73% predicted adding staff earning less than $150,000 in total compensation. Among real estate investment management firms, most looked to add asset or portfolio management professionals. Even among commercial mortgage firms, 47% of respondents anticipated adding staff, while only 17% expected reductions. They foresaw significant demand for personnel in underwriting and processing functions, supporting a move to tighten underwriting standards and focus on underperforming loans, according to FPL. "In the mid-Atlantic region, demand for talent is at peak levels among private equity firms, hedge funds, big banks and investment management firms, largely driven by New York's status as one of the premier global real estate markets," the report stated. And many firms are staffing up outside the U.S., which makes executives who've worked abroad a hot commodity. TROUBLESOME OMENS On the other hand, unfriendly credit markets and a shaky economy are creating a powerful headwind within the U.S. Professionals who trade commercial mortgage loans repackaged into securities already have seen a large chunk of their 2007 compensation blow away. “Those comps have come down significantly," said Jeremy Banoff, an FPL senior director. As commercial mortgage-backed securities (CMBS) activity tailed off from August onward, bonuses for last year dwindled by 20-40% compared with 2006. As for 2008, the outlook is cloudy. It hinges on the future course of the real estate and financial markets, as well as the overall economy. "If you have a job, you should consider yourself lucky," said Banoff. "There have been massive layoffs in the CMBS arena." The year's initial CMBS deal wasn't sold until mid-February, making January 2008 the first month in the market's two-decade history when not a single new issue was priced. Moody's Investors Service estimated that less than $100 billion of CMBS will be issued this year, compared with last year's record $233.7 billion. A RBS Greenwich Capital report projected an even deeper decline to $80 billion. MARCH 2008 A LTHOUGH PRICES FOR MOST commercial property types are holding steady and purchase and sales activity haven't dragged nearly as much as residential business, there’s a storm on the horizon. Interviews with headhunters, consultants and deal advisors reveal a widespread perception the market will soften during 2008, thereby pulling down compensation and dampening hiring activity. That would be in stark contrast to last year, when banks were moving some residential mortgage staffers into commercial real estate finance as an alternative to laying them off. "Some people I talk to say that commercial mortgage is the next shoe to drop," said Peter Arian, managing director at New York search firm Analytic Recruiting. Usually, commercial real estate lags the residential market by about two years, according to Larry Adam, chief investment strategist for Deutsche Bank's private wealth management division. Because residential real estate peaked about that long ago, he's now cautious about commercial property investment returns. AN UNUSUALLY ROSY OUTLOOK Despite such reservations, a survey by Chicago-based FPL Advisory Group is fairly upbeat about hiring and compensation in the sector this year. Most respondents planned to increase headcounts, and compensation was expected to post modest single-digit percentage gains. The January report cited opportunity funds, investment managers 8 REAL ESTATE RISING STARS http://eFinancialCareers.com
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