A 'Tidal Wave' Is Coming To CRE C-Suites, Bringing A New Generation Of Leadership

A generational leadership change is coming to the upper echelon of commercial real estate, from the largest brokerages to the most parochial family firms. It’s an immensely tricky change even in the best economic environment, with significant risks to company performance and valuations at stake.

Several factors have made this moment crucial for firms seeking to manage change and provide stability at the helm. Demographically, the nation has hit what’s being called “Peak 65,” when the largest number of baby boomers, relatively overrepresented in real estate leadership roles, hit retirement age. CEO retirement at large public companies in the U.S. slowed down considerably in 2020 but ramped up in 2022 and 2023. 

Current CRE leadership may be motivated to move due to both burnout from weathering the last few years and a desire to cash out before asset values and transaction volume sink further. 

“I think there's clearly a changing of the guard taking place,” said Michael Cohen, managing principal of Williams Equities, a multigenerational family office that manages commercial property in New York City. “And it does raise the question, what does the future hold and how will this be executed?”

The impact may be significant, and soon. Keller Augusta Senior Managing Director Kaitlin Kincaid said many executives may have been waiting for year-end 2023 to put retirement plans in motion, and many senior-level leaders, who have lost equity value in their so-called golden handcuffs, may see this moment in early 2024 as a good time to walk away and do something more entrepreneurial. 

Real estate firms have responded, focusing both on grooming internal talent and reaching out to new executives for fresh perspectives. RETS Associates principal Kent Elliott said a lot of the succession planning his firm has focused on has involved looking for new talent.

“Firms just got caught when the pandemic hit, when a lot of folks planned their exit,” Kincaid said. “There's a little bit of that phenomenon of older talent saying to themselves, ‘I have had a great career, if this year is going to be rocky and rough, I'm out, like I was gonna be out soon anyways.’”

Any time a large number of executive baton passes take place, drops will occur, impacting continuity and company performance. Contentious battles for control can hinder firms’ growth and cause significant declines in value and performance. At the same time, ushering in a new generation of leaders also might mean broader and faster adoption of new business strategies and technologies. 

The New York City real estate world went through a series of leadership changes last fall that might foreshadow shifts in the industry at large. On the same day in October, two dynastic family firms made significant leadership changes. Rudin Management announced Samantha Rudin Earls and Michael Rudin were taking over the reins as co-CEOs while longtime Silverstein Properties CEO Marty Burger stepped down to make way for Lisa Silverstein, daughter of the firm’s founder. This shift occurred just a few weeks after SL Green announced it wouldn’t be renewing the contract of its president, Andrew Mathias.

Some suggest industry-wide change is long overdue.

“There’s a changing of the guard that really needs to occur,” said Allison Weiss, founder and CEO of CRE Recruiting. “I do think that, as an industry, the alarm has been going off for the last 10 years and we're getting older and older.” 

“Over the next handful of years, we're going to see a kind of a tidal wave as you have these folks that were the old guard get replaced by folks who are more digitally native and apt to innovate,” Weiss said. “And that’s a good thing for the industry.”

Succession challenges tend to be divided into those of larger institutional firms and those involving family firms. Institutional firms can be wracked by challenging politics as well as the tendency of brokerages to reward the biggest dealmakers, not necessarily the best management talent. Family firms can be convulsed by sibling and familial rivalries. 

But there are significant similarities to the challenges at play, including grooming the right leader and getting buy-in from the board, firm and family; preserving institutional knowledge; and giving mid-career talent both a chance to grow and reason to stay and maintain motivation. Firms ramping up their succession planning currently are evaluating different roles in their leadership teams and trying to find overlap so new leaders can learn from from the soon-to-depart. 

“It’s not a new phenomenon that the patriarch of a family business doesn't want to retire,” Kincaid said. “That's the biggest challenge, because of the companies that need to do this, there are people who say they’ll need to be wheeled out because they are not leaving.”

More importantly, it’s about leaders taking the responsibility of figuring out and implementing the right plans for the family business, Cohen said.

Succession plans are often held close to the vest until it’s time to execute. The Williams Equities portfolio is run by three families: Roos, Cohen and Getreu. Cohen, 65, said the firm has a succession plan in place that hasn’t been publicly announced, and no shifts are imminent. It’s something he has been thinking about for the last decade.

“The series Succession dramatized the waiting-in-the-wings phenomenon,” he said. “I don’t look at things that way. It’s a top-down question. How do I grow my successor? Will they be ready when I need them to be ready? And how do I introduce them seamlessly into the family and the management hierarchy?”

Most famously, Vornado, led by 83-year-old Steven Roth, hasn’t outlined a clear road map for succession despite being a publicly traded company. But that isn’t to say there isn’t one in the works. Vornado didn’t respond to a request for comment for this story.

The history of commercial real estate is filled with stories of succession battles that ended poorly for most parties involved. Heirs of Sol Goldman’s multibillion-dollar Solil Management empire have recently been squabbling in court over control. 

The lack of transaction activity in the market is also creating interesting dynamics around succession planning, said Rob Gilman, a partner and leader of the real estate practice at Anchin. For family firms and landlords, while it can be a struggle to plan leadership changes, there’s a sense that the family is staying involved and sticking around through the downturn. 

Large public brokerages are in a much more challenging situation right now. High-level leaders who see an uncertain future may be looking for exits, while mid-level staff are looking for more certainty around their salaries and seeing less guaranteed income. This creates a leadership vacuum at the top and fewer mid-level workers to internally promote to fill those gaps. 

“That next level of brokers who firms thought they were going to take over, well, there’s no income now,” Gilman said.

Waiting too long can have a significant impact, and not just at the moment when succession goes from a planning problem to an immediate issue. Donald J. Schepker, research director at the Center for Executive Succession at the University of South Carolina, has found that a mistaken pick, which can take a year and a half to reveal itself, tends to take the same amount of time to turn around. Failure can cost firms millions in market capitalization and lost opportunities.

Over the decade he’s studied executive succession at large public companies, Schepker has seen the process become more formalized. That’s likely where CRE is headed. Weiss points to Orlando-based Foundry Commercial and industrial REIT Prologis as firms that systematize and identify high-potential talent in the organization and focus on retention, which helps them hold onto mid-career staff. 

Weiss hopes this means a generation that’s more apt to try and invest in new technologies, and one that’s more welcome to taking ideas from other industries like consumer products and tech. It’s a problem in the whole industry, not just at the top, she said. Companies need to build better talent pipelines instead of the “fire-drill recruiting” that is more reactive than necessary. 

“Succession planning gets emphasized for mid to senior-level positions,” Elliot said. “But when you think about succession planning, it should be endemic throughout an entire organization at all levels”