CRE Roles On The Chopping Block? How The Downturn May Shift Real Estate Job Market

A recent series of high-profile staff reductions by international brokerages, including a “global transformation” at JLL, layoffs at Avison Young and cuts at CBRE — which announced $300M worth of cost-cutting that will focus on headcount — sent ripples of worry through the CRE industry as the economic downturn continues to unfold.

But this particular slowdown — Urban Land Institute figures estimate $600B in transactions annually in both 2022 and 2023, far below the record $855B set in 2021 — coming during a seismic shift in office usage and increased investment and deployment of technology across the industry, may hit harder for some job types and leave more long-lasting impacts across the CRE job market. 

Every significant downturn or recession leaves lasting marks on the job market. This round seems poised to push tech to the fore, endangering those jobs that can be replicated with an automated process or a contract worker, with economic factors intertwining with the structural issues at play in CRE.

“The real estate industry is clearly moving, some firms faster than others, to automated solutions; offshoring; greater use of independent consultants and temporary workers; use of third-party vendors; and greater digitization of processes,” according to Christopher Lee, whose firm CEL & Associates conducts a highly regarded national salary survey for commercial real estate firms. “I envision layoffs and personnel reduction activities to continue through 2Q of 2023. The next six to nine months are going to be very challenging from an operating and growth perspective.”

Deal volume may not return to 2021 levels until at least the second or third quarter of 2023, according to Lee. During this period of downturn and pause, he sees layoffs concentrated primarily in office leasing, accounting and administrative, last-in-first-out hires, investment sales, finance and select project management positions.  

JLL’s recent future of work survey, which questioned more than 1,000 global CRE leaders, concluded that the next few years represent a key transition point. Firms need to “double down on intelligent technology investments,” the survey said.

There are already clear signs that pandemic-era shifts in operations have changed the labor calculus for many firms. In property management, for instance, there’s much greater emphasis on tech, such as remote viewing and digital platforms and apps for tenants, that makes repairs, operations and programming more effective and less labor-intensive. 

Historically, the boom-bust cycle of CRE, as well as a traditional reluctance to invest in tech relative to other industries, means hiring of administrative positions and assistants rises and falls steeply with deal volume. Long-term planning, sustainable hiring and investment in automation have often been ignored in favor of rapid hiring and firing when needed, CRE Recruiting CEO and founder Allison Weiss said. That appears to be happening, as 2021’s peak gave way to less activity this year. 

“Big firms call these roles ‘cost-cutters,’” Weiss said. “As transactional volume slows down, you don't need more transaction coordinators, you need fewer assistants, you need fewer folks in marketing, you need fewer folks in recruiting because you're not bringing new people into the business. The teams on the front line, attached to brokers but not actually brokers, see their roles more at risk.”

These cuts can sometimes lead to offshoring, said Weiss, as roles don’t get backfilled during a recovery, rather moved to foreign and contract workforces. Berkadia has an overseas financial analyst team, Weiss said. 

But that doesn’t mean that more senior and management roles are necessarily safer than the frontline and support staff. These are the moments where middle management can get trimmed, and Weiss believes this is the moment when the “bad economy” excuse can be leveraged by firms to skip bonuses or lower salary increases. 

Other analysts don’t see the situation being quite as dire. Bullpen CEO Tyler Kastelberg, whose platform connects CRE freelancers with job opportunities, said he’s not convinced the market has hit bottom yet. Hiring will lag, and has slowed in the brokerage and lending spaces, but he doesn’t anticipate any more major layoffs; firms have been running relatively lean since 2008. CBRE, he said, let go of a lot of back office workers who will likely be replaced by contractors.  

There will be cutbacks, but more of a pause than a long-term drop, according to Anita Kramer, senior vice president at the ULI Center for Real Estate Economics and Capital Markets. She said firms will start looking ahead strategically and plan for the rebound. There’s been a pronounced hiring of analysts, because deal quality matters a lot more now, so people are being very picky. 

“The strength of the multifamily sector is still there, and the industrial sector is still there, and retail, there's always great pockets of retail in the right locations,” she said. “There are a lot of people planning for a different time period right now.”

The winners, of course, will be those in sectors and services generating revenue and showing significant potential. Lee said layoffs will likely be far less in the multifamily sector, leadership positions that create value development originators, talent management, asset and property management and C-suite leaders.  

The recent layoff announcements also suggest more shifts toward roles focused on analysis, consultation and recurring revenue streams. CBRE CEO Bob Sulentic said in a statement that the company would focus on “enterprise and local facility management, investment management” and other “cyclically resilient advisory business lines,” part of an industrywide shift toward more full-service offerings. 

And despite, or maybe because of, the disruptions forecast ahead, retaining talent, especially those involved in transactions and revenue, will become even more vital. Lee actually forecasts compensation to “rise dramatically.” 

“It will be important for all real estate firms entering this period of disruption and uncertainty to have a robust talent management plan in place,” he said. “Nothing in real estate is accomplished without talent.” 

Weiss argues that if the downturn does last and employers get more leverage, it’s easy to envision a world where those hiring, tired of overpaying in a competitive labor market, start cutting into recent wage gains.

And again, this comes back to the challenges of utilizing technology as a labor-saving device. There’s potential, especially in a market where there’s still challenges filling empty roles, to make existing employees more efficient and cut costs. But there’s always the potential to eliminate jobs, and as beginner roles and responsibilities get more and more automated, it cuts off some entry-level jobs key to gaining a foothold in CRE.

“If we then offshore financial analyst roles, or brokerage assistant roles or coordinator roles, we're cutting out a very crucial stepping stone for people who want to get into our industry and learn the business,” Weiss said.