Mid-Year Global Business Update from FPL Advisory Group
Real Estate Industry’s Somber Mood Impacts
Executive Compensation and Hiring
Recruitment Continues But Compensation Flattens;
Emphasis on Corporate Strategy and Organizational Refinement;
Global Markets Present Current Opportunities
According to members of the global real estate industry leadership, the remainder of 2008 will be characterized by a more somber approach to executive compensation relative to recent years and new emphasis is being placed on corporate strategy and organizational refinement as companies work to maximize efficiencies in anticipation of the next positive cycle. These findings were published in FPL Advisory Group’s Global Business Update, which also highlights emerging and declining areas of demand for executive recruitment by geographical region and professional specialization in the wake of the subprime fallout, and, the growing focus on global real estate investment.
The Global Business Update, a mid-year report highlighting key trends and implications shaping the real estate industry, is issued each year by FPL Advisory Group, one of the real estate industry’s leading strategic recruitment and advisory firms. Findings are based on the viewpoints of FPL’s Co-Chairman and Co-CEO William J. Ferguson and other prominent real estate leaders. The Update can be read in full online at: http://www.fplassociates.com/ .
Bonuses Remain Safe but Raises are Capped at 4 Percent
Given the dour mood that has dominated the real estate sector over the past several months, the Update provides some positive news. Thanks to the bottom line financial and operating achievements across sectors in 2007, many public companies report that cash bonuses remain sound.
But, the good news on compensation ends there as companies work to tighten their belts. Given the uncertain market conditions, it is unclear as to whether the value of prior equity grants will hold up. Across the broader employee base, salary increases will be capped at around four percent. As for private companies, with fewer opportunities to generate the outsized returns of the recent past, long-term incentive programs will also be squeezed.
Economic Contraction Provides ‘Time Out’ for Companies to Realign Their Organizations to New Market Conditions
According to the Business Update’s findings, companies are looking to take advantage of the current economic slowdown to re-plot their courses by adapting their organizations to the new market environment and realities. As part of this trend, there is an increasing drive towards organizational refinement targeting greater efficiencies.
In terms of specific types of recruitment, there is a reasonable consensus among the real estate leadership that demand will be driven by growth in global markets and by the need for companies to restructure their portfolios as lenders focus on identifying and managing under-performing loans resulting from the spill-over of the sub-prime crisis.
Demand for Experience and Global Capability Fuels Recruiting Efforts
Given prevailing uncertainties, it is somewhat surprising that recruitment, excluding in debt markets, remains healthy. In the US, with the exception of the real estate finance and development sectors, recruitment remains active. In the UK, where the real estate sector has been hard hit, London’s role as the international financial center most focused on global growth markets has helped to maintain some level of recruiting activity.
However, the strongest recruitment demand is driven by the heady real estate growth of Asian, Eastern European, and Middle Eastern markets, where the Gulf states and Israel are the most active investors. Overseas, local talent with global experience, especially in construction and development, is at a premium, according to the Business Update. Similarly, investment managers are becoming highly sought out to deploy capital for the increasing numbers of new funds investing in global markets.
“As a report from the front lines, the Business Update provides a bird’s eye view of the transitional period the real estate industry is currently experiencing,” commented Bill Ferguson, FPL’s co-Chairman and co-CEO. “With the clear growth in global markets coupled with plentiful equity capital and reasonably strong real estate fundamentals, new directions have been charted and, while caution still rules the day, the real estate industry is actively pursuing these in an efficient, well-considered manner.”
About FPL Advisory Group
FPL Advisory Group (“FPL”) is a family of companies focused on providing highly specialized advisory services to the real estate and related industries. Through our complementary practice areas, we work with our clients to develop the right talent, leadership, structure, and strategies for success in today’s intensely competitive marketplace.
FPL is comprised of two primary operating companies that work together to serve a common client base. Ferguson Partners provides executive, director, and professional search services. FPL Associates provides a range of specialized consulting services in the areas of compensation, management consulting, executive onboarding, and succession planning. FPL’s survey practice conducts regular surveys on hiring and compensation practices in specific sectors of real estate as well as across the industry as a whole. The firm is headquartered in Chicago and maintains offices in New York, Los Angeles, London, and Hong Kong.
