What a difference a year makes. Last spring, armed with master's degrees and plenty of ambition, graduates of top real estate programs across the country were weighing multiple job offers. But that was before the subprime mortgage meltdown led to a domino effect of trouble in the capital markets and upended the U.S. economy.
Employers shed more than 230,000 jobs during the first three months of 2008, according to the Bureau of Labor Statistics. Meanwhile, the unemployment rate rose to 5.1% in the first quarter, up three-tenths of a percentage point over the fourth quarter of 2007.
With consumer confidence sinking and corporate profits softening, businesses have cut back on the number of new hires in 2008. In some cases, investment banks have rescinded job offers made last year to prospective graduates.
For real estate grads, the stakes are high since many have thousands of dollars in loans to pay off after investing a year or two in post-graduate studies. Tu-Uyen Do, who is graduating this month with a Master of Management degree in hospitality from the Cornell University School of Hotel Administration, knows all too well the difficulties new grads face.
“I have got to say the job search is not that great at the moment,” Do laments. “It is even harder if you're looking at the big cities.” Many firms simply aren't hiring. But Do and her classmates are convinced that their opportunities will come.
And when the career doors do swing open, the students' efforts and financial investment could pay off handsomely. Cornell's tuition is $54,450 for a three-semester hotel program that spans one year. The good news is that last year's crop of graduates who landed hotel-related jobs in acquisitions, asset management, development, finance, or consulting earned an average salary of $65,000 a year.
Upside of a downturn
Robert Toothaker, former president of the Institute of Real Estate Management (IREM) in Chicago, reassures the Class of '08 that when the economy goes south the demand rises for real estate professionals who can manage a portfolio of properties and analyze market conditions.
While deal making and development have slowed, property management giants such as CB Richard Ellis and Jones Lang LaSalle as well as regional asset firms, often look for new hires with strong financial skills, Toothaker says. “The world of property management opens up.”
Some students are taking the weak job market in stride, viewing it as a temporary setback. Eric Bishop-Berry, a master's degree candidate at the Mays Business School at Texas A&M University, says his studies taught him that the economy will bounce back due to its cyclical nature.
So he looks on the bright side. “I am very fortunate to be in school when the industry is experiencing a downturn,” Bishop-Berry says. The class delves into topics that might not otherwise be explored, such as the credit crunch. Industry experts have visited the classroom to reveal what's transpiring in the turbulent marketplace.
Bishop-Berry pays about $18,000 per year as an out-of-state student at Texas A&M, while in-state students pay about $11,000 a year. But education has its rewards. A Texas A&M graduate with a Master of Real Estate degree earns an average starting annual salary of $65,000. A new hire with only an undergraduate business degree should expect an offer of about $45,000, school officials say.
Silver lining for hotel grads
Two years ago, one-third of graduates went into the mortgage business, says Cydney Donnell, executive professor of finance and director of the Master of Real Estate program at Texas A&M. But now those employers are laying off people in droves. Earlier this year, securities firm Goldman Sachs cut 1,500 jobs, Morgan Stanley chopped 1,000 positions, and Countrywide Financial said it has reduced head count by 11,000 since 2006.
An increasing number of the school's 45 or so students who graduate annually land jobs in brokerage firms, investment, valuation and private equity shops. “I am not worried for our graduates,” says Donnell, a former principal at European Investors Inc., an investment advisory firm with assets of $3.5 billion.
While the hotel market is not immune to the effects of the current economic malaise, job prospects for hospitality professionals remain bright, says Steven Carvell, associate dean for academic affairs at the Cornell School of Hotel Administration.
“They are relatively low paid and are needed to do the basic work. The people hit more are the much higher-priced people in the firm making six or seven figures. Hiring a couple of master's students is not going to dent your budget.”
Applications for Cornell's one-year hotel program have grown by 20% in each of the past two years, Carvell says. The school gets more than 250 applications a year and limits enrollment to 60 students.
Playing the property game
Cornell will soon offer a class on real estate trading and securitization. Students can study the impact of hotel real estate investment trusts (REITs) and the role of private equity giants such as The Blackstone Group, says Carvell.
Some classes offer hands-on experience at booking firms such as Expedia and Orbitz, or at large corporations that manage distribution channels like Marriott and Starwood. Newer programs include spa development, Web-based distribution and revenue management.
Georgia State University often relies on case studies rather than lectures to make courses dynamic. For instance, Georgia State master's degree candidate Andrea Ivory competed in a match to identify a site for a new distribution center, taking into account taxes and the labor market.
The competition was sponsored by the National Association of Industrial and Office Properties. “It is exciting to get this kind of experience,” Ivory says. It gives students a chance to act like developers.
Georgia State attracts professionals in their late 20s, says Julian Diaz III, chairman of the real estate program, which focuses on trends such as mixed-use and brownfield redevelopment. Industry professionals address market trends.
In-state students pay $10,000 a year in tuition while out-of-state students pay more than $36,000 annually. A recent Georgia State survey of former students showed that grads with a bachelor's degree in the real estate field earned an average of $42,500 a year, while those with a master's degree earned nearly $66,000.
Graduate schools are responding to business community needs for new hires who can also persuade and communicate effectively. Schools are also placing emphasis on environmental issues, since many of today's grads pursue companies with green building programs.
Toothaker says many segments of the industry are eager to welcome the Class of '08. Employers need property managers and market analysts, he says, people who can stay ahead of trends. “It does create an opportunity,” Toothaker says. “We need good people.”