For North American Properties, epiphany came in the form of a college intern. Twenty-one-year-old Kate Dabney helped with small-shop leasing during her four-month internship with such verve that company brass changed their outlook about scouting talent. As the real estate industry wakes up to a severe management shortage at the middle and entry levels, North American and other companies are beginning to seek out young, inexperienced turks.
About time, says Rich Poline, an executive recruiter in Atlanta who is watching what he calls “the graying of the shopping center industry.”
“All we're doing is recycling existing talent,” he says. If the sector doesn't hire and develop more talent at the entry level and junior level, he warns, “it's going to be an industry of old farts. Who's going to do the cold calling and the prospecting?”
The talent gap's roots date to the real estate recession of the early 1990s, when college grads looked elsewhere for lucrative careers, says John Cigna, partner with executive-search firm Crown Advisors Inc. in Pittsburgh. Then in the late 1990s the booming stock market led young MBAs to get their stock broker's licenses.
“Throw in the dot-com bubble of the late 1990s and your young talent who would now have 5 to 7 years' experience also did not enter the industry,” Cigna says.
In 2006, that leaves the real estate sector short of thirty-somethings who would be prospective middle and upper managers. With that mid-manage talent gap, retail real estate firms have had to turn to creative solutions to fill positions.
Where do you turn to find good people? Headhunter Cigna suggests a solution: “Send a check.” His senior-level searches can take up to four months as he scourges for talent. For that job, he gets paid a king's ransom: up to one-third of the first-year's compensation as his commission.
Faced with that reality — of having to churn talent within the industry — North American is trying a different and more expensive tactic: recruiting and grooming new, talent, like Dabney.
“If young newcomers are bright and aggressive but don't even know how to spell real estate, you can teach them how to spell,” says Mark Toro, a partner with the firm. “You cannot teach passion.”
Take Dabney, for example.
From age 8, she toured construction sites with her developer dad, wearing a little hard hat and picking up trash. When she first walked through the door of the Roswell, Ga.-based shopping center developer in 2001, she was a University of Georgia senior working toward a degree in real estate.
She knew little about development, says Toro. But she had heart. The firm's recruiting from the industry had been less fruitful. There were mismatches with the company's delicate balance of aggressive hard work and one-big-family fun. Others “aren't what they seem to be in an interview,” says Toro.
Dabney, however, left an impression: North American hired her out of college in 2002. And in the past 18 months, as the Roswell office has doubled in size to 33, three more have joined the team.
Other companies as well are getting serious, and creative, about developing talent. Some, however, still “throw 10 against the wall and see which one sticks,” says Jerry Anderson, president of the National Advisor Organization at Sperry Van Ness.
Wish upon a star
You might find your next young star almost anywhere — maybe in menswear. Sperry Van Ness 2005 “co-rookie of the year” Jason Little was selling suits in Edmond, Okla., just a few months earlier, as he worked on finishing his international business degree at the University of Central Oklahoma.
One of Little's regulars was Gary Gregory, a veteran of Oklahoma City commercial real estate whose firm now is a Sperry Van Ness franchisee. Little was interested in commercial real estate and repeatedly offered to intern for free. Gregory liked his persistence and his sales style and eventually hired him. Now age 23, Little closed 14 deals and earned $569,000 for himself in 2005.
Gregory, who started in real estate at age 18, likes new blood. Since 2004 he has hired seven people with no experience in commercial real estate, most of them straight out of college. He trains new hires himself and also sends them to Certified Commercial Investment Member classes from the CCIM Institute, the Chicago-based education and networking organization. Sperry Van Ness named Gregory its trainer of the year in 2005, the same year Little earned his honors.
Whenever Little needs guidance, Gregory turns trainer. “Gary and I have offices right next to each other,” says Little. “He's always just right around the corner. The key is not to be embarrassed to ask.”
If you can't find a star among your interns or selling suits, you may have to go the conventional route and pay top dollar to lure someone away from the competition. Cash compensation for executives rose 3.5 percent to 5.5 percent in 2005 and is expected to rise another 3 percent to 4 percent this year, says CEL & Associate Inc.'s annual National Real Estate Compensation & Benefits Survey.
The Los Angeles firm, which tracks compensation in commercial real estate, says senior leasing staff now command $250,000 a year or more.
“When you've got too many companies chasing too few candidates, it winds up driving up the price of talent,” says headhunter Poline. And in 2005, according to CEL, it took 56 days to fill an empty office, up from 51 days in 2004. It all points to a brain drain — into retirement.
Developing from within takes time, which explains why some firms hesitate. It's a toss-up: Make your quarterly numbers or get shadowed by a promising prospect. Toro says he halved his own shopping-center development work to develop people.
He's not doing it alone, of course. North American also hired a director of organization development last year to set up a training program for all employees.
The undertaking includes mentoring, a competency model, online and in-person courses and 360-degree reviews. The cost for the program in 2006 is $250,000 and 2,880 employee-hours.
Industrywide, training numbers are edging up — but not as quickly as pay figures. CEL reports training as a share of payroll costs rose to 2.3 percent in 2005 from 2.1 percent a year earlier, or $1,050 per employee, up from $970.
Is that enough to get newcomers ready? The real test is approaching for hot new prospects. “They have more grit and vinegar than they know what to do with,” says Anderson of Sperry Van Ness, “but they have yet to see a market downturn.”
Experience Need Not Apply
GGP's Prodigies program is a good return on the investment
With college kids interning everywhere nowadays, it's easy to discount internship programs as glorified summer camp. General Growth Properties Inc. of Chicago rather sees it as prospecting for talent. “You're working side by side with these students,” says Judy Herbst, GGP senior vice president of human capital. “It's not like interviewing them and getting just a snapshot.”
The big mall REIT has worked with 530 interns since 2001, when it launched its GGP's Prodigies program. In that time, it has hired 13 percent of them. In 2005, GGP hired 24 of 140 interns, 17 percent. “To me that's a great return on your investment,” says Herbst.
GGP interns take courses and help with marketing, promotion and mall events. “There's a place for interns in just about every discipline,” says Marty Ehrhardt, GGP's vice president of training and development. They also pinch-hit during busy periods and provide “a constant influx of fresh ideas,” says GGP spokeswoman Nicole Spreck. About 40 percent are paid; unpaid interns earn college credit.
In order to turn a semester's charges into next year's deal-makers, Ehrhardt advises against coddling: “Challenge them to make a major contribution. Treat them as good employees, help them map out a plan.” If you don't push them, you may be wasting your time — and theirs. Herbst says, “If you're not valuing the fact that they want to learn, they're going to go someplace else.”