Josh Feinberg remembers starting out in commercial real estate in 2007 as a college graduate who found himself hacking together low-tech client presentations on Microsoft Word. Now the 34-year-old founder of Austin-based Otso, a financial services firm focused on commercial leasing, Feinberg began his career as a broker in Houston, working under a mentor who “did everything with pen and paper pad, balanced his checkbook by hand, and hated tech.”
“Being a broker can be equal parts art and knowledge, which can be hard to learn,” he said. “Until we get to The Matrix and can plug into someone else’s head, it takes time.”
Like so many others who began their career in commercial real estate, an industry long considered a technological laggard with antiquated business practices, Feinberg felt like he was entering a world decades behind the times. He’s far from the only one. A recent study by Deloitte analyzing workplace culture and technology adoption within the CRE industry found that the software wasn’t the only thing that was outdated. Skills, culture and workplace practices were also lagging behind the workforce at large, in part due to the graying of this sector of real estate. An analysis of Bureau of Labor Statistics data found that 45% of CRE employees were 55 or older — almost double the rate in banking and insurance. Just 4% were aged 19-24.
According to leaders at newer, digitally native CRE firms who spoke with Bisnow, the Deloitte study is spot on: Traditional companies need to evolve working practices and change how they use tech in the workplace or risk turning away the younger generation of talent. Failure to adapt means losing the valuable contributions of younger workers, Feinberg said.
While commercial real estate has embraced more technology in recent years, especially when it comes to conducting market research, automating aspects of prospecting and improving overall workflows, it’s still “a decade behind” residential, Feinberg said. Corporate culture is often similarly stuck in the past.
“It’s run like Mad Men with a thin layer of email and software tools layered on top,” said Michael Colacino, president of SquareFoot, the commercial leasing site. “It’s still happening in the brokerage industry; you’ll see big corner offices and class distinctions between senior and junior brokers.”
The industry has been slow to change, he said. The traditional system, which coalesced in a world of decentralized information, still allows for sizable profits because of the size of the asset class. Colacino, who at 63 has been preaching increased technological investment in CRE for decades, said he thought “an inefficient, non-transparent market begged to be changed.” But it takes a big lever to disrupt. Today, generational shifts at large have forced the industry to catch up.
“In recent years, people have come out of college with an expectation that there’s a technology system in place they can use to do their work,” he said. “Instead of saying ‘I don’t want Salesforce to take something away from how I operate,’ new employees are saying, ‘I don’t know how to operate without it.’”
The technology and data shift, from individual brokers keeping their records to a more team-based, CRM approach, also underscores a cultural sea change, from individualistic to more team-based. Doug Shankman, senior vice president at CREXi, an online CRE marketplace, who had previously worked at larger, traditional firms such as JLL, said companies need a more collaborative sales culture. CREXi has a strategy of “gamification,” providing small rewards or acknowledgement that encourages brokers to share data and leads on software, not to “lock it in a drawer,” fundamentally creating a team focus without dulling competitiveness.
“The younger workforce wants a more dynamic work environment,” Shankman said, and building teams from the ground-up with CRM software allows for organizational strategy built around collaborating to woo customers, due to increased transparency, which fosters more feedback and open communication. “Improving diversity also means making everyone from the youngest hire to senior leadership feel a part of the process. You should always have to earn your keep at a brokerage, but feedback is a gift.”
Along with a culture of shared information and success, it’s important to empower young brokers with real responsibilities, instead of learning at the feet of a more experienced team member, SquareFoot’s Colacino said. Young hires are rushed into responsibility, placed in a client-facing role running transactions more quickly than they would at a traditional firm.
“Attrition happens in the first few years, when young talent dies on the vine,” he said. “We want employees to immediately be doing work that means something to themselves and the company, and not merely wait for their chance to get into the batting order.”
A focus on inclusion, and a workforce that better recognizes diverse talent and resembles the community in which it operates, has also become key for a majority of young workers. Both CREXi and SquareFoot are tracking diversity and inclusion figures and have taken steps to make the hiring and talent recruitment process prioritize these goals.
At SquareFoot, Colacino said, an HR system called Greenhouse, which helps automate early parts of the hiring process, helps remove many of the subjective, often biased elements of it. CREXi’s Shankman adds that changing compensation structures — providing fixed base salaries instead of a straight commission model — makes it easier for new hires to make it through lean early years after college as they’re learning the ins and outs of the job, which leads to less weeding out of those without more economic privilege.
There’s recognition the industry still has a ways to go to reach inclusion goals, including building up a larger talent pipeline.
“The fact is, we don’t want to look like Mad Men, clients aren’t happy with four old white guys doing a pitch,” Colocino said. “If there was a huge pool of minority applicants, my industry would be very interested in hiring them. The problem is, in this case, history sets a trend.”
Real estate-adjacent firms may offer additional strategies to attract and retain a more diverse workforce. At VTS, a tech firm that builds software for the CRE industry, hiring for any position requires that at least two candidates from underrepresented demographics make it to the in-person interview stage, according to Jess Scott, the company’s vice president of talent. In addition, all job descriptions were recently rewritten to focus on how the position makes a difference to the company — setting expectations for a new hire immediately — as well as creating road maps for promotions, providing key benchmarks to guide employees as they seek to develop their careers and skills.
“The workforce today demands that we show up in a different way,” Scott said.
While not every brokerage may feel like it has the capacity and the bandwidth to change its HR and hiring practices, the industry’s perception problems suggest that not making changes can threaten future talent and innovation.
“I’d like to see a continued investment within the industry around different ways of doing things,” Feinberg said. “There are a lot of antiquated practices that can be updated in ways that benefit the client. Even the most old-school broker would agree doing right by the client benefits the broker.”