The squeeze on middle management compensation and recruitment in the European private equity real estate industry as rewards accrued to top talent in the past few years of difficult markets is now easing, but bonuses are lighter across the board this year, new research from executive search firm Bohill Partners shows.
Thomas Hughes, Senior Consultant at Bohill said: "Senior directors have been very focused on closing deals and raising capital, while also managing and restructuring existing assets. This has been reflected in strong compensation levels for the most successful leaders, but to a certain extent sidelined the expensive execution management layer of Vice-Presidents and Directors without these skills.
"Analysts and Associates stepped up into the resulting gap, with the best execution talent being paid at historically high levels and some being offered carried interest for the first time. The situation now appears to be normalizing and we are aware of more market demand for VPs. Overall, however, moderate business activity is matched by softer bonuses."
Hughes added that the aftermath of the financial crisis has also meant demand for asset management professionals with particular expertise in refinancing, portfolio repositioning, and hands-on property management experience to retain and attract tenants, as well as handle distressed situations. Those individuals who can combine financial acumen and knowledge of bricks and mortar are being paid premiums for these skill-sets.
The Bohill Partners research showed that salary levels in the private equity real estate industry in France and Germany are broadly comparable to the large and competitive London market, although on a euro/sterling 1:1 equivalent basis and with wide regional differences. In larger private equity real estate firms in continental Europe, where Managing Directors often have broader roles including managing office operations, basic salaries can be well over the 300,000 mark.
There is increasing interest in the Nordic markets and this is expected to be reflected in longer term upward pressure on salaries. In the troubled southern economies of the Eurozone, salaries for junior positions in particular are under strain, but the scarcity of top talent in smaller markets such as Spain and Italy means that experienced senior directors can continue to command commensurate compensation packages.
Bohill Partners noted a trend towards lifestyle choices becoming an increasingly important element in the selection of work locations. These are age-related with younger professionals looking to London, but then opting to return to Continental Europe later in their careers, where you "get more lifestyle for your money."
The introduction of the 50% top tax band in the UK has also had a negative impact on London, with some displacement of global private equity real estate roles to New York, for example.
Emily Bohill, Managing Partner at Bohill Partners concluded: "Recruitment and compensation trends in the West European private equity real estate business appear to be gently stabilizing with signs of modest growth, very much like the market itself."
Source: Bellier Financial
