As they cope with a recession and property market downturn, leaders of Europe's real estate companies rewrite their business plans. Despite seeing first green shoots of recovery in select European economies, in an uncertain environment, most remain focused on risk management protecting their assets and conserving capital, according to an annual economic report released today.
Based on interviews and surveys with approximately 100 leaders across European property companies (public and private), investment banking, investment management, private equity and brokerage firms, banks and insurance companies, and other sectors, the report The Business Enterprise in Europe provides an assessment of how real estate executives are managing their companies through challenging economic conditions and how they are adapting to transformative changes within the broader industry. The study was completed by Ferguson Partners Europe Ltd, a leading provider of executive search services, in conjunction with the Urban Land Institute (ULI), a global non-profit research and education institute dedicated to responsible land use, and ULI EMEAI (Europe, Middle East, Africa and India) which serves the Institute's members in those countries.
Respondents reveal that leaders are intensely focused on maintaining stable cash flows, looking for every opportunity to cut costs, redoubling efforts to maintain good relationships with investors, and taking the initiative to keep closer communication with lenders. More than ever, leaders are also re-examining and restructuring talent pools to ensure that organisations have teams with vision, knowledge, and skill to drive further growth and success in the real estate industry of the future.
According to the report, the forecast regarding headcount change in 2010 is not overly encouraging. Demand will be most significant among investment managers and property services firms, with investment management firms expecting to increase their total workforce headcount by an estimated 2.8% and the private equity sector anticipating an increase in total workforce headcount by an estimated 0.7%. The development/construction and banking/lending sectors are expected to see decreases in their workforce decrease by 1.3% and 3.3% respectively.
The report notes that, in general, salaries throughout the real estate industry are expected to be flat to slightly up for 2010. 2009 cash incentives will be down and equity awards will be higher to retain and incentivise executives where common equity holdings are largely meaningless. Creating compensation programs is particularly challenging, as companies try to restructure or replace plans that were developed during boom times, the report says.
ULI EMEAI President William Kistler said: "Real estate executives are being tested as never before. This report offers a unique insight into how well they are coping and what strategies they are using. Without a doubt, human capital is a top priority as companies move beyond survival towards success for the future."
William J. Ferguson, Co-Chairman and Co-CEO of FPL Advisory Group commented, "Companies are focused on strengthening asset management and restructuring teams, as well as finding executives who can interface effectively with disgruntled investors and lenders."
Serena Althaus, Managing Director, Ferguson Partners Europe noted, "Experience is at a premium right now. Business leaders who started their careers in the early '90s have not managed through a significant downturn before. There is therefore a demand for those who have been through this or something similar previously. The large-scale change of senior management, across Europe, over the last two years, illustrates the point."
Geographically, growth seems to be focused in Western Europe and, on a global basis, in Asia. Thirty-two percent (32%) of respondents expect to increase their workforce in Western Europe, while 41% of respondents expect a decrease in Southern Europe and 43% of respondents expect a decrease in Eastern