What Does Resilience Mean for Commercial Real Estate?

September 16, 2019 • Ryan M. Colker

Around the world, the frequency, intensity and impacts of natural disasters are increasing. These events can significantly affect the social, economic and environmental functionality of communities. The ability of the commercial building stock and the businesses they house to adequately prepare for such events and quickly return to full operations—a quality known as resilience—contributes significantly to a community’s ability to bounce back. In addition to the community-wide impacts, the state of individual buildings also can affect the long-term viability of the businesses that occupy those buildings.

Identifying measures to reduce risks and increase resilience, undertaking actions deemed cost-effective and communicating such actions to tenants and prospective tenants can help commercial building owners and managers serve their communities, while also providing a value to their occupants.

Making the Case, Identifying Capital

A key challenge for building owners looking to increase resilience is identifying where to invest. What mitigation measures will provide the best return? What outside funding opportunities can be leveraged? While each building and their risks vary, tools do exist to help support decision making.

The National Institute of Building Sciences (Institute) is in the process of updating and expanding its 2005 study, Natural Hazard Mitigation Saves: An Independent Study to Assess the Future Savings from Mitigation Activities, for the Federal Emergency Management Agency (FEMA), which found that $1 invested in hazard mitigation saves society an average of $4. While the initial study was focused on societal-level benefits, the $1-to-$4 ratio has been widely applied to justify mitigation measures across the economy. The expanded study will look at benefits that accrue to the private sector. Results from the update and expansion to the Mitigation Saves study will provide insight into specific mitigation measures and the benefit-cost ratio of each.

While understanding the return on investment of mitigation measures is essential, finding capital to invest in such measures and capturing that value in lease agreements or building sales can be challenging. Working with industry stakeholders, the Institute’s Multihazard Mitigation Council and the Council on Finance, Insurance and Real Estate have identified a strategy to begin aligning costs and benefits into a holistic strategy of incentives called “incentivization.” Through such an approach, government incentives, along with incentives that mirror benefits accrued to the private sector (e.g., insurance or financial institutions), can be packaged together to provide building owners with clear direction and access to capital. While such an approach is in development, successful energy efficiency and sustainability programs can serve as a model. In fact, property assessed clean energy (PACE) programs in Florida and California do allow some hazard mitigation strategies to be funded through them.

Money Talks

Consistent with the past three studies, the 2020 study finds a substantial compensation gap between women and men. Overall, the difference in total average earnings (salaries, bonuses and commission combined) across genders in 2020 is 34 percent—a nearly 11 percent increase from 2015.

The average fixed base salary in commercial real estate in 2020 is $112,290 (USD) for men and $100,802 for women. The 10.2 percent salary gap means that, on average, women make 90 cents for every dollar that men earn in fixed salaries. For Black, Asian and Hispanic/Latinx women, the salary gap is wider. Black women make 85 cents, Asian women make 86 cents and Hispanic/Latinx women make 80 cents for every dollar that men earn.

With regard to commissions and bonuses, the gender gap is much wider across all sectors. White women earn 51 percent less, Black women earn 71 percent less, Asian women earn 73 percent less and Hispanic/Latinx women earn 74 percent less than their male counterparts.

The average entry-level compensation in commercial real estate is $62,828 for women and $70,294 for men. This 9 percent gap is wider than in 2015 when entry-level compensation was nearly level. As in previous studies, the overall compensation gap (with bonuses and commissions) is the widest in the C-suite at 33 percent, a 3 percent increase from the 2015 study.

Some factors may be related to gender bias in hiring or disparities in commission-sharing arrangements. In other words, women may not be getting access to high-profile clients or the most profitable projects and deals.

Few Cracks in the Ceiling

Twenty-two percent of male respondents occupy the C-suite (a 5 percent increase from 2015) versus 9 percent of women, the same number from both the 2010 and 2015 studies. In senior vice president, managing director and partner-level positions, the percentage of women decreased in the past five years from 27 percent to 22 percent, while the percentage of women at the senior level remained the same at 33 percent. The study saw a greater proportion of women at the entry- and mid-levels (1 and 5 percent increases, respectively).

Forty-three percent of men and 32 percent of women aspire to reach the C-suite. Women’s career satisfaction and perceptions of success decreased across all industry specializations in 2020, while men’s perception of success has continued to increase since 2010. Similarly, the percentage of women who reported being very satisfied with the level of success achieved in their careers had remained relatively stable in the prior three studies, but has decreased in 2020.

When it comes to property management, in particular, men in the study represented 18 percent of the C-suite, while women represented only 7 percent. How do these numbers translate to property management as a whole?

Property Management Deep Dive

Property managers were well-represented in the 2020 study, with 11 percent of respondents indicating property management as their primary specialization. Fifteen percent of property managers identified as BIPOC. Industry experience was equal between men and women, with an average of 18 years.

Property management leads the way in several areas of the benchmark study. For example, women occupy 48 percent of property management positions, 11 percentage points higher than the 37 percent industry average. Twenty-one percent of property management professionals consider their workplaces to be diverse (25 percent or more are BIPOC), which is 5 percentage points higher than the 16 percent industry average. The average fixed base salary in property management is $109,536 (USD) for men and $105,545 for women—a 3.6 percent gap, which is well below the 10.2 percent industry average. But, women average $39,377 in commission and bonuses annually, while men report $74,981.

Action Leads to Change

To state the obvious, commercial real estate has historically been a predominately male profession. CREW Network’s various research initiatives exploring such issues as diversity, pay parity, unconscious bias and more show that the industry is finally starting to recognize the business benefits of diversity based on gender, race, ethnicity and sexual orientation. As more companies prioritize recruiting, retaining and advancing women, the needle will move, resulting in faster progress.

While the lack of progress for women in commercial real estate is disappointing, the extreme disparity in compensation for women of color in this industry is especially concerning. The industry has to do better, and it starts by recognizing that women of color face unique and often systemic barriers.

The research reinforces the fact that the industry must take intentional action to recruit, retain and advance diverse talent. Companies that prioritize diversity are outperforming others, including greater earnings, better governance, greater innovation and more opportunity. To increase DEI in commercial real estate, CREW Network is calling on industry leaders to understand the issues presented in this benchmark study and take action to resolve them as a business imperative, such as:

1. Greater DEI starts at the very top of your organization. Leaders and stakeholders must be invested and involved.
2. Be honest about unconscious bias in your hiring, promoting, assignment of challenging projects and inclusion in high-profile client relationship development. Acknowledge that BIPOC face a different set of barriers to advancement than women, especially white women. Hire an external consultant to recognize gaps, barriers and unconscious bias; take action to overcome it; and put accountability measures in place.
3. Conduct employee pay-equity tests regularly to identify disparities in compensation by gender and race. It is only through fact-based analysis of all forms of compensation that employers can truly know if, and where, pay gaps exist.
4. Intentionally recruit a diverse workforce. Partner with historically Black colleges and universities (HBCUs) and organizations, such as CREW Network, the Real Estate Executive Council (REEC) and the Asian Real Estate Association of America (AREAA), to seek out diverse talent.
5. Partner with industry associations, such as CREW Network and BOMA International, to help drive the conversation forward. Their initiatives help create a more diverse talent pipeline and support critical research. They also develop enriching industry education and provide leadership development and advancement opportunities for women, BIPOC and other historically underrepresented groups.

Gender parity and greater diversity, equity and inclusion are important investments for companies, employees and the future of our industry to remain a competitive and attractive career choice. Don’t be left behind.

ABOUT THE AUTHOR

Wendy Mann is CEO of CREW Network, a global business network and the leading producer of research on gender and diversity in the industry.