Commercial real estate firms trying to fill positions for property managers, landlord representatives and other posts expect 2024 to be a challenging year.

Interviews with search executives, as well as survey results from property and compensation advisory firms, show demand for certain commercial real estate positions, especially those in property management, will remain robust in the year ahead despite a slowdown in dealmaking. This could pressure real estate firms to offer higher pay for those positions, according to a national compensation study and a real estate search firm executive.

In fact, 85% of companies said they are having trouble finding skilled talent to fill some positions, according to an annual survey commissioned by the Robert Charles Lesser & Co. consultancy and CEL Compensation Advisors. About 67% of companies surveyed said they expect to keep hiring despite industry headwinds of tight capital markets and higher interest rates, according to the report.

Robert Charles Lesser & Co., known as RCLCO, said the latest of its 34 annual compensation surveys, one of the longest-running in real estate, covers salary trends of about 140,000 people who work in 200 positions in industrial, office, retail, multifamily property and advisory and brokerage-services. Brokers paid on commission weren't surveyed.

Though growth in compensation has moderated from previous years, companies that responded to the RCLCO-CEL survey said they expect to give average merit increases of 4.9% this year.

The year ahead could be somewhat challenging for commercial real estate companies, according to RCLCO. Firms must balance their need to pay up for the talent that powers certain profit centers with cutting costs in other areas that are feeling the brunt of a down market, such as development, acquisition and leasing activities.

Of course, compensation firms have a self-interest in predicting that their clients should be receiving more money. Even so, the findings are in line with federal government data and other real estate demand expectations.

The number of employees needed for property, real estate and community association managers is projected to grow 5 percent through 2032, "faster than the average for all occupations," according to the U.S. Bureau of Labor Statistics.

"I think this is, in many ways a continuation of a trend that we've seen, particularly heightened in the post-COVID period where the market for talent has been especially tight, both at the property level for our kind of onsite teams but then also at the corporate level," Eric Willett, a managing director at RCLCO, said in an interview. "And even though the market has slowed down a bit in terms of the competition for labor, it certainly hasn't created real slack in the system."

David Poline, who's been working as executive search consultant focused on retail real estate and commercial property positions since 2010, said the tight labor pool could be an issue for years to come.

"We certainly lost some talented people during COVID from the standpoint of they left the industry or took an early retirement," Poline, president and CEO of Poline Search Partners, said in an interview. Even as more colleges and universities create real estate programs from which viable job candidates emerge, they cannot fill the void especially for higher-level positions, he said. His firm is working to fill more than 20 positions, typically at the director and vice president levels, from the West Coast to New York City.

"One of the reasons the unemployment rate is so low, this demographic shift to Generation Z is such a small generation numbers-wise that you're going to have a supply problem probably for a while," Poline said. Generation Z generally is made up of people born from 1997-2012.

Lawrence "LG" Gellerstedt, managing director and Atlanta market leader for real estate services, development and investment firm Foundry Commercial, said the overall decrease in revenue at brokerages due to lack of capital markets activity has affected staffing needs. However, interest in Foundry's job listings recently has grown, he said.

"That being said, we've seen a pretty significant increase in the past 3 months in applications for open positions," Gellerstedt said in an email. "That increase has also allowed us to find more qualified candidates."

As for compensation, Willett said real estate companies can expect to continue to offer pay increases above pre-COVID levels for a while. "We're still operating in a bit of a new normal with respect to comp increases," he said. "And until there's some sort of economic downturn or kind of economic event in that vein, we don't anticipate seeing it pull back."

The commercial real estate industry faces a sizable challenge this year when hiring to staff on-site property teams, especially involving multifamily property, where oversight roles were heightened in the pandemic, Willett said. "We see it most acutely in the [multifamily] sector, but I think there are kind of shadows of it or ripples of it across all of the property types," he said. "But certainly multi has been especially impacted, both because of the heightened demand as properties deliver, the more human intensive management style of those properties."

Despite the overall slowdown in new development, a large number of apartments are projected to be completed this year and next, and their owners will need to staff them with onsite management and leasing teams. CoStar projections put the number of new apartments completed in 2023 at a 40-year high of almost 573,000 units. Another 443,000 units are expected to be completed this year, according to CoStar.

"There's obviously a substantial pipeline still delivering and building up the teams in those markets is really quite challenging for a lot of our clients," Willett said. "And so I think that's reflected in this sense that even though perhaps the economic headwinds have intensified over the last six months, the talent challenges haven't abated. And so groups are doing all they can to hold on to talent and continue to incent them appropriately."

In contrast, the decline in transactions and new development in other sectors is taking a toll on hiring for those positions, according to the RCLCO-CEL survey. The number of companies hiring for transactional roles "is down sharply year-over-year," according to the survey. Also the share of companies hiring for development and acquisition roles was down 10%, the survey found.

"I think it times very well to the general rise in interest rates, which really slowed down transaction volume across the industry, both in terms of starts and development, but also in terms of acquisitions," Willett said. "So that's a new factor over the last 12 to 18 months, as rates have climbed and the capital markets have slowed."

As for 2024, he said transaction activity could begin to improve this year, and that could lead to more hiring.

"We don't anticipate seeing further declines in transaction volume," he said. "And if anything, we think there may be some momentum behind it, particularly given the news of the last several weeks in terms of the Federal Reserve. And so I think there is reason for some cautious optimism in that space, but probably too soon to say exactly where we end up."