WEB FEATURE: Compensation Trends in Multifamily
- Feb 04, 2011
After the slashes to compensation, bonuses and hiring made in response to the financial meltdown, the commercial real estate industry is starting to see those numbers trend upward again. The multifamily sector—sticking out like a skyscraper in the Kansas plains recently—is fairing even better, with a select few companies having avoided making cuts in the first place.
The National Multi Housing Council’s 2010 National Apartment Survey of Compensation & Benefits—which covers salaries, bonuses and incentives, benefits costs, employee turnover, and cost containment strategies for more than 100 apartment firms and includes anyone from CEOs to leasing consultants—shows a 1.4 percent average salary increase among participating companies in 2010 as compared to 2009. When considering total cash compensation, including bonuses and compensation earned from variable pay programs, that number goes up to a 1.7 percent increase.
The NMHC survey also found that median increases to 2010 salary budgets were 2.8 percent for executives and 2.5 percent for both exempt non-executives and non-exempt employees in 2010. Projected increases for 2011 salary budgets are 3.0 percent for all three categories. NMHC’s data was collected between April and July 2010. The 2011 survey will begin in April.
Commercial real estate as a whole looks to be firmly on the rebound as well. The FPL Advisory Group’s 2010 Year-End Compensation Pulse Survey reports that salary and bonus components have turned positive, and the number of companies freezing salaries has dwindled to almost zero. Looking at 2011, many companies are projecting that salaries will increase by 2.6 to 3 percent.
Research by CEL & Associates, Inc. also shows that hiring and compensation are trending upwards. According to CEL, “Most companies have been through the worst, and are now facing stable budget levels for the next year or two.” Companies are now adjusting their business model to dovetail with improving market conditions. Compensation increases have essentially been reset closer to pre-crisis levels.
CEL principals have been tracking compensation trends since 1989, surveying hundreds of real estate companies. Their numbers show that compensation increases aren’t quite up to the average of boom years, but the forecast for 2011 is 3.2 percent—if anything, a significant improvement over the 1.9 percent low of 2009. CEL’s outlook for 2011 also shows hiring up 3 to 5 percent, a return of 401(k) contributions and reinstatement of annul bonuses.
Christoher Lee, president and CEO of CEL, tells MHN that some regions show more promise than others, with Washington, D.C., New York City, Silicon Valley, Dallas and Austin, Boston, Chicago, and Southern California looking to be the “most active markets for higher-range increases in 2011.”
One multifamily company that was able to weather the recession is Village Green, a national developer and manager of luxury apartments. Gerald Schulz, vice president of human resources for Village Green, tells MHN, “We’ve continued to grow in the last 24 months, so we weren’t cutting back on staffing, and we’ve never felt that we needed to put a hold on compensation.” And this includes everyone: property managers, leasing agents, service technicians.
Village Green continued to offer compensation increases of 3 percent on average, with the sites that were making money doing the best. “The only thing that we did from a cost containment perspective—because we had some deals that we weren’t able to close—was we put a hold on executive raises in 2009,” Schulz says.
A lot of Village Green’s success can be attributed to the resilience of the apartment industry, but Schulz points out that the company also did well because its revenue is balanced between fee-based management and its development pipeline. Out of the 145 properties that it manages, Village Green has interest in only about 30. If they owned more properties, they may have taken more of a hit.
“We had some periods when our fees were impacted by occupancies,” Schulz says, “but occupancies have been growing over the last 18 months and will continue to grow. The toughest part of these economic times has been in raising rents, so we did a lot around expense control to make up for that and rewarded our people for doing so. We are seeing a positive trend, however, in raising rents in many markets and with many of our products.”
The company puts a premium on taking care of the people who keep its gears turning. “We feel very strongly that compensation needs to be aligned with the owners’ interest,” Schulz says. “When we do well, we want our employees to do well, and conversely, our employees doing well is necessary for us to do well.”
Village Green is of course not alone in that belief. As Betsy Feigin Befus, vice president of employment policy and counsel at NMHC, tells MHN, “Apartment industry leaders increasingly recognize the value of investing in strategic best practices for hiring and retaining employees that are engaged and productive, and competitive compensation is a key element of that approach.”