CoStar Q&A: The Real Estate Executive Recruiter’s View
5 October 2020
COVID-19 is affecting commercial real estate markets in the UK in numerous, often surprising ways. An interesting area to track is which parts of the market are being seen as opportunities and which require significant strategic re-working to protect businesses.
Key to understanding how key players are approaching this is often looking at where they are hiring. To that end CoStar News caught up with Ghada Sousou, of London and New York headquartered headhunter for executives in real estate Sousou Partners, to see how business has been affected by the pandemic.
CoStar: How has COVID-19 affected your business recruiting and placing high level real estate professionals, and in particular how has it compared to the immediate aftermath of the GFC?
COVID-19 has been and continues to be a health and economic tragedy and has cut large swathes through many countries throughout the world. It is accelerating trends that were in place before the pandemic such as changing how office space is used, the growing acceptance of working remotely, and the increasing pressure on the hospitality and retail sectors.
We have seen a very different reaction to COVID-19 than what happened immediately after the global financial crisis (GFC). During the GFC, the initial period of shock and triage was followed by a deep downturn in activity, with clients going defensive, freezing assignments, hunkering down and trying to mitigate risk. As an example, at the time of the GFC crisis, Sousou Partners were retained by over 40 clients, and all but one froze or ended the searches at the time – reflecting and mirroring the seismic shock and profound feeling of dislocation felt by many businesses.
This time round, that initial period of adjustment was far quicker and after two or three weeks, most of our clients seemed to adjust fairly seamlessly to operating from home and conducting the different parts of the recruiting value chain in a remote, distanced manner. We have taken briefs, identified, assessed and clients have hired and on-boarded people virtually without missing a beat. We have seen little downturn in assignments. We have had two searches put on hold and both were in the hospitality sector which has been hard hit by COVID. But otherwise business has expanded over the past six months and continues to grow.
What opportunities are emerging from the current situation for real estate professionals? Have some seen it as an opportunity to re-evaluate what they are doing?
There have been two very different reactions in the marketplace. The first reaction has been an aggressive stance – from clients, who despite the tragic fallout from COVID, see the current investment landscape as the opportunity of a lifetime. These tend to be either smaller investment funds that are nimble, entrepreneurial and bullish about longer-term prospects (especially with regards to their own positioning within the industry) or investment players who have been thinking about entering the real estate market for the past five or six years and now feel (with distressed opportunities) that this is the best entry point they are likely to get. Both types of firms are looking to build their people capabilities or lure senior talent from top-tier firms.
The second reaction has been the exact opposite – a defensive, risk mitigation response from many top-tier firms that are concerned about their holdings, particularly in retail and hospitality and are looking to rationalise or divest their portfolios or protect their investments by finding ways to reshape assets and add value. Here the re-evaluation is defensive and so these firms are also hiring but are looking for talent to help them ‘sweat the assets’ and get more value from the portfolio they are holding rather than focus on deal-making.
There is of course a reaction on the individual level as well. We are seeing several senior executives appraising this landscape and thinking that now may be the time to make a move either to an entrepreneurial risk -taker at the centre of the next wave of action or a bigger firm looking to add a different, non-traditional skill set to their team. We are also seeing an increase in firms looking to hire whole teams and strengthen board and non-executive capabilities. This increase in interest stemming from top tier talent is further fuelled by the uncertainty around the values of their carry. The focus seems to be shifting yet again towards the opportunity ahead versus the comp structure that was designed to retain talent.
What areas are people looking at in terms of capital-raising?
We saw a very quick response from those potential investors who had been outside the market, waiting for an entry point. Even those that have had real estate strategies, there is more of a focus on building towards a dedicated real estate fund including hiring teams / buying platforms with AUM and / or distribution capabilities. Separately, there has been tremendous success from top tier funds raising further capital from targeted strong LP relationships in a club format or as side cars. This has been particularly true for debt strategies as well as enhanced closes on ongoing fund raises.
As for investment into different sectors – logistics is undoubtedly the biggest play right now. Multi-family and single family residential are popular and some of the more contrarians of the entrepreneurial firms are looking closely at hospitality recovery opportunities.
Is there a greater focus on employing defensive roles such as asset managers?
Yes, in several top-tier firms that are adopting that defensive positioning, we are seeing a real move to add more asset management skill sets. But also less traditional and more creative, out-of-the-box thinkers who can help re-configure office space and create new value.
We continue to actively work on fund raising assignments, debt strategies, specialist experts (multi family / logistics etc) and we’re seeing an increased need for COOs to help manage teams more closely given the virtual reality that has emerged.
Is this a good time for people from outside of the traditional real estate world to come in to provide fresh ideas? What are the buzz words?
Yes, definitely. A phrase that kind of encapsulates what’s going on is: ‘talent is restless.’ Individuals are looking and some firms are aggressively recruiting. The kind of people in demand are: ‘innovative’, ‘creative’, ‘experimental’ and ‘entrepreneurial’ – all of which is quite a departure from the more traditional hunting grounds of the big investment banks and people who thrived on the deal. This change in emphasis may help drive almost a generational shift in the industry.
How have you found it practically, meeting and interviewing people during lockdown? How have you managed that process?
At first, it seemed a daunting prospect, especially for a business like ours that thrives on relationships and human face-to-face connection. But we found that everyone in the process – clients, candidates and our staff – quickly adapted to doing everything via a video and audio link.
In some ways, the technical constraints made the process quicker and more efficient. Certainly at the beginning of lockdown, it helped to speed up the process because all the key players were available. No one was jetting around visiting anyone and so people were able to make the time and progress briefs much faster.
It’s a very different world today: as one extreme example we have placed a candidate and on-boarded him remotely – six months on and he has still not met the team in his new firm face-to-face as he is currently in a different continent. No doubt, things won’t always be this way, but we are not sure business will revert 100% to the way things were before COVID.