Looking ahead in the real estate sector has always involved speculation and a bit of guesswork. But with the impact of COVID-19 still taking its toll and companies looking to be cautious as they forward, where does this leave employers and employees when it comes to future real estate salary growth and, of course, bonus payments?
Our latest Rewards, Attitudes and Salary Report addressed the impact of salaries directly before and after the pandemic. In anticipation of our next survey and report for 2022, we recently surveyed a small number of hiring managers in various industry sectors to understand their salary and bonus budgets in the current financial year.
Our results gave a valuable first look at how remuneration plans are shaping up prior to the release of our next annual salary survey, due to commence this Autumn.
The remuneration plans survey provided an insight into the current confidence that real estate businesses have in their potential to "bounce back" and their commitment to salary increases and bonus payments where possible.
Understanding our data and results
Hiring managers to our survey mainly come from the advisory, investment and development sectors, while a smaller percentage of 8.1% come from employers in occupier real estate.
We also take our data from businesses of different sizes, such as those with 1-15 employees to those with 250 and over. Companies with 101-250 employees are slightly underrepresented in the survey compared with other groups; however, the difference is marginal.
Below, we look more closely at hiring managers' confidence in business growth and profitability, salary increase forecasts and bonus budgets.
Confidence strong, despite pandemic hangover
As many as 70% of our respondents said their organisation feels confident in achieving pre-COVID levels of profitability in 2021. This figure is promising as it shows the market is in a good place and feels confident about the immediate future.
Digging deeper into the results, we found that confidence levels do vary by market type. Developers and investors are the most confident of all, with 78% and 81% of respondents giving a confident or very confident response to our question.
As we'd probably expect, occupier’s optimism is a little less strong, as they see first-hand how lockdowns have impacted retail and office space. We found 56% of occupiers surveyed scored neutral or very unconfident to achieving the same level of profitability in 2021 as they would have done pre-pandemic.
Modest salary increases for some real estate markets
Salary increases are important to employees and potential employees alike, but the last 12 months have impacted many firms' cash flow and profitability. It is understandable that 42% of respondents to the question ‘Will you expect to see salaries rise in 2021-22?’ said their salaries would not change. All of those in the occupier market answered no to budgeted salary increases, but there are plans for moderate rises in other sectors. We found 33% of all respondents expect salaries to rise by 3-6%.
Advisors and investors are forecasting a little more strongly for pay rises, with 15% and 6% respectively budgeting for salary increases of at least 6%. On the other hand, developers are a lot more cautious when it comes to salaries, with respondents in this market split evenly across the 0%, 0-3% and 3-6% increase options.
A year of little to no business activity does affect salary budgets. Not surprisingly, businesses may need to wait to see how the market picks up and business increases before committing to salary increases.
We also asked our respondents if they had any concerns about staff reacting negatively to salary, and the results were varied. Understandably, as most investment companies are budgeted to increase salaries by at least 3%, they are very unconcerned about a hostile reception from staff.
Other markets, including occupiers and advisors, expect a mixed reaction to no salary increases, understandably again, as staff may have expectations that are not currently forecast to be met.
Making bonuses count
Bonuses in real estate are something that can be instrumental in staff choosing a particular employer or remaining in their job. Still, the past year has impacted profits in a way that may mean companies need to find ways to save. Bonus payments are not necessarily guaranteed, so it is an attractive area for companies when considering savings.
However, our survey found 20% of developers budgeted to pay more bonuses in 2021-22 than they did in previous years. This is the highest percentage of all our employers, though others are still committed to bonus payments. A total of 62% of investment companies planned to pay similar or more bonus this year than previous years.
At the other end of the spectrum, 50% of occupier employers are not confident in paying bonuses or plan to pay substantially lower than in previous years. Advisors are also cautious, with 44% for the same answers.
Varied forecasts dependent on markets
Our data shows that the market you work in is key to whether bonuses and salaries were forecasted to increase. When you consider the roles within these markets, it is easy to see why those in the occupier market are more cautious than the others.
Unprecedented times have significantly impacted the position of many businesses in the real estate sector. Companies are looking for places where they can tighten their belts and limit salary increases. Bonus payments are a natural place to start, as many businesses know their employees, implicitly or explicitly, understand the impact of the last year on their profits and growth. Expectations for post-pandemic pay are probably lower than average, so considering this is important when exploring the results.
This first look at the state of remuneration gives a little insight into how real estate hiring managers have planned for the coming year and what staff can expect regarding pay increases and bonus payments.
Our next annual salary survey will dig deeper into the figures and show precisely where the market stands and, by proxy, how confident businesses and employees are across the different market areas in real estate.
Survey data results
For more information about this survey, to discuss recruitment projects, or for salary benchmarking, get in touch with Nick Carman for a friendly discussion.