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Industry Outlook
By Anthony J. LoPinto
May 2003
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I have just attended the Urban Land Institute's Spring Conference in Baltimore, the largest spring meeting the ULI has ever held. The general mood was upbeat because there is a general recognition that with the combat phase of the Iraq war over, and with the current economic downturn now over three years old, the market is poised for a recovery. Most council meetings during the session included an economic forecast and most of the pundits predicted a slow, gradual improvement.
We also heard a lot about current investment conditions. Domestic and foreign (especially German) capital continues to be "committed" for real estate investment, but there has been little deal flow because of the dislocation between the "bid and ask" price in almost every sector. How are investors dealing with the pent-up demand for investment real estate in a very competitive environment? Our observation is that they are hiring investment professionals now so that they are able to aggressively pursue opportunities.
Since the 4th quarter of 2002 our executive search practice has experienced a significant increase in assignments to recruit seasoned investment professionals. Investment funds and advisors, public and private investors, and insurance companies have all initiated searches, and in most cases they are looking for new national or regional leadership. At the lower level, SelectLeaders has had a significant increase in recruitment and job posting activity for analysts, associates and other midlevel professionals to support the investment process.
Many investors are also reorganizing to deploy their resources where they are needed to maintain a competitive edge. For example, one client historically had investment professionals responsible for both acquisitions and dispositions. They decided in January to split the functions creating a new head of dispositions who will build a dedicated team, leaving the investment team focused on new investments. Why the change? To insure deep market penetration and coverage so that they can meet investment goals as the economy improves. However, their concerns are beyond the current market. Looking forward many investors see a very competitive environment for all types of investments because of the sheer volume of committed capital.
How deep is the market for proven investment professionals? Generally pretty good, although it is not as strong as some employers believe. As is always the case, the best talent is kept on the bench and taken care of, because smart executives know that they'd be tough and expensive to replace. That doesn't mean that there isn't high performance talent on the street; there are plenty of seasoned pros who find themselves without a job. Nevertheless there is hot competition for investment professionals who can be really effective in a highly competitive market.
I suggest that if your organization is concerned about the depth of its investment team, it would be wise to act now to recruit talent. As I have noted, there is already strong demand for top professionals, and as always, the compensation they can demand will only increase.
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