Hiring Freezes

Has there been any talk about hiring freezes or trimming the headcount? I feel the current market has made firms reevaluate their needs.

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Comments (135)

Controversial
Mar 9, 2020 - 4:26pm

Removed because things have obviously changed since 3/9

Commercial Real Estate Developer

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Mar 9, 2020 - 6:15pm

Perhaps. But, panic or not, a stock market dip/correction/slide/etc. also doesn't necessarily mean a reduction in real estate activity.

Commercial Real Estate Developer

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  • Intern in IB - Gen
Mar 11, 2020 - 2:08pm

For some reason people love to panic on this site and tell everyone the world is ending- Idk why I guess it makes people feel better about themselves somehow?

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Mar 11, 2020 - 2:17pm

That's because none of you have ever lived through a downturn...

I'm in NR and this is my fourth correction since entering the workforce in 2010; on the other hand, most asset classes haven't experienced one yet. It's time you all understand that prices don't move only up for a decade without creating underlying problems.

Mar 23, 2020 - 8:56am

Nope. Time traveler.

Commercial Real Estate Developer

Mar 23, 2020 - 7:26am

In my opinion, the reason for so much monkey shit is that very early on while everybody was still trying to figure out the extent of the impact of Covid-19 and a recession will have on CRE, it felt like you immediately dismissed any possible impact the stock market crash will have on CRE. Not saying thats how you felt but the tone and the way your wrote your comment, it certainly felt that way. In reality, we all know that the stock market and CRE is related even if there is no direct relationship and secondly, you yourself saw how much has changed in a week, so when there is so much happening in a quick period of time, if there is limited data available, it is better to not believe in two extremes-either the world is crashing or everything is fine. The way your worded your comment, it felt like you were in one extreme and even in 08 when the world was crashing, there were people who had their heads in the sand saying everything was fine and it left a bad taste in everyones mouth particularly when the person saying everything was fine had something to gain from it. Not saying you had any nefarious intentions, just offering one perspective on the amount of monkey shit and why someone would not like what you said as it comes off like a person having their head in the sand.

Mar 23, 2020 - 9:00am

I respect that.

I do think it's a result of just skimming my initial comment. OP asked if there had been any talk about hiring freezes or layoffs, and when I originally posted that my answer of "Nope" was both honest and correct, as I hadn't heard either. I also made sure to say "Don't immediately assume" in my assessment of the current stock market's impact on the real estate world, not that the two aren't tied or that it won't ultimately have an impact.

Still, clearly people took issue with it, so if I didn't get my point across that's on me.

Commercial Real Estate Developer

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Most Helpful
Mar 9, 2020 - 5:48pm

I always thought a recession would be a good thing for opportunistic PE funds with significant dry powder (although not good for their predecessor funds or pretty much any owner of real estate).

Many opportunistic funds haven't been able to find good deals because valuations are so high. If prices start to drop and investors begin panic selling, this could create more activity.

What you don't want is for capital to dry up. Meaning you don't want lenders to stop lending, LP investors to stop giving operators capital through JVs, Pension Funds to curtail their investment into PE Funds, public REITs to lose their ability to raise debt/equity.

Right now the only issue I see is public REITs losing their ability to raise equity due to their low stock prices. But again this can create deal flow if the REIT is forced to sell properties in order to pay down debt.

Anyone have a different take on this? I'm mostly thinking through the lens of the value-add / opportunistic PE fund because this is the field I want to get into

Array

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Mar 9, 2020 - 8:27pm

I think there's a chance they will because this time around a lot of the high leverage credit is coming from RE debt funds rather than banks. They have raised tons of money in the past few years. I know 2018 was an all-time record year but can admit I haven't kept up with fundraising activity since the

Array

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Mar 10, 2020 - 2:13pm
JSmithRE2010:

I always thought a recession would be a good thing for opportunistic PE funds with significant dry powder (although not good for their predecessor funds or pretty much any owner of real estate).

Many opportunistic funds haven't been able to find good deals because valuations are so high. If prices start to drop and investors begin panic selling, this could create more activity.

What you don't want is for capital to dry up. Meaning you don't want lenders to stop lending, LP investors to stop giving operators capital through JVs, Pension Funds to curtail their investment into PE Funds, public REITs to lose their ability to raise debt/equity.

Right now the only issue I see is public REITs losing their ability to raise equity due to their low stock prices. But again this can create deal flow if the REIT is forced to sell properties in order to pay down debt.

Anyone have a different take on this? I'm mostly thinking through the lens of the value-add / opportunistic PE fund because this is the field I want to get into

The thing about market downturns is they aren't just a momentary hard reset of asset valuations followed by another 7 year run-up. You don't just get to buy something at half-price one day and then enjoy robust income growth into perpetuity. There are years and years of negative growth.

Example:After the dot com bubble of 2000 the S&P didn't return to previous highs until roughly 2007 (then it fell off a fucking cliff again). It didn't even start to recover until 2003. Most PE funds don't have a 7 year horizon to wait until pricing recovers. Most models I build don't work with 3-5years worth of negative growth assumptions.

Mar 10, 2020 - 2:26pm

Fair points.

PE Funds have 3 year terms? I always understood them to be 7 years at the shortest with an "investment period" at the start of the 7-10 years

Array

Mar 10, 2020 - 6:08pm
Nudnick McMooch:

The thing about market downturns is they aren't just a momentary hard reset of asset valuations followed by another 7 year run-up. You don't just get to buy something at half-price one day and then enjoy robust income growth into perpetuity. There are years and years of negative growth.

Example:After the dot com bubble of 2000 the S&P didn't return to previous highs until roughly 2007 (then it fell off a fucking cliff again). It didn't even start to recover until 2003. Most PE funds don't have a 7 year horizon to wait until pricing recovers. Most models I build don't work with 3-5years worth of negative growth assumptions.

Except your example seems to vindicate the idea that you buy something at a "hard reset" and then enjoy 7 years of run up. Perhaps I'm missing something, but under your example, someone who bought in early 2002 when the S&P was at 1,172 and sold in early 2007 at 1,409 would have enjoyed reasonable returns, even accounting for the fact that the S&P dipped below 900 at one point. Am I thinking about this in the wrong manner? Understood that perhaps the 4% appreciation plus whatever dividends on top isn't making a fund manager rich, but it's certainly upside. To say that the market didn't reach it's previous high to til 2007 ignores the fact that we're discussing investing in the aftermath of a correction, not before.

Funniest
Mar 11, 2020 - 2:34am
Nudnick McMooch:

You don't just get to buy something at half-price one day and then enjoy robust income growth into perpetuity.

That's where you're wrong, bud…

[lowers sunglasses]

…welcome to the Real Estate forum.

[pops denim jacket collar, walks off into the sunset]

“Doesn't really mean shit plebby boi. LMK when you're pulling thiccboi cheques.“ — @m_1
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Mar 9, 2020 - 6:39pm

Don't buy into it just yet. Seeking to draw a doomsday correlation in the private real estate markets based on public market behavior is not the best way to go. Generally, think of real estate more as a marathon and public markets as a sprint. You won't feel the volatility in real estate in the same sense so it's kind of inefficient to compare them the same way. Financial markets react immediately to both rational and irrational behavior, and that becomes compounded during times of near term uncertainty. Real estate doesn't work that way and it takes a lot more time to turn the ship around, which means we are somewhat shielded from the corrections and volatility the market is experiencing right now.

Does that mean we are immune to a headwinds? Far from it, but I believe one of the hottest places going forward would be in a well-capitalized real estate firm with execution bandwidth, a solid business plan and market knowledge.

Mar 10, 2020 - 6:14pm

Hah. I'd go further and argue that the more vociferous someone is about saying this, the more likely they are to be the one who is going to lose their shirt. Anyone who thinks that they'll be in a position to be wildly aggressive is probably already wildly aggressive.

  • Developer in RE - Comm
Mar 14, 2020 - 9:15am

Wanted to throw a data point into this. I've been in communications/the interview process with three firms whose names you would know. I haven't heard any official "freeze" but the hiring process has become suspiciously extended and the people in question not responsive.

Maybe they're simply going with other people, but the change in "feel" for the process has been noticeable.

Mar 22, 2020 - 3:02pm

Can confirm as I'm currently interning with one of CW's research teams. Luckily we only got slimmed down from 5 to 4 people, but man do I feel bad for my co-worker who's last day was on the 12th, right when things started to get a bit crazy with the virus situation. I can't imagine what the job market'll be like for the next few months.
Slightly related but I also know JLL froze the hiring process for some of their intern positions and I had one good friend who had signed an offer letter from a $5 Billion aum MultiFamily REIT straight up cancel their internship program for the summer.

Mar 15, 2020 - 7:32pm

I would expect a lot "halts", there should still be interviewing (via skype, zoom, etc.), but with offices clearing out due to COVID-19, I can't imagine a lot of people wanting to focus on hiring in the very short-term. Beyond that, every company will need to assess its cash position, business viability, valuations, etc.

In short, way too early to know the impact of everything. But, hiring is not likely to be the focus.

Mar 16, 2020 - 10:37am
redever:
with offices clearing out due to COVID-19, I can't imagine a lot of people wanting to focus on hiring in the very short-term.

Understandable too. Imagine getting hired, meeting your team via phone call or video chat, having some work emailed to you that you have no reference point for on your personal computer since they haven't gotten a company laptop set up for you, not knowing your team, etc.

Commercial Real Estate Developer

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Mar 16, 2020 - 11:54am

Speaking from the principal perspective here.

Tangential to the question, but I'm having a different perspective on the covid impact on real estate.

While recently raised funds or funds with significant dry powder may be well positioned to capitalize on value opportunities from distressed sales etc, and that historically, the inverse correlation with equities would suggest that people would gravitate toward RE in times like these, I think there will certainly be significant headwinds to the office RE space (and hospitality) in the next few quarters.

Buildings that we've been prepping for the market have all been sidelined. Nobody's touring nowadays, so no point in marketing a property if you're going to get a fraction of interested buyers. I know for our fund there will likely be a freeze on all investment activity for at least the near term, and I can't imagine too many other buyers making purchases at a time like this.

And that's not even touching upon the impacts on capital markets. I'd be surprised how many of the traditional lenders are willing to make loans now.

Aside from new investment activity, existing portfolios are going to suffer as well. As the entire country gradually comes under the restraints of 'lockdown' and employers are forcing employees to WFH, I imagine there will be little to no leasing activity for the next few quarters. Who's going to sign a large expensive lease when >50% of your workers are going to be remote? And let's not forget our friends at WeWork in all of this. Boy have they just hopped out of the frying pan and into the fire... they just can't catch a break. Our AM's are walking these wework spaces and seeing entire floors just barren. I can't imagine any short term leasing to be done at WeWork esp considering they have the highest density spaces possible so they've gotta be hemorrhaging cash. Would Softbank's investors even allow another bailout at this point?

To the point of real estate being more of a marathon and not a race, I'd think this is true for long-term hold funds, at least for the Boston Properties of the world out there who are likely in a fine position to weather this. But for those playing in the value add or opportunistic spaces out there with fund lives

Mar 16, 2020 - 1:26pm

You make fair points. The question is how long this "freeze" will last. People - especially Americans - tend to adapt/stop giving a shit pretty quickly. After months of scary headlines with masks/microscopic images of a virus, people will accept that as part of life and stop caring. Once the COVID-19 curve has "flattened" (2 weeks, 2 months? how long do we need to lockdown is the question), I imagine people will slowly go back to working from their offices, getting their nails done, consuming, etc. while remaining cautious. In short, i think consumer confidence will spike back quickly.

In the RE world, most owners who did not over-lever should be able to weather a freeze in activity - again assuming it only lasts for a month or so. RE institutional fund performance is relative to peers. We are all going through this so your 5-year 15% projected IRR might be a 12% IRR, but so will everyone else. As you mentioned, there is a lot of dry powder out there, I think things will reprice and buyers will start swooping in.

Mar 16, 2020 - 1:52pm

More concerning to me is how my buildings get built and staffed. Having vacancy rates 5-10% higher for one year than you underwrote isn't going to destroy an investment.

But if I can't get construction workers on site for 3 months and capital markets are disturbed afterwards? That could mean losing the keys.

And if I have a 500 unit building and I can't get maintenance staff out there for weeks at a time? Well sure, not sweeping the hallways won't kill anyone - but what about repairing the plumbing, keeping the boiler operating, operating the trash compactor? Losing some money on your office leasing is one thing, but there are genuine health and safety concerns for some of these asset classes. That's far more disturbing to me

Mar 16, 2020 - 2:13pm

I work for a private debt fund. We have stopped lending, many have stopped lending, to the point that we are getting really good deals we are now passing on. We have significant construction exposure of committed capital and our fundraising has come down dramatically. We cant make new loans because of this. There is some institutional capital that is trying to move out of equities and get with us, but that is the only silver lining.

Mar 17, 2020 - 2:45am

There will be distressed opportunities in hotels, retail and office in the coming months. Sit tight for now.

Robert Clayton Dean: What is happening?
Brill: I blew up the building.
Robert Clayton Dean: Why?
Brill: Because you made a phone call.

Mar 17, 2020 - 8:23pm

Currently in University and just had my recently accepted full-time offer revoked. Also, haven't heard anything from other places that I've been recruiting with, so looks like a freeze across the board on my end.

Mar 22, 2020 - 3:20pm

I have a close friend who's in a similar situation. Signed an offer letter to intern at a ~$5 Billion aum REIT that just got cancelled. I'm also supposed to be interning with the Debt Equity Structured Finance team at one of the big 3 brokerage firms come summer, and although I haven't heard anything from HR, I'd be lying if I said I'm not shitting bricks at the moment. It's looking like a tough situation for us students/recently graduated but hopefully we'll get through this!

Mar 30, 2020 - 1:35pm

I hope it all works out for you guys. Markets like this are bad for everyone, especially recent grads. Just remember that it will pass and you'll find a great opportunity at some point in the near future. Imagine graduating in 2008...RE guys were SOL for almost 2 years. Everything I've read indicates that this recovery will be quicker. There is still ample dry powder in the market so transaction volume and hiring will pick up when the dust settles, hopefully in a few months.

Apr 4, 2020 - 11:39am

Seems like there's three different camps.

Camp 1 - Fuck Covid. We need people ASAP for reason X, Y, or Z and that's not going to change so we're gonna keep our process going albeit online.

Camp 2 - We have no clue what's going on, so we're gonna freeze everything until it clears up.

Camp 3 - Our capital has dried up, our tenants are asking for rent abatements and/or are saying they can't pay us indefinitely. So we're either firing people or about to fire people.

Based on my personal communications, I'd say it's about 10% Camp A, 80% Camp B, and 10% Camp C. With things potentially trending toward Camp C if it keeps getting worse. Although, the one positive thing I've seen out of this situation is that people are more responsive, so it's been easier to make connections and gather information.

Good luck everybody!

  • Analyst 3+ in RE - Comm
Mar 20, 2020 - 2:41pm

Can confirm that we're putting a freeze on hiring too. I was interviewing candidates for my firm and we have to put everything on hold for the time being until things are a bit more stable. Tied to the lending side and most of it is at a pause, or quickly slowing down where little to no deals are being put through into application.

Mar 23, 2020 - 3:19pm

Can confirm a hiring freeze in brokerage for all jobs except our PM division. Deals are still getting done but most had already be queued up in the last q. Some tenant rep assignments (100K+) are being pushed back. Banks are continuing to lend but expect that to change soon. Best of luck to all incoming interns and analysts.

  • Analyst 1 in CorpFin
Mar 30, 2020 - 6:28pm

I am in a similar situation - took an offer/gave notice before this whole thing broke out. Start date is now pushed out by a month. I hope this role doesn't get eliminated

Mar 26, 2020 - 3:09pm

What asset type? What type of firm? What role?

Commercial Real Estate Developer

Mar 26, 2020 - 3:23pm

Hey dropkilla - sorry to hear about that. Would be very helpful if folks knew what region/role you are in. Thanks.

Array
Mar 30, 2020 - 6:04pm

I've had an associate role at a newer, small, institutionally backed REPE shop doing value-add deals in a few markets. I took a pay cut for the role because I get a little bit of equity (not worth much right now, but if we grow it could become solid). I'm getting paid what new analysts are paid... much less than new Eastdil kids.

Fortunately we have a lot of dry powder and sounds like I'm good job-wise.

Question for the others. Is this a time to be contrarian? I'm certain 2009-2011 was the absolute prime time to breakout on your own despite the lack of financial security by doing so. This market is going to take 1-2 years to fully correct so I imagine 2021 is going to be a great buying opportunity as the supply/demand equation moves around.

Apr 7, 2020 - 1:42pm
Surfing Pirate:

Question for the others. Is this a time to be contrarian? I'm certain 2009-2011 was the absolute prime time to breakout on your own despite the lack of financial security by doing so. This market is going to take 1-2 years to fully correct so I imagine 2021 is going to be a great buying opportunity as the supply/demand equation moves around.

This may be true if you had capital behind you.

It matters how long this lasts. 2009-2011 was bad because the market didn't recover immediately, so valuations were down when mortgages came due. If this goes back to some approximation of normal by
August, there won't be that pressure on owners.

Mar 31, 2020 - 5:26pm

Hearing Newmark has a company wide mandate to cut internships this summer and they've let incoming full-time's know their spot is fine for the time being - at least in nyc

  • Analyst 2 in IB - Cov
Apr 1, 2020 - 10:40pm

Some PE funds are moving forward with recruiting virtually. Just had an interview set up at a large REPE fund and spoke with a recruiter who said many groups are still actively looking for people. Although no one has been hired through a fully virtual process (meaning first round to hire 100% virtual - no face to face), there is a chance that happens in the near future - according to the recruiter

I imagine this applies to REPE but not Lending, development or owner/operators

  • Developer in RE - Comm
Apr 2, 2020 - 8:15am

REITs too. I have a Zoom interview next week.

If I had to guess, they will delay making the final offer and/or on-boarding until we are able to meet in person, but much like people are doing everything they can on pursuits up until they can't, some companies are taking the same approach to hiring.

Apr 10, 2020 - 9:55am

I work at a proptech startup in a major market and was just laid off. 20% of our global staff. Also can confirm that there are hiring freezes at at least one of the top real estate crowdfunding platforms (Fundrise, Realty Mogul, CrowdStreet, etc.).

All the best to everyone who's looking for jobs and to those who currently have jobs as well!

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Apr 10, 2020 - 11:47am

Not sure about them but it wouldn't surprise me. Not making it political, but I've heard that most of Kushner's investments aren't built to last: financially, technology-wise, etc. Cadre being one of them. So it wouldn't surprise me if they're not doing so hot. Though of course very sad for the people on the ground who got let go.

Is your firm doing okay?

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May 18, 2020 - 10:01pm

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