Armageddon. That’s what recruiters say to me about the state of the recruitment market for real estate. No one’s hiring, they say, only you.
Yeah, right and if I was to actually believe that, it would not make me feel good in a “oh, clever me, we must be doing something right” sort of way, it would make me feel really anxious, in an “Oh my God, what am I not seeing?” sort of way. Recruiters take note.
Despite the woeful strike-rate for lateral hires (and see the excellent book written by my fellow blogger Mark Brandon on the subject) external recruitment has to be part of any growth/diversity strategy for smaller firms, as indeed it is for us. In your niche firm, this function has to be carried out by management. Indeed, given the cost of getting it wrong, it is essential that we try and get it right first time.
Those of you living in more rarefied environments, who don’t have to get involved directly with the dirty business of recruitment, will not necessarily know that a partner-level recruitment will set you back somewhere in the region of 25% of the first year’s salary. Candidates certainly don’t seem to be aware of this when they apply for jobs through an agent.
So, given that I do spend quite a lot of my working day talking about, thinking about and indeed actually doing recruitment, I thought I would spend a little time considering what is really going on in the recruitment market, particularly in real estate and where it might be going.
Take a look at the jobs page of this magazine. Interestingly, what appears to be the top area for recruitment is banking/finance (1351 positions). I find this figure fascinating and I wonder how it is that there are so many positions available in that particular area. Is it a reflection of the continued importance of London as a major financial market? Very likely. Is it that many banking/finance departments were decimated after the 2008 meltdown and some firms cut too far? Probably. Is it that these jobs are generally well remunerated and therefore the recruiters make more money out of them and therefore they are advertised more heavily than, say, your average mid-range position in a medium-sized national firm? Definitely. Unlike in many other areas, the majority of jobs available in banking/finance are in the top pay brackets. Ker-ching!
Real estate comes in at a respectable 4th place. And real estate is a broad church.
Alongside what one would describe as conventional real estate roles, we find adverts for a “property litigation associate” a “real estate finance lawyer”, a “real estate funds lawyer”, “senior legal counsel- Edinburgh, for a renewable energy company” and even, as one advert puts it, an “M&A/corporate lawyer (with RE/PE focus) (emerging markets – location flexible) US/UK qualified.” What is that doing in real estate? Shome mishtake surely, Ed?
So, what do I think is really going on?
Fact: the number of property transactions has reduced markedly in the last 4 years.
Fact: Pressure on fees has never been higher and some very competent firms are (again) low-balling to keep their departments busy, hoping for a turnaround. (My view – dream on).
Fact: some firms are again going down the redundancy route, having imbibed the daily diet of doom from the financial press in the last few months.
Fact: it is becoming ever more expensive to practice real estate law, seen by many as risky and unprofitable. Indeed, in this year’s round of insurance renewals we were advised that there were a number of insurers who would not actually even consider covering firms where more than 25% of the fee income derives from property transactions.
Fact: the advent of organisations such as Quality Solicitors will be a real threat to high-street conveyancing and I think that we are going to see real changes in that area.
So what is left for real estate? Many mid-tier firms are moving away from real estate as a focus and downsizing their departments or quietly merging them into other areas. Certain City firms will not allow their lawyers to carry out certain types of property work, or take on lower value work, even for their larger clients. There are still some larger firms recruiting and investing, but mainly at the junior end. Almost everywhere, senior lawyers appear to be at risk.
The pyramid structure is starting to look more like a funnel, where a smaller number of partners manage larger banks of junior assistants. The desire to maintain high PEP figures at all costs means that this model has spread to other firms, who don’t necessarily have the sort of work to justify it. As a profession, we have our own “squeezed middle.”
Every cloud has a silver lining and the sun is out for niche players, as we now get an opportunity to take on senior lawyers from the very best firms, with respectable followings and realistic aspirations, who have found themselves with no place to go in their current firms, no hope of achieving equity and no ability to justify their salaries on the basis of the work they bring in themselves, even though that was never the deal when they started.
Not only that, but new ideas about the provision of legal services have already led to changes in the way lawyers are employed by firms – check my reference. Necessity being the mother of invention, lawyers have already become more flexible in the way they market themselves, often willing to work on a pay-as-you-go, or fixed contract basis and new models are sitting alongside the old. Job for life? It’s another country. We don’t live there anymore.