Realty Executives’ Pay Outpaces Others : Compensation: The increases, detailed in a survey, are at odds with declining real estate prices and the stagnating salaries received by most workers.
Total compensation for top corporate real estate executives has jumped 40% since 1989--far outpacing the average pay increase given to top executives in other fields during the period, according to a new survey by the National Assn. of Corporate Real Estate Executives.
The big rise to average annual salaries of more than $200,000--while at odds with declining real estate prices and the stagnating salaries received by most American workers--reflects the growing importance companies now place on managing their holdings, industry officials say.
“Corporate CEOs are increasingly aware of the potential of real estate as a performing asset,” said Mark W. Hoewing, executive director of NACORE. “The skills and expertise the positions now demand are reflected in a substantial compensation increase from 1989 . . . to 1991.”
Yet the pay hikes come at a time when stockholders and some financial experts are highly critical of awarding big pay hikes to executives in the midst of a sluggish economy and slumping corporate profits.
“It seems utterly insane to have a 40% increase when there ought to be a tremendous surplus of good real estate people on the market,” said Gaef S. Crystal, a former management consultant who is now a professor at UC Berkeley.
“I’ll grant you real estate people are working harder now than they did in the good times,” Crystal added. “But are we paying for input or output? If we are paying for results, real estate executives should be paid less, not more.”
With corporate earnings under siege, many companies are nevertheless streamlining their real estate divisions and paying their top real estate executives substantially more to produce greater profit from selling or leasing retail, office and industrial space, experts say.
“The corporate real estate manager in the past decade was more of a custodial position; now we are more actively managing real estate assets,” said John Blake, senior vice president of properties and facilities at Hertz Corp. One upshot, Blake said, is that pay has improved and his division now reports directly to Hertz Chairman Frank A. Olson. He also is scrambling to sell off the car rental firm’s used car lot sites.
“I’m having to be a lot more creative these days,” said Blake, adding that he has approached everyone from fast-food outlets to funeral parlor owners about buying Hertz’s used car lots.
The glut of office space has made it easier for corporate real estate executives to save their companies money when they lease or buy office space. But selling corporate real estate has become a lot more difficult because of low demand and because many lenders won’t finance commercial real estate acquisitions.
The slumping real estate market “has brought a lot more focus to the job today,” said Frank Camps-Campins, director of asset management at Pitney Bowes. “The game is still the same, but the frequency (of change) has accelerated. There’s more visibility, much more recognition and much higher pay.”
The hefty rise in average pay may also reflect the elimination of non-essential, lower-paying staff positions in many corporate real estate divisions, according to one of the authors of the NACORE study.
In its compensation study, NACORE surveyed presidents and chief executives at more than 500 industrial, commercial, retail and restaurant companies nationwide and found that their total annual base salary and bonuses averaged $203,000 in 1991, up 40% from $145,132 in 1989. That jump compares to an average 14.2% increase in compensation for the typical CEO of an American company during the same period, according to Sibson & Co., a Princeton, N.J., consulting concern that annually surveys executive pay.
Real Estate Pay Since 1989, pay hikes given top corporate real estate executives have far outpaced average increases given to executives in other industries. Below are the average salaries and total compensation paid for selected real estate positions.
Total compensation Job title Average base salary with bonuses President and CEO $161,375 $203,000 Real estate manager 58,045 63,263 Corporate real estate lawyer 85,591 91,918 Construction general manager 71,560 74,250 Real estate broker 88,750 100,000 Director of facilities 65,454 72,103 Property manager 38,333 53,000
Source: International Assn. of Corporate Real Estate Executives.
