No “Hire-and-Fire” Mentality in the Real Estate Economy

Skilled staff are the backbone of the real estate business. Rather than making precipitous decisions, real estate companies tend to pursue conservative and reticent staffing policies. This is the upshot of the latest Extra Evaluation “Human Resources” of the monthly King Sturge Real Estate Economy Index.

“The extra evaluation has confirmed once again that qualified staff are deemed the backbone of their companies, and are kept on the payroll – whenever possible – even in times of slow economic growth,” observed Sascha Hettrich, Managing Partner of King Sturge Deutschland, adding: “The low volatility of the Human Resource Climate shows that companies tend to avoid hasty staffing decisions.” Between the time the survey started in 2008 and now, the Human Resource Climate has oscillated between just over 80 and 135 index points. The poll participants – more than 1,000 market players – rated the human resource situation as predominantly positive at 110 index points, and did so despite the uncertain environment. “Time will tell whether the current optimism will weaken,” said Hettrich. “After all, we have yet to cover a complete cycle.”

The extra evaluation of the King Sturge Real Estate Economy Index shows that the staffing policy is closely synchronised to the sales expectations of the respective company. Between early 2008 and August 2009, the correlation coefficient between human resource trend and sales trend stood at 0.98. As the economic growth gathered momentum, the correlation coefficient dropped to 0.95. Yet the time series between Human Resource Climate and sales expectation remained more or less in sync. By contrast, the national economic situation in general proved to be no decision-making basis for the human resource policy. The expectations in national-economic terms and the Human Resource Climate evolved a widening gap.
Hettrich summarised: “The human resource policy of real estate companies is guided by an advanced sense of circumspection. The staffing decisions made on the basis of sales expectations have proven to be highly sustainable and reliable. Conversely, there is no sign of the – occasionally suggested – hire-and-fire mentality in this industry, which is characterised by small and medium sized enterprises.”

A Sustainable Human Resource Policy the Prerequisite for Business Success
Given the dependence of the real estate industry on the financial sector, the Human Resource Climate of the King Sturge Real Estate Economy Index presages the personnel situation in other industries. Starting as early as August 2008, the Human Resource Climate captured the ramifications of the financial crisis by a corresponding negative trend. By comparison, the ifo Employment Barometer, which monitors primarily the consequences for the export-oriented sectors of the manufacturing industry, did not reflect the negative trend until three months later. And the job index of the Federal Employment Agency (BA-X), which maps the willingness of companies to recruit personnel on the labour market, registered the negative repercussions of the economic trend even later.

“The level-headedness in the human resource policy of real estate companies is bound to pay off,” commented Hettrich. “After all, there is virtually no way to replace a core workforce of skilled and dedicated staff. In companies where major job cuts proved unavoidable, it can take years to rebuild a reliably operating team. This makes a consistently conservative human resource policy look like the very prerequisite for business success.”