Commercial Real Estate’s Diversity Problem Is a Data Problem
Without hard numbers, how do you measure progress — or failure?
Commercial real estate has a diversity problem. It’s hard to miss it.
You see it in the boardrooms, where the head of just about every firm is a man. You see it at conferences, where the participants are overwhelmingly white. You see it on panels and Zoom calls, and even award lists, where a woman of color is a rarity. You see it in Commercial Observer’s own annual Power 100 list, where only 14 percent last year were either female or minorities.
And you see it in the deals, the handshakes (and elbow bumps), the opportunities that flow along the same channels they always have.
Just how big is the problem?
Truthfully, we don’t know.
That’s because most companies don’t disclose their diversity data; many don’t even track it, except, perhaps, the minimum required to fill in federally mandated forms. So, it can be difficult to know how many women, people of color, people with disabilities, veterans, and other members of underrepresented or marginalized groups work in commercial real estate.
And just as importantly (perhaps more so) it’s difficult to know what happens after they first come through the door. Do women advance toward the C-suite, or stagnate? Do employees of color leave the company or drop out of the industry altogether because they feel alienated, unseen, or unable to advance? Do employees get paid an equal amount for equal work? Are they given the same opportunities?
Without data, it’s impossible to know where the industry stands and, therefore, it’s impossible to know if there has been progress, or what progress looks like. Chad Tredway, the head of real estate banking on the commercial side at JPMorgan Chase (JPM), put it succinctly during a late February forum on diversity that CO hosted: “What gets measured, gets done.”
Many real estate companies have made significant verbal and monetary commitments to diversity over the course of the last year, motivated by the outpouring of hurt, anger and demands for justice after the May 2020 killing of George Floyd by Minneapolis police.
Such was the case with Gil Borok, CEO of U.S. business at Colliers (CIGI) International, who renewed his focus on diversity in the wake of those events. “The issue that has been brought to the forefront is Black professionals, and that’s what we’re going to focus on,” Borok said.
Since last summer, companies have hired diversity officers, established committees, brought in outside consultants, and joined initiatives to do better on diversity. Some have begun to track the data that will provide answers to the questions above, or reevaluate the metrics they have collected in the past.
“For companies that are implementing diversity and inclusion initiatives, their measurements are critical,” said Wendy Mann, CEO of CREW Network, a professional association for women in real estate. “You have to measure to show that progress is made.”
It’s also important so companies can show progress on the promises they made. Or broke.
At Colliers, Borok started a Black Equality Taskforce, and that led the company to begin an initiative to track population data more methodically. “This is not something that we, or our competitors, have tracked with purpose,” Borok said, until they were prompted by the events of the past year. “We started collecting data to set a baseline, so we can track our success going forward in order to create a more diverse population.”
It’s true that the problem of disclosure and transparency is not a problem that’s specific to commercial real estate. However, over the last decade, there have been considerable efforts on behalf of a variety of civic groups, regulators, investors, and even private equity firms like BlackRock to make progress on diversity across the corporate landscape, particularly in the areas of board composition for public companies, diversity in hiring, and pay equity.
And, in sectors like technology and banking, where there has been more pressure regarding disclosure and transparency, such companies as Google, Facebook and Citigroup have indeed begun reporting detailed workforce diversity data, and, in some cases, compensation data as well. Such transparency can often work in companies’ favor.
“It’s a talent issue for them,” Mann said. “If they’re doing the right thing and they’re transparent about it, they’re going to get the best talent in the industry.”
That being said, most companies are unlikely to share data until they feel they can show progress, which could take several years if those plans are being put into place now.
The first, and potentially easiest, number to track is the employee population of an industry or company. In particular, since companies with over 100 employees are required to submit population data annually with the federal Equal Employment Opportunity Commission.
The nation’s workforce has hovered around 50 percent men and 50 percent women in the last year. It tipped up to 50.4 percent women in December 2019, marking the first time women outnumbered men in more than a decade, but has slipped back to 49.8 percent women as of February, according to the Bureau of Labor Statistics (BLS). This was a huge setback caused primarily by women leaving the workforce in unprecedented numbers, thanks to the COVID-19 pandemic.
In the commercial real estate industry, the share of women in the workforce was roughly 37 percent as of March 2020, according to a study by CREW Network last fall. That share has stayed relatively stable for the 15 years that CREW has kept track, per the report.
That ratio was borne out by a few data points that some of the major real estate brokerages shared with CO. At CBRE (CBRE), the percentage of women in its global workforce was 33.5 percent; and, at JLL, 35 percent, according to their respective 2019 corporate responsibility reports. It was 39 percent at Cushman & Wakefield (CWK), according to data shared with CO.
As far as the number of minorities in real estate, the data is thinner than gender data. Of the public real estate brokerages, only CBRE shares a topline breakdown of their workforce: 67 percent white, 23.5 percent diverse, and 9.5 percent unspecified. BLS data does provide some industry-specific insight, and it’s fairly stark. While 78 percent of the employed workforce across all sectors nationally is white, construction is 88 percent white; architecture is 85 percent white; and real estate leasing and property management, across both commercial and residential, is 84 percent white.
While the topline gender and racial breakdown is a first step, the real insight comes from more granular data. If companies, and the industry as a whole, have access to diversity metrics across the career ladder, that can provide insight into the critical points along the pipeline — whether that’s hiring, promotion, retention, or all of the above—where measures need to be taken.
According to a report from McKinsey & Company on the career pipeline, which tracked five levels along the corporate ladder in general in the U.S., women made up 47 percent of the first rung, but 21 percent of the C-suite. People of color made up 35 percent of the entry-level workforce, and 15 percent of the executive level. While the ratios for both dropped with each consecutive rung, the biggest drop-off came at the first rung, between the entry and managerial levels.
Tracking the pipeline is not only about the composition of each seniority level, but about tracking metrics that offer insight into which areas require the most work to ensure diversity down the road. It also offers a first step to…
A third data category that has received greater attention in recent years is pay equity data, which measures whether or not employees are paid an equal amount for equal work across gender, race, and other categories. While there is less precedent for disclosing compensation data than population data, there have been increasing calls for more transparency on the issue, and some companies have begun to do so.
Citigroup was the first and only bank to provide pay equity data, beginning in 2018, which it claims is at 99 percent for “like for like” work. However, the available data on the matter is generally less heartening. In commercial real estate, pay equity actually regressed between 2015 and 2020, according to CREW’s report, which it publishes every five years. With all earnings factored in, including commissions and bonuses, across all positions, the compensation gap between men and women came in at 33 percent, nearly 11 percent higher than in 2015, per the report. At the entry level, the wage gap increased to 9 percent, up from 2 percent in 2015, an early disadvantage that can follow women throughout their careers.
Compensation data is not always an exact science, because the definition of equal work can differ considerably, as can a variety of other issues like bonuses, performance-based pay, and commissions to name a few. Because of that, companies will often hire specialized consultants to collect and review their data periodically.
An Obama-era rule that would have required compensation disclosure with the federally mandated Equal Employment Opportunity data, has languished in the courts, but may have provided a standardized format for disclosure of such information.
Programs and policies
The final area for the commercial real estate industry to measure is the broad universe of programs, initiatives and policies that can be implemented to advance the goals of having a more diverse workplace. That begins with binary issues like hiring a diversity officer, establishing a diversity committee, and implementing measurable goals.
It can also mean programs that target recruitment and hiring to bring in more women and people of color, as well as policies that support existing employees of diverse backgrounds, including such issues as child care, parental leave, flex time, and mentorship programs.
For Colliers’ Borok, collecting the data is only the beginning, but it is a necessary first step. “We are trying to get the data to understand where we are, and that will help us set some goals. How we will set those goals, we don’t know yet,” he said. “I can state without data, without a printout, I can tell you that we need to improve, that it will be a target to improve on the past.”
Commercial Observer will be tracking diversity and inclusion efforts at individual commercial real estate companies and in the wider industry. This article is part of that ongoing project.