Real Estate Could Profit From Heavy Dose of Diversity: Report
By Mark Hallum March 3, 2023 3:19 pm
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Black and Hispanic developers could be a huge success in real estate — if the industry made way for them, according to a new report from Grove Impact and the Initiative for a Competitive Inner City (ICIC).
The two organizations released a report titled “Breaking the Glass Bottleneck: The Economic Potential of Black and Hispanic Real Estate Developers and the Constraints They Face.” The report found that Black and Hispanic developers make up less than 1 percent of the industry, but asserted that more people of color in executive roles could close the national housing shortage and create 51,000 new development firms.
While the report aims to elevate Black and Hispanic people to leadership roles in the development industry, it also says that doing so could create 2 million new jobs and more than $106 billion in new business revenue.
“There’s a stark representation crisis facing the real estate industry today,” Derwin Sisnett, lead partner at Grove Impact, said in a statement. “With Black and Hispanic developers making up under 1 percent of the field, it’s no surprise that diverse communities continue to face significant housing challenges. In publishing this report, we hope to demonstrate the tremendous economic benefits of uplifting diverse real estate developers not just for underserved neighborhoods, but for the economy at-large.”
Grove and ICIC found that Black developers represent 0.4 percent of the real estate, while Hispanic developers represent 0.16 percent of the industry. But even with those small numbers, the study found that companies led by people of color are more successful than similarly sized white-owned firms.
On average, out of development firms raking in less than $350,000 per year, the study found that Black companies made $170,563 on average, Hispanic developers generated about $178,319, and white developers brought in around $159,591.
For larger development firms with $17 million or more in annual revenue, minorities were also scoring bigger deals with Black and Hispanic companies making $60.42 million per deal compared to $43.88 million for white developers.
While this isn’t to say there is much diversity at the top, the minority-owned firms that are there are outperforming their white counterparts, the report said.
“Our country cannot afford to let the enormous potential of Black and Hispanic developers continue to go to waste,” Howard Wial, director of research at ICIC, said in a statement. “And while the industry has a long way to go before it’s truly equitable and inclusive, we are leaving massive opportunities and wealth on the table if we allow this status quo to prevail any longer. The time is now for new policy, new investment and new efforts by existing firms to unleash the power of diverse developers.”
Developers aren’t the only facet of real estate lacking in diversity. Despite pledges to change the industry after the murder of George Floyd, diversifying real estate remained slow, negligible and nearly impossible to measure.
In the total commercial real estate industry, the share of women was stuck between 35 and 37 percent from 2005 to 2020, and the number of women in some of the largest brokerage firms changed fairly little after 2020, according to a study by the network group Commercial Real Estate Women.
Mark Hallum can be reached at mhallum@commercialobserver.com.
