Private real estate compensation growth slows

Remuneration growth is muted as the world tackles inflation, according to Sousou Partners, the executive search firm which partners with PERE for an annual pay report.

When it comes to private real estate compensation, 2022 will be recorded as a year in which increases slowed down.

The market faced myriad challenges in 2022, including occupational issues at the property level and broader macroeconomic headwinds with Russia’s invasion of Ukraine compounding existing inflation concerns. The year ended with soaring interest rates as governments and central banks tried to mitigate the fallout.

All of that significantly reduced transactional activity in private real estate. Global investment volumes fell 20 percent in the full year, totaling $1.14 trillion, according to advisory firm CBRE. Mirroring the soaring rates, the decline in Q4 was the sharpest, dropping 60 percent year-on-year to $226 billion of deals completed. PERE’s 2022 fundraising data told a similar story, showing a 21 percent drop in capital raised to $168.7 billion, the lowest figure in at least five years.

The impact of that “wobble,” as Ghada Sousou, co-founder of private real assets executive search firm Sousou Partners, put it, is the key theme from this year’s compensation study, published jointly with PERE. The overarching finding is average median growth in remuneration falling to below 5 percent. It was a rare muting of wage advancement, despite the high levels of inflation.

“It’s the first year in a bunch of years where the data hasn’t actually moved a lot,” Sousou says.

Data download

Click the image to view and download a PDF of the compensation survey data


A major reason for the slowdown, Sousou contends, relates to when the downturn happened. Compensation discussions usually happen at the end of the year, she points out. Since this coincided with the transaction and capital formation slowdown, a pause on significantly extending remuneration growth was widely deemed justified. She says this was particularly the case with bonuses, the part of an employee’s compensation traditionally subject to most movement.

“If 2022 ended how it started, I think we would have seen much better numbers on bonuses,” Sousou says. Senior executives at private real estate managers agree the volatility in the latter half of 2022 played a part in slowing compensation growth. Michael Levy, chief executive of Dallas-based manager Crow Holdings, says even during the first half of the year when market conditions were more positive, there was a sense they could change quickly. “Those of us who are more experienced and who’ve lived through multiple cycles, could both see it coming from the data and feel it coming from the marketplace,” he says.

Levy says younger professionals, on the other hand, might not have expected such a market shift. However, he also says the issues faced by their peers working in the financial and technology sectors made conversations about modest compensation rises manageable.

In January, the Financial Times reported banks were preparing for global financial crisis-sized layoffs. In the technology sector, redundancies already started with behemoths Twitter and Meta announcing multiple rounds of layoffs. Zoom, one of the biggest benefactors of the remote working culture that materialized during the coronavirus pandemic, announced 15 percent of its staff was to be cut in February.

“I don’t think people have been surprised by not experiencing the growth [in compensation] they had over the past three, five, 10 years,” Levy says. “People read about what’s happening at the largest financial institutions and that begins to get them to focus on ‘Okay, well it’s that bad there, so maybe it’s not going to be as robust as I had hoped here.’”

Not everywhere

While expectations broadly have reset, not everyone has experienced muted growth. Junior levels of organizations have, generally, seen larger wage growth than their more senior peers. On the acquisitions side, the median growth in total compensation for associate-level staff was 15 percent at investment managers and 4 percent at private equity real estate firms. Head of platform remuneration, by comparison, was 3 percent and 2 percent, respectively.

This is not atypical, Sousou explains, as there is more room for growth at smaller wage numbers. There is also less need for growth relative to inflation, as people making more money are typically shielded from some of its effects, she adds. “Anyone making above a certain number, they’re not really affected by inflation,” Sousou says. “At least, that’s the employer’s view.”


Total number of respondents


Average median growth in remuneration, a decline on previous years’ growth


Number of female respondents


Female respondents’ share of the total, up from 25% in 2021’s study

One such employer sees it similarly. A chief executive officer of a manager in PERE’s top 100 managers ranking says today’s market conditions have meant higher wages for staff on smaller packages.

On average, where wages increased in the organization, junior employees have seen higher increases, he explains. “We’re in a very difficult economic environment,” he says, speaking on the condition of anonymity. “The reality is, the more senior they are, the more they get it. I think what we tried to do is protect our junior staff more from a compensation perspective and inflation perspective.”

Another area of relative positivity was in asset management roles. They saw higher wage growth than their acquisitions peers. In private equity real estate, managing directors and directors saw 7 percent and 3 percent median growth in their total salary, respectively. Their acquisition peers saw 5 percent and -2 percent changes in median total salaries, respectively.

“The likelihood is that it’s all about value creation, and less about doing new deals,” Sousou says. “That must have bumped up demand for asset managers, and, more importantly, for workout skills which falls within asset management.”

This is directly driven by market conditions as debt costs rise, meaning returns going forward are more likely to be generated via the operation of a property. As such, a gap in pay is tightening between asset management and acquisition executives as firms prepare to take advantage of turnaround opportunities ahead, Sousou says.

Levy agrees. “Creating value through implementing business plans; sweating the nickels and dimes. That skillset, people with deep real estate experience, managing and executing business plans, that function which we call asset management, is more an area of focus than acquisitions at this time,” he says.

How will compensation kick on after this period of slow growth? Much of the impetus will come from the wider macroeconomy. When inflation and, subsequently, rates stabilize, private real estate market capital movements are expected to pick up. Expect to see a ripple effect in take-home then. Until such time, ‘muted’ is the word to describe compensation growth for executives in private real estate.