The future of DE&I in private real estate

Creating a diverse workforce in all industries, not just real estate, is arguably one of the most significant challenges we face. Not only does it generate strong returns, but it also creates an environment where employees from underrepresented backgrounds can thrive. 

Despite the advantages of having a diverse workforce, McKinsey and Company data from the US and Canada reveals that in 2022, ethnic and racial minorities represented just 20 percent of managing-director-level investing professionals in private markets. 

However, looking at private real estate there is recognition that more needs to be done, with 78 percent of investors agreeing that diversity and inclusion is a priority to be addressed for real assets stakeholders, according to GRESB research in 2021. Research by management consulting firm Escalent in 2022 showed that nearly a third of institutional investors consider DE&I a ‘highly important’ factor in considering allocations.

But how is DE&I being addressed? And how can firms retain top talent? One way to prioritize diversity is through working with organizations such as Sponsors for Educational Opportunity (SEO), which help firms to hire diverse talent, particularly at entry level. Since 1980, SEO has been working with underrepresented, high-achieving students through its SEO Career program, helping them to find internships within areas such as financial services, technology and real estate. 

The internship program at SEO Career consists of two phases. Phase one focuses on preparation, providing interview tips and resume reviews; phase two is about preparing for the internship, with SEO offering training and an individual coach for each student. 

Pamela McKoin, assistant director of the real estate program at SEO, explains how firms can attract and retain quality talent, and the importance of embedding diversity into workplace culture. 

How have attitudes toward DE&I in private real estate changed in recent years, and how are firms incorporating it into their strategies?

The real estate industry has recognized the need to diversify its talent base as it is the industry’s job to serve everyone regardless of age, race or gender. Not only do we house the world’s economy, but we represent where people live, work and play. So we impact every kind of community, and we want these communities to thrive by occupying our buildings and retaining our tenants and owners. To do this, we need to understand the communities that we serve, and their preferences. Essentially, if we do not speak the language, we cannot be a part of the conversation. 

Therefore, it is good business to diversify our talent and have different kinds of people at every level of the decision-making process and the execution. In terms of the strategies that private real estate firms are employing, I think it varies across different companies. Some firms focus on adding diversity at every level and have very intentional goals. Others may be looking at it as a pipeline issue and are just bringing people in at the entry level. These firms may not have specific goals but have more diversity initiatives. It really varies across the platform.

What advice would you give to firms looking to hire diverse talent? 

Firstly, I would say to partner with companies like SEO at the entry level, to help bring candidates in. Secondly, I think people forget how much we did not know early in our careers and how helpful it is to have a mentor or colleagues to help us navigate the work and corporate culture. 

So, I think being intentional about mentorship or affiliate programs up and down the ladder is very important. The more successful companies that I see are exposing early talent and mid-level talent to the senior management in intentional ways, through initiatives such as coffee chats or fireside chats, where you bring a group leader in to talk about their group, strategy and successes. 

Having that dialogue so that senior management can see early talent is important. It also helps junior talent to feel comfortable speaking with, getting to know and presenting in front of that senior talent. So, again, I think having diversity at every level really helps talent to stay, and while we can help early in the recruiting, it is retention that makes the difference over the long term.

In 2016, SEO partnered with Pension Real Estate Association (PREA) to help promote diversity within real estate. What were the motivations behind this alliance? 

PREA is the industry association that represents institutional capital and asset managers, and they had identified lack of diversity as an ongoing issue in our industry. So PREA set up a foundation, raised capital from real estate companies and then they selected SEO to partner with.

The PREA partnership allowed us to expand our program in financial careers by identifying and introducing students from underrepresented backgrounds to real estate. In the past, only around 50 or 60 students in our program were focused on careers in real estate, but this year we have nearly 400 students interested. 

Why is it important to diversify the real estate industry’s pool of decision makers?

Real estate is one of the largest industries in the world, so we have a diverse base of constituencies. In addition to the communities and industries we house, we also invest capital for high-net-worth individuals, public pension funds, city, state, federal and pension funds and invest money for fire, police and trade unions with different objectives for their real estate allocations. 

We also have a variety of issues ranging from lack of housing supply and oversupply in office to environmental and sustainability concerns. Without new voices and new thinking at the table, we are not going to meet our investors’ objectives or solve these problems. 

If everybody is the same gender, age and racial component, they are going to think the same. They are not going to come up with creative solutions that help us improve our built environment. I reiterate: if you do not understand the conversation and if you do not speak the language, you cannot find solutions to the issues. That means we need a broader group to be working in real estate making and executing decisions to be effective.

What are the most significant challenges when prioritizing DE&I?

The most important thing is retaining talent; people will stay if they feel valued, supported and equitably compensated. There are a lot of things that must happen in the human capital or HR roles to make people feel more comfortable. Mentorships and employee resource groups can make a difference if they are viable and supported and not just window dressing.

We are currently experiencing a backlash in the US against diversity programs, and I think that is because people look at opportunity as a zero-sum game, which it is not and should not be. 

By bringing diverse people to the table to make decisions, we are adding more voices and improving the opportunity for growth, better working conditions, better living conditions and better built conditions. If we keep seeing it as a zero-sum game, we will never solve this problem.

How will the DE&I landscape in real estate look 10 years from now?

I hope that we see even more diversity at all levels. I have been in this industry for over 30 years and I used to be the youngest, maybe the only, person of color at the table and frequently one of the few women, but that is no longer the case. I do see more women, more people of color as well as younger people in the industry, but where I do see that it is less diverse is at the C-suite level. 

Women and minority owners of real estate companies exist, but sometimes they only get capital because of social responsibility programs. What I hope to see in the next 10 years is these owners raising capital because they are best in class and because of the track record that they have. There is some real talent in the Black, Latinx, women-owned real estate community, but that is where I am seeing less progress.

Breaking into real estate 

SEO Career looks to recruit and train underserved students to help them land internships within the financial services, technology, real estate and corporate sectors

In 2016, SEO Career partnered with the PREA to introduce real estate as a viable career path for the program’s interns, and since then, the number of interns pursuing real estate opportunities has grown from 43 to 172 in 2023.

“We recruit nationally at a wide variety of colleges and universities including the Ivies, HBCUs [Historically Black Colleges and Universities], large well-known universities and smaller, lesser-known ones,” says Mindy Davis, senior vice-president and managing director at SEO Career. “We know that talent is everywhere, and opportunity is not.”

Davis adds that students often do not consider real estate as a feasible career path. “Many young people overlook real estate because they are only familiar with the residential side,” she explains. “A career in commercial real estate has unlimited potential. A young person can have immediate impact – whether it be putting together financial deals or helping to revitalize a community. There are tangible outcomes and lucrative benefits. So, go for it.”