In the face of adversity

Real estate companies are looking to make savings – and it seems it will be employees who could be bearing the brunt. Tensions are now becoming unbearable, even in the offices of the biggest players

Ewa Andrzejewska

 

To write about labour market trends in the real estate industry today is no easy task. For instance, when I recently set up a meeting with a company boss to talk about personnel changes (and not necessarily about dismissals, but rather about the creation of new posts) I suddenly found out that they had no time for a meeting, while a few days later we received an official press release in which the specific person was thanked by the company for their years of fruitful work and wished much success in his future career. Another example: my interview with a head hunter that did take place, but when I later asked him to authorize my text I learned he was no longer employed there.

Agencies bear the brunt

The OECD is forecasting an increase in global unemployment of between 20 and 25 mln by 2010 – according to OECD secretary general Angel Gurría, as reported by the Polish Press Agency (PAP). In his opinion, the construction sector will be the hardest hit, since the activities of companies in this sector have been halted in a particularly brutal manner – especially in Spain and Ireland. This is only one of many items of information making the rounds of the media, and not only in Poland. Analysts, experts, business people and politicians alike are predicting that the labour market will finally succumb to the global financial crisis. In the real estate sector, tension started to mount in October. I learned at a meeting following the Munich Expo Real Estate fair that this year’s event was a labour market rather than a property event.

International agencies were the first to talk openly about dismissals. In early November, Cushman & Wakefield/Stiles & Riabokobylko confirmed that it had dismissed some of the staff (around 30 of the total number) of its Moscow office. Sergey Riabokobylko, C&W S&R’s partner and director, declared that: “It is with regret that we are forced to make such a move, to adapt company resources to changing market conditions.” The company’s Polish office has declined to make any comment on employment issues. Jones Lang LaSalle has also suffered the effects of the crisis. The managers of the Moscow and CIS offices have decided to lay off 50 employees. However, John Duckworth, JLL’s director for Central Europe, has made assurances that his company is not planning any redundancies in this region. King Sturge has announced that it will be reducing staff by around 60 to 80 people, but only in its London office. The Polish branch of CB Richard Ellis has acquired a new head, who will be arriving from England this month. In December he was named as Charles Wardroper, who had been manager of the north-eastern region of Britain, where he was awarded the title of best office leasing agent in the Leeds area. He will be replacing Nigel Wade, who is leaving CBRE after eight years. To many, the move came as quite a surprise. (I might add that it was with Nigel Wade with whom I had arranged the previously mentioned meeting).

Even the greatest have suffered

To quote Jakub Kostecki, who was recently still employed in the property section of SpenglerFox personnel consultants, it was in October that panic hit the real estate industry. Even the warehouse sector, which would seem to be the least affected by the crisis, has started to take fright. Much has been said about the departure from ProLogis of its American chairman and CEO, Jeffrey H. Schwartz. Press releases from this developer have announced that, in response to the difficult economic conditions, the company is currently cutting down on overheads and admin costs by 20 to 25 pct by reducing employment and restricting business costs.

Panattoni Europe, a ProLogis competitor, has also felt the effects of the crisis. In the past few weeks, the thinking of several individuals connected with this part of the market has been occupied by a number of steps which have had to be taken by both American players, who have recently become keen rivals in Poland. According to Robert Dobrzycki, a partner of Panattoni in Central Europe: “The real estate industry is experiencing a correction, which means Panattoni Europe is adapting to the new conditions by streamlining its activities. In the last three months, the staff of the Polish branch was reduced from 108 to 84 people. The development and project management sections were reduced to a number which can operate effectively in a situation in which we have cut down on investment.” He went on to remark that the commotion which these moves have caused is quite natural. But he warned: “In my opinion it is better to act now, before it is too late. We have been brave and unafraid of taking difficult decisions. But for the moment it is not easy to assess what savings the dismissals will bring in their wake.”

Natural results of the construction process

The main subjects for discussion in all recent business meetings, press conferences and specialist events were about the companies that are making job cuts, or in which managers are being changed, and or which will be looking for new staff. Temperatures have risen as gossip has intensified about projects being put into cold storage and banks withdrawing finance, as well as – making things even worse – the number of developers go bankrupt. Even the most innocent piece of news can suddenly acquire the status of story of the year. A very real challenge is to make changes without losing face, when the whole industry is in such a panicky state. Bartosz Puzdrowski, Quinlan Private Golub’s new managing director in Poland, has revealed that: “Faced with the current collapse of the financial markets and the potential problems which could affect the real estate market, Quinlan Private Golub has recently reviewed its activities in Poland. Following a precise analysis of company operations, we had to take the painful decision to dismiss 30 of the 90 employees in our Polish branch, mainly in the finance, administration and sales departments. We have decided to discharge these workers, since we have to focus on work on projects being implemented and planned, and to simultaneously cut operational costs.” He also claims that the steps the company has taken will have no impact on the projects the company is planning and carrying out in Poland and the CEE region. These include starting the construction phases of Hala Koszyki in Warsaw and the Enterprise Park office project in Kraków, as well as the second stage of the Oakland Park residential estate in Konstancin.

The residential developer Dom Development was able to give more details. The company was planning to lay off up to 40 people (as much as 23 pct of the total personnel) by late 2008 and that would allow annual savings of around PLN 5.5 mln in personnel costs – according to information supplied by the company.

Clearing and cleansing

During the last two years, wage demands by employees, especially those with significant experience, have been exorbitant. Marcin Liwacz, head of recruitment for Human Resource Consulting, describes the situation: “Until recently it was an employee’s market, but now the time for an employer’s market has arrived. Potential employees are much more flexible and the ceiling at which negotiations start is also lower.”

Much is being said about the time for “cleansing” having arrived. Many companies in 2006-2007 complained bitterly about the lack of available manpower and had to resort to employing poorly skilled people who lacked the