Many corporate executives value experience over study, but the increasing sophistication and complexity of the commercial real estate industry drives the demand for continuing education in good times and bad Article by Michael Gottlieb For Noreen R. Sadler, a vice president and senior asset manager for Wells Fargo, the $10,000 and several weeks she has spent over the years pursuing her CPM and CCIM designations were well worthwhile. Not only did Sadler's investment in continuing education further her commercial real estate career from her start as a clerk in 1976. It also has helped her become a better asset manager and expand her network of professional relationships, she said. "I don't always know everything. But I usually know somebody who does," Sadler said. Mostly, the prestigious achievements listed on her business card give her clients added confidence in her, and give Sadler added self-confidence as a woman working in a male-dominated industry. "I think knowledge gives you confidence," Sadler said. "It helps with clients, with marketing. It shows I'm dedicated to my profession. Stability is very important in our line of work." Wells Fargo supported Sadler's educational pursuits by reimbursing her expenses, including travel to attend various classes around the country. But continuing education is not necessarily highly prized throughout the commercial real estate industry. The cost, in terms of time and money, is often viewed as too high for education's relatively intangible rewards, especially in today's soft economy. In a survey last year of 130 firms, Equinox Partners, a New York-based recruitment firm, found that senior real estate executives consider a formal real estate education relatively unimportant in evaluating potential employees. According to the study, which was sponsored by the National Association of Real Estate Investment Trusts, Pension Real Estate Association and the Urban Land Institute, "because formal real estate programs have existed for [only] 15 to 20 years, most senior executives have no personal experience with them and continue to espouse the 'sink or swim' approach by which they were trained." The study also found that companies increasingly look to professional organizations such as ULI, NAREIT and PREA to provide specialized employee training and skill development opportunities. And while companies are willing to reimburse their employees for outside training, they often do little to inform employees that these benefits exist. On-the-job training is the most extensive form of professional skill development, the survey found. But many are dissatisfied with their training - reflected in high employee turnover. Employees may also consider training "a remedial exercise carrying pejorative connotations, or a safety blanket for the incompetent manager who wants to appear to be addressing an employee's underperformance and development needs," the report states. Despite such views, there is clearly a demand for continuing education in the commercial real estate industry. The state Department of Real Estate requires all brokers to renew their licenses with 45 hours of continuing education every four years including 18 hours of consumer protection courses as well as a six-hour survey course. Also industry organizations offer more than 15 professional designations, which carry a continuing education requirement. A quarter of the 1,100 attendees at the Real Estate Conference Group's recent Real Estate 2003 forecast signed up for credit at the conference, according to Martin S. Stolzoff, a partner at RECG. And firms such as Marriott Corp., Insignia/ESG, Costar Group, Jones Lang LaSalle and many real estate investment trusts require their employees to pursue continued education. The value of continuing education is much more than meeting requirements, however. The real estate industry has grown increasingly sophisticated over the years. It used to be enough to know your market or building inside and out. Today, real estate professionals increasingly must understand outside influences on a national and international scale, and be able to parse through vast amounts of data, now instantly accessible on the Internet. This sophistication, combined with consolidation of services, means that brokers, for example, can't be just salespeople. They must understand complex financial mechanisms, demographic trends, liability issues, political and economic trends, new development models and public planning policies, to name a few. "There will always be the local broker. But the local broker needs to understand the big picture at the same time," said Barry Baker, vice president of Grubb & Ellis' investment group and president of the Los Angeles chapter of CCIM. "Certainly, continuing education is of tremendous importance. But it doesn't preclude the experience and seasoning gleaned from whatever field you are in. You can get a Ph.D. in commercial real estate and hit the streets and be run over by the least-educated broker in town," Baker added. When asked whether he'd prefer a gunslinging entrepreneur or a highly educated employee, Baker compared that choice with being forced to choose between giving up water or air. "The lack of air will knock you off faster, but ultimately they both result in the same thing," he said. "You can't do without any of these things. To be successful, you need to have experience and savvy, but you also need an education." Market Trends and Education The demand for continuing education follows the day to day needs, trends and economics of the commercial real estate industry. The BOMI Institute in the 1970s as a way for members of the Building Owners and Managers Association to stay abreast of the latest in their industry. The institute established its Systems Maintenance Administrator designation in the wake of the Middle East's oil embargo of 1973, which pushed up operating costs dramatically and forced building owners and managers to actively pursue energy efficiency. In the 1980s, the institute rolled out its Facilities Maintenance Administrator program in response to the widespread expansion of computers and high-tech building systems. Today, the institute is busy educating its members on environmental health and safety, security and other current topics to provide students with both a theoretical and practical understanding of the issues they face, said Michael Clevenger, BOMI national instructor for the local BOMAs and a past member of the board of trustees for the BOMI Institute. "The books are theoretical, but the classroom isn't," he said. "The classroom is where the practices and theory move into today's issues." Clevenger said that with the dramatic increase in real estate-related information available now - he cited studies that say the amount of available information doubled from 1995 to 2000, and will double again by 2005 - real estate professionals must be lifelong learners. "There is no panacea," Clevenger said. "If we don't find a way to contain costs or improve net operating income, we won't be here." That's why the institute is expanding its educational offerings through online education and value-added education in which students don't memorize information necessarily, they learn how to access information quickly. While companies look to cut costs when profits are down, Clevenger, who travels around the country teaching classes, said many companies are sending their employees to classes to prepare for anticipated economic growth. "I am double-booked through the entire 2003 year," he said. "I never have seen a year like I am doing now. The demand on education and demand on accelerated learning shows people are trying to find ways to save money and survive." Continuing education is popular in good times as well. According to Karim Cherif, director of UCLA Extension's department of business and management, the demand for commercial real estate classes dropped to a minimum during the industry doldrums of the early 1990s. Now that Southern California has emerged as one of the strongest markets in the country, the demand for the West Los Angeles program has reached record highs. "We haven't seen numbers this large since the real estate boom of the '80s," he said. Cherif said students are attracted to UCLA Extension because of what they see as a net cost savings. "They look at what they would spend if they wanted to spend one hour with a real estate attorney, which can cost more than a 36-hour class that may be taught by a real estate attorney," he said. Cherif said the opportunity for hands-on learning with educators actively working in the industry keep classes current. "The people coming to the classroom are really coming because they tell us the half-life of knowledge for real estate is getting shorter and shorter all the time," he said. "Everything has become more complex and all the documents have become more difficult." Howard Benson, managing director for the Anthony Schools in California, has seen enrollment in the 60-year-old correspondent real estate brokerage program increase 50 percent - mostly with residential brokers. On the commercial side, the Anthony Schools are adding live courses to their staple home and online training programs. "We are finding that, in talking with people, the real value of live education is the opportunity to network for their own career potential," Benson said. The other major educational sources for the commercial real estate industry are more traditional university-based programs and the dozens of professional conferences conducted throughout the year. Often the two coincide as universities with real estate programs tap their extensive alumni networks and research capabilities. Raphael Bostic, a professor and director of the Casden Real Estate Economics Forecast for the Lusk Center for Real Estate at the University of Southern California, said conferences are valuable because they provide an objective assessment of the marketplace, which attendees can bring back to their offices and apply immediately. "What I think people get out of these conferences is they get perspectives on how the marketplace is functioning," Bostic said. "That kind of information should help shape professionals for the issues they face on a day-to-day basis." Bostic said there is a danger of being overwhelmed by the influx of new information available, but he doesn't think that point has been reached yet. "I think that commercial real estate professionals have access to more information now than they have ever had, [and] by virtue of that they have to be more aware and more attuned than they have ever been," he said. Striking a Balance Despite efforts to stay current with commercial real estate trends, continuing education programs will always be one step behind the action. So, it falls to real estate professionals to strike a balance between education they get from the street and the one they get from a classroom or conference. Jeffrey R. Jennison, vice president of real estate asset management for Watson Land Co., started pursuing his CPM in the mid-1990s, because, he said it is a competitive necessity for fee managers. "The main reason for my initial pursuit [is that] if you are trying to obtain a management contract, it carries a lot of weight," Jennison said. "There is a perception that those [with CPM designations] had committed themselves to the field." Once Jennison's professional focus shifted to development, his educational focus shifted as well. "On the owner-developer side, I kind of strayed away from it. I haven't completed it," he said. But Jennison said he is committed to completing the CPM program this year. "It makes me a better professional, and provides access to people and resources I might not have otherwise. It provides a great foundation. It is probably one of the best things that someone new to the management end does," he said. Clay Dunning, vice president of education for the Los Angeles chapter of the Institute of Real Estate Management, president of Sierra Commercial Real Estate Services, Inc., and himself a CPM, has a sense that attendance has declined in continuing education programs. His IREM chapter has seen a 16 percent decline over the past five years in CPM candidate members, he said. "We believe the decline is a function of a number of factors, including expense-cutting, more emphasis on on-the-job training and in-house education programs, continued consolidation of property ownership and of service providers, and simply a lack of time," he said. To offset that trend, IREM has introduced a series of skill-enhancement courses, which are typically one-day programs costing $100 to $200, with targeting topics as opposed to the three week-long tracks costing $1,000 to $1,200 each, required for a CPM designation. As a result, attendance at IREM's Los Angeles courses has increased 35 percent over the previous year. This ability to adapt to the needs of commercial real estate professionals will help sustain the demand for continuing education, even if professionals are less willing to devote the time to education, said Edward J. McKeegan, CPM, president of MEI Real Estate Services and president of IREM's Los Angeles chapter. "I think the outlook is good, particularly with this challenging cycle in the market," McKeegan said. "People tend to gravitate toward continuing education when the market slows or when there is a change in a person's career. Not only do these market cycles offer a person the ability to enhance their education, but it also offers them an opportunity to network." And that investment in education can pay dividends, especially when combined with real-world experience. "Often people who possess both the education and the talent are the regional, divisional or executive leaders of a real estate company," Dunning said. "Such individuals are found throughout most of the major service providers and [include] many property owners." As to whether the acronyms on a business card really matter when sitting at the negotiating table trying to hammer out a deal, Dunning said more often than not the answer is a strong "yes." "In a highly competitive marketplace and for a relatively little investment in time and cost, why wouldn't you obtain the alphabet soup appropriate for your industry?" he said. "Why wouldn't you set yourself apart?" Dunning added. "The good ones do."
February 10, 2003