The Real Estate industry has notoriously been referred to as living in a “feast or famine” condition. At the start of the pandemic, a couple of notable fiscal policies stimulated consumer spending. This included the 2020 Paycheck Protection Plan and the 2021 American Rescue Plan. The Federal Reserve lowered its overnight lending rate to zero while nearly doubling its balance sheet with asset purchases. This caused interest rates to stay at historically low levels driving a strong Real Estate Market. Today is a different market with rates increasing and refinancing ground to a halt. As a company operating in this industry, what is the best way to overcome staffing challenges? How can this be done while adjusting expenses to manage profitability in times of such great instability?
What Led to This Volatility?
Today’s condition is not attributed to just one factor. Many things occurred within a brief time to create a powerful shockwave across the entire global economy. The Real Estate industry is now experiencing these disruptions firsthand, which has significantly impacted staffing and other business conditions.
- Geopolitical Risk – Russia’s invasion of Ukraine led to energy and food shortages fueling a faster jump in inflation. This triggered the Federal Reserve to raise interest rates and led to a 20% reduction in the number of homes sold in the U.S. between August 2021 and August 2022.
- Remote Working – It has become increasingly clear that remote working is here to stay. This staffing model has changed the types and sizes of homes buyers want. A decentralization of wealth away from the coasts has occurred that dramatically changed pricing in many markets.
- The Great Resignation – The U.S. has an unemployment rate of 3.5 percent. This is full employment. Employers face new challenges in hiring and retaining star employees. The market is tight, and salaries have increased. Further, the shift to remote working has also created new variability in commercial and office real estate markets across the country.
Some of the biggest players in the real estate industry, including RE/MAX, Redfin, and Wells Fargo, have begun to announce layoffs in recent months totaling thousands of jobs. Industry analysts are projecting the cuts could eventually be on par with what was seen during the housing crash of 2008 (source).
3 Ways to Help Overcome Staffing Challenges
Organizations that are directly or indirectly impacted by the health of the Real Estate industry now face enormous uncertainty over the next few months. How deep or shallow the next downturn becomes will substantially impact future profitability and business viability.
This article points to the importance of investing in systems and processes that contribute to business flexibility. Improve Agility to Stay Profitable in a Low Volume Real Estate Market points to several options for businesses to improve resilience and operate with greater profitability.
In addition, improving employee productivity and flexibility is also a top area to focus on. Keeping the right staff and skills on board will be critical to best capture the next market upswing.
Here are three suggestions on how to best overcome staffing challenges.
- Overall, there is a labor shortage – According to CRE, there are almost twice as many unfilled positions as unemployed workers to fill them, equating to a shortfall of more than five million workers. In the prosperous years before the pandemic, there were about 20 percent more open positions as unemployed workers, and the ratio had never reached 25 percent. Now it is over 90 percent!
The economy has bounced back since the start of the pandemic. Most of the 22 million jobs that were lost during the initial lockdown have now been filled. Today’s challenge is that there is a mismatch between the open positions and the workers available to fill them. Many workers reassessed what type of work they were willing to do, under what conditions, and for what pay. This resulted in many quitting their existing jobs – at a rate 25 percent higher than during the pandemic.
If a significant drop in business activity requires a staffing reduction, consider options that could be more temporary or part-time to retain relations with these employees. If the Federal Reserve is successful with dropping the inflation rates by year-end, you may quickly be in a position to hire new staff – which might be much harder to accomplish than previously has been the case.
- Start outsourcing staffing – Increasing the scalability of your business through the use of partners, gig workers, or managed service providers could be an effective strategy to remain staffed with knowledgeable workers that understand your industry and business. One of the frameworks for achieving this staffing diversification is standardizing job roles and responsibilities. Consistent systems and processes will also help ease the accommodation of new hires or gig workers that might come and go with greater frequency.
Establish training documentation to capture industry-specific knowledge and business intelligence. This information will then be available to each of the various staffing models.
Evaluate outsourcing processes to a managed services provider. This case study, A Business Case for Smart Data Extraction, explains how a Title industry analytics company was able to reduce costs by 40 percent.
- Automate processes – Intelligent Process Automation systems can improve business scalability and efficiency. These types of investments open new possibilities to pivot and adapt quickly as business conditions change. Business resilience is the top strategic objective. Evaluate future investment opportunities and business partners by the level of automation they can provide. Perform this evaluation across every business function. Examples include how data is extracted to how billing processes and systems integration is done. A decline in the cost of labor resources will follow to ease business volatility.
The world continues to become increasingly digital and automated. Every business – including those operating in the Real Estate industry – must invest in these technologies to remain competitive and viable. Now is the right time to accelerate this investment. Business opportunity costs are low, and staffing availability exists to help migrate over to new systems and processes.