The real estate recovery, such as it is, is translating into higher compensation for property company executives, but only if their performance warrants the reward.
That’s the finding of a nationwide study released last week by the Building Owners & Managers Association International and the Arthur Andersen Real Estate Services Group.
The study said pay for performance continues to drive compensation for key job positions in commercial real estate, with 62 percent of executives and managers reporting that they receive some form of incentive pay.
The second annual study, “Managing The Future: Benchmarking Compensation Trends in Commercial Real Estate,” found that total compensation, including incentive pay, for the most senior property executives totaled an average of $118,600 in 1993. Two-thirds of these executives received some form of cash incentive pay with the average amount at $25,000.
Due to the lower salary levels, incentive pay was generally more prevalent for less senior management and supervisory positions. Incentives for these positions offered key opportunities to improve overall compensation, particularly with base salary levels remaining almost unchanged from 1993 to 1994 for many positions.
The highest pay increase was recorded by top regional financial managers and assistant regional managers, at an average 5 percent, while the majority of top property executives and leasing specialists earned no increase.
“Clearly, the commercial real estate industry remains committed to incentive pay,” said Thomas B. McChesney, president of BOMA International. “Top property executives have less pay at risk with base salary levels averaging $100,000. The majority of managers and specialists at lower pay levels have significant bonus opportunities based on performance.”
Managers with responsibility for a larger number of properties, either regionally or in a metropolitan area, tended to have higher total cash compensation (base salary and incentives) than others.
Top regional managers, typically with responsibility for more than 3 million square feet of space, earned an average total compensation of $95,785, with incentive pay at $15,000 last year.
Incentive pay patterns also varied widely by type of position with leasing specialists receiving incentives amounting to 58 percent of base salary for average awards of $26,663.
Companies reported diverse methods of figuring incentive pay.
“We discovered that more than half of the respondents do not base incentive awards on company performance, but rather on other factors that include individual effort, discretionary evaluations and property performance,” said Ellen S. Valles, an Arthur Andersen compensation and benefits expert who was project manager for the study.
“Most companies made awards in the form of annual bonuses to salaried executives. Leasing specialist is the only position involving extensive use of commissions,” she said.
The study was based on a nationwide survey of real estate management companies for 11 job positions, including executive, management and supervisory personnel. The database reflects 1,908 responses from 204 companies in the United States and Canada.
Holiday cheer
This is the time of year, now that we’re into fall, when an annual dilemma hits those in the real estate professions-what to do about holiday greeting cards.
Not that big a dilemma, you say. Well, according to Chicago architect Stephanie Weidner it is. She has started Card Art, a new business dedicated to publishing greeting cards specifically aimed at those in the design, architecture, building and engineering industries.
“I realized image is extremely important to architectural firms, even when it comes to sending out holiday greeting cards, and there was a very limited source of cards which conveyed the appropriate message,” Weidner said.
Her collection, which features work by a number of Chicago artists, includes six cards-Blue Figure with Building, Building in Snow, Abstract Architectural Details, Still Life with Full Moon, Holiday Parade and City Night. A catalog is available from Card Art, P.O. Box 81584, Chicago, 60681.
And you thought you’d have to settle again for the card showing Donald Trump hanging decorations at the Plaza.
Retail cannonball
Occupancy and asking rents for retail space along the State Street/Wabash Avenue corridor continued their robust, upward trends this year, according to an annual survey by Northern Realty Group Ltd.
Michael Shields, executive vice president of the real estate firm, said the numbers for State/Wabash are the strongest the company has seen in five years of tracking downtown retail.
Over the last year, average asking rents have risen 19.5 percent, to $33.85 per square foot, while vacancies have delined a full percentage point, to 12.5.
“The State/Wabash vacancy has been improving steadily since 1990, when it was 27.4 percent. This indicates State Street has recaptured its historical stature as one of the world’s strongest shopping districts,” Shields said.
Other leases and sales
– Richmond, Va.-based Heilig-Meyers Co., a home furnishings retailer, has leased a 98,800-square-foot facility at 100 Overland Drive in North Aurora and will relocate its warehousing operations there this fall from Chicago. CB Commercial Real Estate Group, which represented ownership of building in the transaction, said Heilig-Meyers also plans to open a showroom on the site. The retailer operates 23 stores in the Chicago area after its recent acquisition of Nelson Brothers Furniture Co. and its eight stores.
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Steve Kerch’s columns appear in Real Estate on Sunday and in Your Money on Thursday.
