So who were the biggest hirers in UK real estate in 2010 and where is there going to be most demand in 2011? What types of vacancies did we see in 2010 and what vacancies are going to be vogue in 2011? And finally, how have the events of the past couple of years affected compensation levels?
Readers of this blog will be pleased to hear that banks were the biggest recruiters by volume, in UK real estate in 2010 with that trend set to continue in 2011. This makes sense given the huge volume of redundancies by banks in 2008 and 2009 and the need to bolster fairly lean teams as we move into more positive territory following the credit crunch. Whilst recruitment volumes are lower compared to the lofty heights of the peak in 2006 and 2007, it is not all doom and gloom as some readers may think and feel.
I’m sure it will be no great surprise that by volume, the majority of vacancies over the past twelve months have been in debt restructuring, risk management and portfolio management. That said, towards the latter parts of 2010 we started to see surprisingly high demand for bankers in relationship management and even debt origination roles, relative to the amount of lending actually being done in the real estate market. As it stands, we know of at least five banks actively recruiting in relationship management and origination here in the UK.
Recruitment in the debt restructuring world has followed an interesting three phase cycle beginning in the second half of 2008 when one or two banks anticipated early the challenges faced in the debt markets and started hiring externally in modest volumes.
This volume dramatically increased by the end of 2008 and by 2009, demand for workout bankers, was at an all-time high. The majority of restructuring vacancies in this second phase of the cycle were being filled internally through redeployment from origination, relationship management and credit risk teams with the odd sporadic external hire. It was difficult during this second phase in the cycle to gain employment in restructuring through a third party recruiter, the most effective way for candidates to secure employment was by approaching banks directly. The exception at this time were smaller representative or branch offices of international banks who did not have the luxury of redeploying hundreds of property bankers internally into restructuring roles. Being small by nature, such institutions did not hire in high volumes compared with their UK counterparts and appointed recruitment firms to hire on their behalf.
In the second half of 2010 we started to see banks looking externally to recruit restructuring bankers again, as market stability returned. This signified phase three of the restructuring recruitment cycle. Staff that had been loyal during the credit crunch doing restructuring were starting to resign, disappointed at poor bonuses, lack of strategic direction and limited internal communication. These people needed to be replaced and the larger banks started appointing recruitment firms again to search on their behalf. We are still in this third phase of the cycle and it is expected that banks will continue to need staff in restructuring for at least the next three years as they continue to work through challenging lending cases. It is unlikely that recruitment volumes in restructuring will reach the lofty demand of 2008 and 2009 as such roles have a finite shelf life. The question then is what job opportunities will be available to bankers after three to five years in restructuring?
If the recent increase in the volume of relationship management and origination vacancies is anything to go by, perhaps banks will redeploy everyone back into the front office and we will all wake up and think the last couple of years were a bad dream? With the major banks shrinking their real estate balance sheets and some international players pulling out of the market altogether, this seems unlikely. Who then, will employ restructuring bankers going forward? The most likely scenario seems to be a balance between jobs in relationship management, origination, portfolio management and credit risk management. For real estate finance high flyers, there have been and will continue to be opportunities in mezzanine finance on the buy side, although such firms are small and hence recruitment volumes are low. It will be interesting to see the impact that pension firms make on the market from a senior debt lending perspective as this will directly affect their ability to hire in the UK. Finally, question marks remain around the future of securitisation and whether opportunities will present themselves any time soon in this market. Whilst there were a few hires last year in securitisation by one or two investment banks, in reality these people have been hired to manage residual CMBS and RMBS books down. Until we see a successful CMBS transaction take place it is unlikely banks will invest in this market and when they do it is expected recruitment volumes will be low as small teams are already in place. Timing-wise it seems likely recruitment in securitisation will only happen in the second half of 2011 if the greatly anticipated first deal is done.
It is difficult to label in broad brush terms the change in remuneration levels over the past twelve months given that the circumstance of each individual and institution has been different. That said, on average basic salaries within investment banks have increased by up to 50% between vice president and managing director level to compensate reduced bonus levels. By comparison, basic salaries within corporate banks have increased by 20% - 30% at director and managing director level, again to compensate lower bonuses. At time of writing, banks are in the process of thinking about and announcing bonuses and with all the re-basing exercises that have happened recently, it is impossible to see what impact this will have on bonus levels until they have actually been announced and paid. On average, it is expected that total compensation will be 20% - 30% down from the lofty heights of 2006 and 2007 across both corporate and investment banking, related to both the institution and individual.
So what does 2011 have in store for the real estate market from an employment perspective? Whilst the tone of this blog is positive as we saw a lot of opportunity last year, the reality is that 2011 will be challenging. The obvious demand will continue to be in restructuring, risk management and portfolio management as banks replace staff that leave. There will also be opportunities in relationship management and origination in small volumes. If the securitisation market does come back this year hiring will only happen around September or October time as banks prepare their budgets for 2012. And finally, there will be demand from the insurers and mezzanine finance houses in small numbers.
