The Federal Reserve Bank just raised interest rates yet again, continuing a year of increasing rate hikes. Coupled with record high inflation and the remnants of the COVID-19 pandemic, we are in some very turbulent economic times. This turbulence poses a big question for real estate firms: how do you keep your team well-staffed to jump on opportunities as they arise, while protecting against market fluctuations that may shrink pipelines? 

The blueprint for a resilient commercial real estate team is straightforward: a core of leaders across each functional area of the business, supplemented by a well-rounded staff and a network of vendors that can stay flexible and responsive to the demands of deal flow. 

Key Components of a Scaling Investment Team

Every rapidly scaling real estate team is, at its core, a system of interconnected parts. Underwriters require producers to bring in new business. Construction managers can’t do their jobs without funding for new projects. As a team leader, you can’t drive your business forward without having all of these functions well-oiled and humming smoothly regardless of whether the market is turbulent or calm, whether the pipeline is long or short. 

Resilient, high-growth real estate teams have three fundamental components that allow them to weather the ups and downs of a tumultuous market. 

1. A core cadre of leaders

The first component is a core cadre of expert team leaders who own each functional area of the business. In a small business, this could be just a sole proprietor. In a larger firm, it may be a team of a dozen, each with clearly articulated roles. These team members are typically full-time employees and are responsible for setting goals and owning processes for the organization.

As an investment firm, your core team will likely include full-time professionals who own acquisitions, asset management, and finance (at the very least). If you are substantially involved in development and construction, those fields will also have their own leaders. Other core roles could include legal, accounting, investor relations, and capital markets.

The professionals that own these roles may be solely responsible for these functions and/or also hold C-level positions in the firm.

2. A support team

The second component is supporting staff within the core functions described above. These team members may be more junior or they may be experts in their own right, and they are able to act quickly to execute tasks and perform the functions that a real estate business needs. 

In larger organizations, these team members will represent the bulk of the workforce. In contrast, on smaller teams, they may constitute only a few analysts or assistants supporting the core leadership team.

3. Vendors and external partners

The third component of your resilient scaling strategy is the vendors and external partners you choose to work with. Not all external partners offer the same amount of resilience, and making the right choices here can turn bottlenecks into opportunities. Does your law firm have the capacity to scale as you grow? Are your capital sources, such as your StackSource Capital Advisor, ready to expand with you? Do your vendors themselves embody an ethos of flexibility? 

Methods to Build Resilience into Your Team

The best companies use various methods to balance their headcount and deal flow. They tend to carefully plan their investment activities ahead of time, leverage flexible contract employees, or cross-train employees so that different staff members can pick up extra duties as needed.

1. Pipeline planning in advance

Pipeline planning is an effective way to back into an understanding of workforce needs. For example, a firm could identify a target number of deals to close in a given quarter, infer the workload that those deals would generate, and then arrive at a target number of staff members for that quarter.

This is an exercise that may be easier for larger firms than scaling ones. With the benefit of years or decades of track record, institutional real estate firms are likely better aware of workload per deal than newer companies. Plus, with their reputations and access to capital, established companies can be more confident that they will hit their target numbers than smaller investors, both within the focus time frame and from quarter to quarter. 

In sum, if you’re an established investor with years or decades of experience, you may be able to reliably predict you’ll need three more underwriters and two more capital markets experts next year. On the other hand, if you don’t have that long of a history, this strategy may be more effective as a rule of thumb than an authoritative guide to staffing demands. 

2. Leverage flexible freelancers

As a company, Bullpen’s sole focus is on placing expert freelancers with commercial real estate firms that need additional bandwidth right away. Freelancers have a number of benefits compared to traditional W9 employees. They can be easily added to or removed from your team as your pipeline ebbs and flows with no hard feelings and fewer expensive onboarding costs. 

The other significant benefit of using freelance analysts, underwriters, asset managers and other professionals is that hiring timelines can be directly keyed to specific projects. If you have an eight-month development project around the corner but little certainty when the next deal will come after, why not hire a temporary development associate and only renew their contract if you have more deal flow in the future?

3. Cross-train employees

The third solution companies can use to keep their teams resilient and flexible is to cross-train their team members. 

Under this approach, each team leader may have the ability to function in a range of roles alongside their primary one. For instance, your head of development may also know how to manage a construction project. This way, your entire team could cover for each other, increasing resilience if you lose a core team member or expand into a new market. 

Cross-training can be a fantastic approach to ensure that your team leaders are fluent in multiple disciplines of the business, but developing completely new competencies across your junior and mid-level employees can be challenging. Furthermore, cross-training won’t help you quickly scale down a team to reduce talent costs if you hit a rough patch or market conditions drastically change. 

If you’re comfortable staying with your established crew of experts, don’t see much need to grow rapidly with new talent, and aren’t concerned about overstaffing, this strategy can be very successful. If you’re looking to expand your pipeline quickly, it may be too cost and time-intensive to successfully deploy across each level of your organization. 

In this article, we’ve discussed the two core components of a scaling real estate investment firm. We’ve also reviewed three different strategies high-performing investors use to keep their staff size in sync with the needs of their business. What other headcount management strategies do you find successful? Let me know on LinkedIn.