Risk management remains top priority for Europe's property firms: survey

Most European real estate companies remain focused on risk management despite signs of cautious recovery in select European markets, according to a report entitled 'The Business Enterprise in Europe' released on Wednesday by the Urban Land Institute in conjunction with executive search company Ferguson Partners Europe.

The study is based on interviews and surveys with approximately 100 leaders across European property companies (public and private), investment banking, investment management, private equity and brokerage firms, banks and insurance companies, and other sectors. It provides an assessment of how real estate executives are managing their companies through challenging economic conditions and how they are adapting to transformative changes within the broader industry.

The respondents reveal that leaders are intensely focused on maintaining stable cash flows, looking for every opportunity to cut costs, redoubling efforts to maintain good relationships with investors, and taking the initiative to keep closer communication with lenders. More than ever, leaders are also re-examining and restructuring talent pools to ensure that organisations have teams with vision, knowledge, and skill to drive further growth and success in the real estate industry of the future.

According to the report, the forecast regarding headcount change in 2010 is not overly encouraging. Demand will be most significant among investment managers and property services firms, with investment management firms expecting to increase their total workforce headcount by an estimated 2.8% and the private equity sector anticipating an increase in total workforce headcount by an estimated 0.7%. The development/construction and banking/lending sectors are expected to see decreases in their workforce decrease by 1.3% and 3.3% respectively.

Geographically, growth seems to be focused in Western Europe and, on a global basis, in Asia. Around 32% of respondents expect to increase their workforce in Western Europe, while 41% expect a decrease in Southern Europe and 43% of respondents expect a decrease in Eastern Europe. Nearly one-half (49%) of respondents expect to increase their workforce size in Asia in 2010.

The report notes that, in general, salaries throughout the real estate industry are expected to be flat to slightly higher for 2010. 2009 cash incentives will be down and equity awards will be higher to retain and incentivise executives where common equity holdings are largely meaningless. Creating compensation programmes is particularly challenging, as companies try to restructure or replace plans that were developed during boom times, the report says.