It’s time to get proactive about succession planning
In any given year, approximately 50% of succession plans for chief executive officers (CEOs) in real estate start from scratch, only beginning when existing CEOs transition out of these roles.8 That reactive, rather than proactive, approach to filling leadership vacancies could lead to business continuity disruptions, especially if timing isn’t aligned. This is because it can take years to plan for leadership succession and errors in judgment can be costly; it may take as many as 18 months for boards to determine if they have made an appropriate appointment to a C-suite level role.9 Addressing the retirement cliff should be a board-level priority; if senior management teams aren’t thinking about succession plans themselves, it should be the board’s responsibility to push them.
Gen X, millennials, and even Gen Z are next in line since an increasing share of the baby boomer generation is likely to retire over the next decade. These younger generations can impact the evolution of real estate, infusing opportunities for new thinking across technology adoption, culture, operations, and sustainability. Deloitte’s latest Gen Z and Millennial survey revealed that younger generations of respondents already feel as though they are leading change on product and service offerings to clients; diversity, equity, and inclusion initiatives; personal development; and work/life balance.10
Younger workers are also growing to expect more from their organizations as strategies for attracting and retaining next-generation talent continue to evolve.11 Organizations can show that they are prioritizing employees, including Gen Z and millennials, by addressing wealth inequality, supporting mental health initiatives, prioritizing climate action, and inspiring the workforce to take part in both everyday actions (like banning single-use plastics) and long-term strategies (such as greener office locations and supply chains). Other common talent levers, especially for younger workers, include having a clear and rational hybrid work policy and building a culture that empowers people at every level of the organization.12
Until that time comes, the real estate industry should act to build up this next generation of leaders and fortify the pipeline. A critical step is to work to ensure all of that expertise doesn’t walk out the door before they have the opportunity to reach the highest levels within an organization. Leaders can take steps to extract knowledge from the aging workforce and work it into systems and processes. One way this can be done is to develop two-way knowledge-sharing and mentorship programs: Firms can encourage experienced professionals to teach less experienced employees core sector and leadership-building and relationship-building skills. At the same time, younger employees can offer informal learning sessions to help older employees embrace digital tools and digitization. Real estate firms can also pivot talent development strategies by adopting a skills-based approach. Doing so can begin the transition from legacy command-and-control hierarchies to building cross-functional alignment and integration. These options may help fill knowledge gaps and can prepare younger employees to start taking over parts of these businesses.
Modern technologies and opportunities to learn about more cutting-edge topics—data analytics, cloud computing, and artificial intelligence—are also playing a bigger role in how firms compete for talent and fill in knowledge gaps. Employees are seeking organizations that have increasingly complex technology capabilities and integration so that they can hone their skill sets.13 And technologies like artificial intelligence are already reshaping how existing work gets done while also potentially creating new jobs. From Deloitte’s first quarter 2024 US economic forecast’s upside scenario for labor markets, AI would be the catalyst for enhanced productivity in a potential “golden era.”14 Real estate firms have not traditionally been leaders in this space: Over 61% of firms from the 2024 Deloitte real estate outlook survey noted they are still dependent on legacy technologies.15 As real estate firms plan to adapt their talent pipelines for the retirement cliff ahead, they should consider that the technologies they employ, and perhaps even more so the technologies they do not, may influence hiring and retention decisions for top talent.
Finally, succession planning isn’t a one-and-done activity; it’s something that should be an ongoing and proactive practice. To focus on longevity, executives and their boards should develop succession plans that help enable leadership transitions and review them regularly. These plans should evolve through business and economic cycles, ensuring that the company and its talent pipeline can continue to move forward, even when unforeseen circumstances occur.
Real estate organizations should act on the impending retirement cliff now and prioritize fortifying their talent pipelines. This will likely require proactive board-level succession planning, attention to growing and developing younger leaders, and investment in the right technologies that can identify or fill in where potential control failures may exist should key stakeholders retire. Collectively, these efforts can help the industry move forward and bridge the transition to the next generation of real estate.
