Commercial real estate faces a DE&I divide

In Real Estate Capital USA’s inaugural DE&I State of the Market Survey, conducted in collaboration with New York-based trade association the Commercial Real Estate Finance Council, respondents reported a divergence in views on how industry-wide DE&I initiatives are faring and the ways in which the landscape could improve further. It amounts to a split between the perceptions of senior management and the rank and file members of their organizations.

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The survey – conducted between June 1 and July 31 – includes responses from 193 working professionals in the commercial real estate debt industry. This first-of-its-kind survey spans organizational charts, with input from executive suites to analysts and associates. Real Estate Capital USA will return to this topic in our next issue, providing further analysis as part of a larger report on ESG in the commercial real estate finance space.

Disconnect on perception

More than half of the total respondents agree that their organization has a diverse workforce. That said, the result shows a bifurcation, with senior professionals tending to agree with the statement more strongly.

“By and large, [industry executives are] keenly aware of the need to provide opportunities to every- one that is qualified for a role”


The proportion of survey participants who strongly agree their companies have a diverse workforce sees a gradual decrease from 45 percent among presidents or C-suite members, to 25 percent among managers and only 12 percent among analysts and associates.
Conversely, only 5 percent of presidents or C-suite members disagree that their organizations had diverse workforces. Meanwhile, 23 percent of associates and analysts either disagree or strongly disagree with the statement.

A similar division can also be seen in responses to the question of whether business leaders’ efforts and employee perceptions of DE&I are aligned within their respective organizations. More than 65 percent of the respondents with job titles including presidents, partners, directors, and senior managers believe there is an alignment between management’s efforts and employees’ perceptions to achieve a diverse and inclusive work environment.

However, only 42 percent of the managers, analysts and associates agree or strongly agree executives’ efforts are in line with their perceptions of DE&I practices.

One respondent notes real estate finance industry executives are “by and large keenly aware of the need to provide opportunities to everyone that is qualified for a role,” but explicit and implicit biases have hindered the improvement of DE&I. This is reflected mainly in the lack of minority representation in leadership roles.

“I can’t help but say the commercial real estate industry is still very much a boy’s club, but so is the entire finance world,” one respondent says. Many also believed having more diversity at the executive levels will help the industry to have more open conversations about DE&I.

Other survey participants say that, despite improving awareness, DE&I policies have not been prioritized.

“There is little to no mandated reporting for US companies to government officials and any reports are never made public,” says one respondent. Some respondents also suggested that assigning DE&I initiatives to a standalone department – a practice that is common among firms – is not enough to ensure key decision-makers collectively prioritize the work.

Boosting momentum

A full 73 percent of respondents say their companies actively recruit diverse talent, with recruiting from universities, professional networks and trade organizations being the primary channels.

“That type of network and skill set is one that is more difficult for many diverse candidates
to possess”


Survey participants in the analyst and associate category say there are still hindrances to address bias in the recruiting process. Some say the industry puts too much emphasis on past experience rather than identifying and training talent who would stay and grow with the organization. “That type of network and skill set is one that is more difficult for many diverse candidates to possess,” says one participant. Some pointed out invisible barriers for candidates from diverse backgrounds are harder to break, and noted it is still not uncommon to see companies “hire via nepotism.”

Respondents from more senior job categories believe the industry can do more to attract and retain diverse talent. One respondent says companies should provide more opportunities for people “to learn complex skills in career advancement.” Additionally, “more mentors with long-lasting, intentional relationships with measurable outcomes, and wider use and adoption of technology to distribute information and recruit diverse talent” is necessary.

Diving deeper into the implementation level, half of all respondents say their companies have a defined DE&I policy. From the highest to lowest proportion, commercial real estate firms have goals for DE&I policy that include providing a supportive environment for employees, attracting and retaining talent, achieving stronger commercial results, improving company reputation and complying with legal and regulatory guidance.

Perception of reality

Diversity, or a lack thereof, also proves to be a point of difference among survey respondents in relation to building a career.

On an industry-wide basis, 58 percent of all respondents agree that a lack of diversity is a barrier to career advancement across the commercial real estate debt landscape. By comparison, only 14 percent disagree. The remaining 28 percent neither agree nor disagree.

One respondent in the director/managing director category notes bias and discrimination are two of the primary hurdles keeping the industry from achieving a more fair and equitable dynamic. “Bias and discrimination based on factors such as gender, race, ethnicity, age, disability and socioeconomic status persist in many industries,” the respondent says. “These biases can manifest in various ways, including hiring practices, promotion decisions, pay gaps, and unequal access to opportunities.”

“Addressing bias in recruiting processes is the biggest hindrance”


Surmounting such biases, as many respondents note, would require a broader effort at an industry and organizational level to address unconscious biases, implement fair policies, and foster inclusive cultures.

At an organizational level, the opinions appear to be more complex. Across all respondents, only 19 percent agreed or strongly agree that a lack of diversity was a barrier to career advancement at their respective organizations.

However, that average is a result of a wider skew between senior and junior professional viewpoints. Based on strong agreement and agreement responses, a lack of diversity is cited by 29 percent of analysts and associates and 45 percent of managers as being a barrier to career advancement at their respective companies.

Only professionals that identified as directors or managing directors come close to matching those totals, with 20 percent saying a lack of diversity was a hindrance to advancement. Most senior managers, partners, founders, presidents and C-suite members disagree or strongly disagree that a lack of diversity was a barrier to advancement.

This split serves as a signal that while shortfalls in diversity expectations may not be visible from the upper managerial or executive ranks, absence is still felt among the junior ranks.

DE&I driver’s seat

The reasoning behind the disconnect between perception and reality can be seen when factoring in the individuals leading DE&I initiatives at an organizational level. Senior executives were cited by 45 percent of all respondents as being the assigned overseers and drivers for such initiatives at their respective companies.

“Having DE&I executives and allies in leadership positions helps ensure more DE&I candidates and students have an ‘in’ to the industry”


Beyond senior management, DE&I at a company level is being led by specialist committees, human resources, affinity group leaders or other leaders such as in-company volunteers or senior DE&I managers, as some respondents note.

Looking across the survey, there is a clear appetite among younger professionals for more DE&I programs capable of delivering results that fit their vision for how the landscape could further evolve. “I am very heartened to see that when you look at our survey, a shift in attitudes about DEI is being driven by the younger generation,” says Lisa Pendergast, executive director at CREFC.

“Having DE&I executives and allies in leadership positions helps ensure more DE&I candidates and students have an ‘in’ to the industry,” one respondent says.

By and large, when respondents were asked the words or phrases they would use to describe DE&I broadly in the commercial real estate industry, the resounding trio that ranked highest were ‘lacking,’ ‘improving,’ and ‘important.’ That combination, in isolation, presents an interesting parallel to the results observed across the survey. But digging deeper also reveals other prominent words and phrases to describe the state of DE&I, such as ‘evolving and growing,’ ‘opportunity,’ ‘work in progress’ and ‘challenging.’

Sentiment for growth of DE&I strategies is also visible in respondent testimonials, including one managing director who notes that “the process and structures are in-place, it will just take time to attract and retain a more diverse group of CRE professionals.”

“Bias and discrimination based on factors such as gender, race, ethnicity, age, disability, and socioeconomic status persist in many industries”

Director/managing director

For analysts, associates and lower-tiered managers, one of the more common demands for fostering more DE&I progress was transparency. This applies to both DE&I initiatives themselves and the results achieved, especially since there are no formal state or federal mandates in place to achieve this transparency through regulatory means.

“Addressing bias in recruiting processes is the biggest hindrance,” one analyst notes in their response.

Among all survey respondents, 39 percent say their company does not report DE&I statistics, while 33 percent did not know if such disclosures were being made. By comparison, a combined 28 percent of respondents say their companies reported statistics internally, externally or in both forums.

Another analyst notes: “The industry is highly fragmented and is very relationship-driven. Relationships tend to be among groups of people with similar backgrounds, which is a hurdle to achieving diversity.”

Building better

Despite the obstacles, DE&I initiatives are still gaining momentum toward wider implementation on a company-by-company basis. The industry does still have room to grow and ground to cover before expectation, perception and reality can align from the top to the bottom of the organization chart.

Current initiatives geared toward creating more inclusive pipelines into commercial real estate organizations at the collegiate level represent one such step in that direction.

Broadly, these development programs have been expanded to reach far more students than simply Ivy League and legacy institutions, which can help address the networking and perceived nepotism issues felt by junior professionals.

“There will be leaps and bounds yet to come that bring DE&I to a normality that we do not always feel today,” Pendergast says.