We wanted to understand what the fastest-growing commercial real estate investment firms were doing differently in order to identify best practices in leadership and operations management. To do this, we conducted a survey of CRE executives June 15-July 2, 2021 and asked a range of questions about portfolio growth, strategy, hiring, management, technology, and budgeting.
108 senior executives at U.S.-based commercial real estate firms participated in the study, representing a cross-section of regional and nationwide sponsors with a mix of property types and a range of portfolio sizes.
Growing firms are more likely to use an investor portal
The survey results showed that one of the defining characteristics of growing firms was their use of an investor portal. Sponsors who had a portal over the past three years were 27% more likely to increase their assets under management (AUM) over the time period.
Investment managers are increasing investments in technology
Not surprisingly, we see sponsors increasing investments in technology as a result. 66% of all respondents report having increased investments in technology over the past 12 months, more than any other expense category.
73% reported plans to increase investments in technology over the next year, again greater than the number that plan increases in expense for personnel (70%) or business development (67%).
What else are the fastest growing companies doing?
To further understand the operational strategy differences of the GPs growing the fastest, we compared data from firms with at least $40M in AUM that had doubled the size of their portfolio over the past 3 years. (Hereafter referred to as “top performers.”) 13 of the 108 firms participating met this criteria, and we found they do things differently.
Top performers are strategic planners
When asked how they would rate their firm’s strategic planning process, it became clear this is correlated with growth:
The biggest differences exist in the areas of alignment around a clear and compelling vision of where the firm is going, and clear individual accountability for results.
Top performers recruit differently
Specifically, they are more likely to use recruiters to find talent, and more likely to hire directly from university. They are slightly less likely to hire from other CRE firms.
Top performers manage their teams differently
The biggest difference between how top performing companies are run and the others is the presence of programs to increase diversity in hiring, development, and leadership.
Having a well-defined compensation, benefits, and incentives strategy is also a significant difference between these groups.
Top performers are more likely to focus on raising capital
46% of top performers said raising capital is their #1 focus, versus 29% of other companies that said the same.
Related: Get the 2021 CRE fundraising survey data and see where and how sponsors are raising money now
Top performers are less likely to be slowed down by manual processes
15% of these firms shared that manual processes are a top challenge, while other firms were more than twice as likely to report the same.
Our fundraising survey earlier this year showed this could be because top performers rely more on technology to speed up investment operations. Respondents using Juniper Square indicated they were closing capital 40% faster than other sponsors. Further, those using technology reported average capital commitments that were twice as large as those not using technology.
To learn more about how commercial real estate investors are using Juniper Square to run their businesses more efficiently, click here to watch a quick video.