The Future of Real Estate

Compensation: Watch for the emergence of the floating salary, whereby real estate firms will bifurcate base salaries into fixed and variable components. The fixed component will likely be 80% to 85% of the market rate for that position. At the end of each quarter or year, real estate companies will study the market and determine the variable component or value of each position and make the necessary lump-sum adjustment payment. Base salaries will likely increase 150 to 300 basis points above the rate of inflation, and annual bonus awards will approximate 90% of the targeted amount. Watch for teaming and profit-sharing to become commonplace in brokerage. The shift toward a 100% split for the high-production broker may be in store for small to mid-size brokerage firms.

Consolidation: The industry consolidation will continue, and as many as one third of today's CEOs will be gone by 2008. Succession and legacy exits will become a leadership challenge for many organizations. Don't be surprised to find the new acquirers to be non-real estate firms. (e.g.: An Amazon.com and Equity Office Properties merger would provide millions of contacts to the acquirer.)

Tenant Service: Watch for tenants to demand service clauses in their rental agreements, and you can expect the "portable" lease to become a reality. Measuring tenant satisfaction, hardwiring the voice of the tenant into the organization and creating artificial intelligence to predict tenant behavior will be commonplace. Building owners and managers may eventually provide small lapel-pin transmitters so tenants' needs (such as HVAC) can be met before they arrive at the workplace. The battle for control of, and access to, the tenant is just beginning to heat up.