Is it better to hire outside of a firm or internally?
For large corporations, recruiting expenses are enormous, and yet in most cases, the process of hiring internally is secondary to going outside to recruit talent. Research suggests that promoting from within can deliver more benefits for companies than hiring outside talent. I came upon a recent study that found that external hires were paid approximately 18% more than internal employees in equivalent roles, but fared worse in performance reviews during their first two years on the job. Even more interesting was a recent Wall Street Journal article that reported on a study by Booz & Co., which found that chief executives hired from outside a company are twice as likely to be forced out as those promoted from within. These statistics support the fact that companies should invest more in succession planning, a process which, if managed well, will save significant recruiting dollars and produce considerably better performance and organizational stability.
Check out LoPinto's weekly "Executive Watch" column at www.globest.com/executivewatch
How do you see the transaction market shaping up?
Low interest rates, the silver lining of the era of caution and uncertainty, combined with increased financing sources, form an important cornerstone of a strategy to capitalize on CRE investment opportunities. Modest levels of new construction, employment growth and improving occupancy signal rising NOIs and price appreciation over the next three to five years. Prices for top-tier, class A assets in primary and more recently, secondary markets have escalated, but the vast majority of the marketplace has achieved price stabilization, not major gains. The cyclical bottoming of prices and improving fundamentals, together with the incredibly low cost of debt, now fuels investment activity across a broader spectrum of properties by quality and location. The slow and steady rise in economic vitality will eventually kick into more of a "normal" economic expansion, but is strong enough in the meantime to spur a more inclusive commercial property investment cycle going into the second half of 2012.
Check out Nadji's "Street Smart" blog at www.globest.com/blogs/streetsmart
What is currently the biggest CRE insurance issue?
We find in talking with risk managers the area of focus that really stands out among others these days is the tightening market for catastrophic capacity for property insurance—particularly North American wind and flood. This is tied not only to recent weather-krelated experience but also in large part to changes in catastrophe models that carriers use as the basis for allocating their capital. The prices of these coverages are rising, in some cases sharply, and capacity in general is shrinking on a per-carrier basis. Capacity still exists but programs with these exposures are often becoming more complicated and expensive, thus requiring more detailed analysis of information and options by all involved parties. On an additional and somewhat related note, lenders have tightened up underwriting standards for commercial real estate loans and as a consequence are paying greater attention to insurance requirements.
Learn more about Zurich's CRE practice at www.zurichna/zna/realestate/realestate.htm
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