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January 18, 2012

Under Construction: Diversity in Commercial Real Estate

by Yahya E. B. Henry

“Commercial real estate is perhaps the most compelling investment opportunity in the United States right now, it is a $5 trillion business where one percent is minority.” Quinton Primo III of Capri Capital Partners L.L.C. “  ~ from Black Enterprise

Under Construction

Under ConstructionThe real estate industry, from a development perspective, is singly the least diverse industry on the planet.  You could also say one of the most vital. There are proportionally more minority accountants, doctors and lawyers than minority management-level commercial real estate professionals (less than 1% of 125,000 – source REAP).

I think part of that rests in the fact that it’s primarily controlled by a few white males. Literally, a small fraternity controls the majority of the world’s real estate. There is some historical significance to this as most property was held by white owners and has been passed down throughout generations. It largely remains that way today. One percent of real estate wealth is held by minorities. No wonder heavily populated urban areas suffer  steeper declines compared to more diverse cities. Women are also significantly underrepresented in commercial real estate as well.

The essence of real estate development is identifying a need and filling it. Whenever I hear someone say, “This area needs a supermarket,” or “We really need a drug store,” I can only think to myself how many would-be developers exist who could benefit from mentoring.  It’s a catch 22: you need minorities in development to mentor other minorities in development, but if the numbers of minorities aren’t increasing, the gap will only continue to widen. By 2030, it’s projected that America will have to build another 200 billion square feet of space to accommodate growth for an expected 70 million, and a great majority of that growth will be from non-whites.

As urban renewal becomes more pronounced, we’ll need a cross-section of real estate minds to address our ever-changing demographics. Chances are your community – no matter the cultural makeup – was developed by someone who does not look like you or share the same value systems you do; a need was identified and filled. Many communities are accustomed to being part of a charette. However, what communities are not used to is being apart of the implementation process once suggestions are made and adopted by a given city.

I think we should inspire, educate and empower community level leaders with the resources they need to redevelop their own communities. The response was quite astounding on Ava Bromberg’s new model that seeks to leverage strip malls into vehicles of economic activity. For example, Abyssinian Development Corporation (ADC) is the largest community development organization of its kind and demonstrates the power of community engagement – they have a portfolio of over $350,000,000.

Detour: Level Playing Field

DetourThe need is much greater than many realize but the conversation has largely been non-existent because so few are affected. I’ve chaired several industry committees and have witnessed, personally, the underrepresentation of women and minorities within the industry. On any given day, you’ll find a number of minorities who practice residential real estate. They often lack the knowledge on how to structure projects and thus pass them on to someone who has the knowledge capital to deliver a project. This isn’t an indictment, we need skilled professionals in real estate but the lack of information sharing has reached critical mass.  Just as social media has allowed communities to be formed online, I believe communities can be rebuilt offline utilizing a similar platform – create the conversations, share solutions and implement the best ideas.

I’m pulling back the curtain to say the secret is out – anyone can develop real estate, it’s not an elite club meant for a few. The question then becomes a matter of how to connect the many dots. I’ve met with some prominent minority developers with businesses that range from a few million to a few billion dollars, but none of them offered solutions to lift up the next generation of real estate leadership. Social media has allowed for the brokering of ideas a world over; Aribra seeks to accomplish a similar feat in the built space. Is this about economic benefit? Absolutely not. It’s about taking our communities back. A lot of people bemoan capitalist organizations that effectively strip other countries of their natural resources. This could happen for any number of reasons; some are political, some are not. Whatever the reason, there is no need for our communities to be exploited by developers, most who don’t live there and are solely looking for economic returns instead of leveraging already existing assets.

The following are organizations that have sought to address the issue of diversity in commercial real estate.  I’ve found them to have successful inclusion programs.

a. CCIM’s Cultural Diversity Education Program (CDEP)

b. Project REAP [Real Estate Associate Program]

c. Commercial Real Estate Women (CREW)

It’s our time.

Yahya E. B. Henry

About Yahya E. B. Henry

Merging his passion for cities, real estate, tech and travel, Yahya is introducing the world to a new model of real estate development that draws from best practices around the globe.

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5 Comments

  • Wow! The lack of diversity in this field is alarming! The decision makers in real estate need to proportionately reflect the population (or at least come close!). It's not to say that I don't trust the current developers…it's just that there may not be anything personal at stake for them. I grew up on the not-so-prominent side of town in Jacksonville, FL. Sadly, my neighborhood as a child declines more and more each year. Who looks pass the demographics or history of a neighborhood to see the potential that lies there? Who decides what areas of a city will have ABC stores on every corner and which will have a Starbucks? I know that money determines most of this but I would like to know that the folks developing consider more than just profit.

  • Thanks for your comment. Many of these decisions are driven by demographics – density, incomes, traffic counts etc. When you're developing in lower income communities there are often challenges in delivering a project without subsidizing. What it costs to build and the required income usually is out of balance. Several gap-financing mechanisms have attempted to address this issue i.e. Low Income Housing Tax Credits (LIHTC), New Market Tax Credits and other incentive-based financing.

  • A slightly different bend on this is the stunning lack of diversity in the Architecture and design sphere. I can't say I've studied the phenomena in depth, but there is a shocking lack of African American representation in the field of Architecture, and not just at the “starchitect” level, working architects across markets.

    Race in general is a hot button topic in the US, so (as a you know, a white guy) I tend to tread lightly. But I'll say this, when it comes to “role model” professions, the things a parent might dream of their child becoming someday, doctor or lawyer, or scientist often come to mind. People, in general, think of real estate developers, designers and architects as some kind of “other.”

    “They” put up another strip mall or “they” tore down that building I loved and put up a Taco Bell. Well “they” are a group of professionals. “They” could be your brothers and sisters and sons and daughters. It's time we de-mystify the built space on every level so people feel empowered and can speak from a position of knowledge when it comes to their buildings and their neighborhoods.

    Great post, Yahya. I love seeing how your mind works.

  • You're exactly right James…the idea of little Johnny or Susy growing up to be a real estate developer (architect, planner) isn't an acceptable career path because it's not understood. Quite the opposite is true when you think of “Doctors and Lawyers”…I wanted to be a lawyer (glad I grew up).

    As with anything else, the lack of effort to understand is self-perpetuating – it will continue unchecked and without argument. I'll echo you in saying we need to demystify our industry. The process of transparency has begun and doors are opening. We're in the midst of the greatest wealth transfer of our generation and I believe during the time the lines will clearly be drawn between the haves and have nots. A lot of the issues in our [black] community are not 'racial' but are 'economic'.

  • You're exactly right James…the idea of little Johnny or Susy growing up to be a real estate developer (architect, planner) isn't an acceptable career path because it's not understood. Quite the opposite is true when you think of “Doctors and Lawyers”…I wanted to be a lawyer (glad I grew up).

    As with anything else, the lack of effort to understand is self-perpetuating – it will continue unchecked and without argument. I'll echo you in saying we need to demystify our industry. The process of transparency has begun and doors are opening. We're in the midst of the greatest wealth transfer of our generation and I believe during the time the lines will clearly be drawn between the haves and have nots. A lot of the issues in our [black] community are not 'racial' but are 'economic'.

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