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Real Estate is Looking More and More Like a Freelancer’s Market

Even with the Federal Reserve decreasing their rate hike to a quarter of a percent in this week’s meeting, the tone was that they were going to stick to the principle that a weaker labor market is necessary in order to combat inflation. Inflation seems to be slowing, but the decrease is mostly due to the change in energy and household expenses, and unemployment has remained low. The central bank’s strategy to aggressively yank up interest rates has already cooled the economy, and now we are seeing the impact leaching into the real estate sector. 

The real estate industry will often thrive during recessions, but the people I talked to for this story told a wildly different story. The rising rates and stubbornly high prices have lowered deal volume, leaving many firms without much work and a need to trim expenses. These slower conditions have spurred a number of layoffs by property firms but, paradoxically, have also created a new market for experienced freelance work. 

A 2022 report from the freelancing platform Upwork found that the proportion of freelancers in the U.S. workforce has risen to an all-time high since the company began tracking the percentage of American freelancers in 2014. Last year, 60 million Americans engaged in freelance work, generating $1.35 trillion in annual revenues for the American economy–a rise of $50 billion from 2021. According to the freelance job site, it amounts to 39 percent of the workforce, an increase of 3 percent from 2021. Additionally, U.S. businesses are increasingly hiring workers on a temporary basis as the economy continues to wobble.

Brokers have long used freelancers to help get their deals done (it’s hard to copy documents on the golf course). The prominence of freelance work in those kinds of roles isn’t all that surprising. However, other industry roles that have typically adhered to the 9-5 full-time schedule, from bookkeepers to asset managers to analysts, have been turning to freelance work as well. 

News of mass layoffs peppered headlines all last year, and the momentum has continued into 2023. Dozens of real estate companies, ranging from hybrid work startups like Anywell to industry juggernauts like CBRE, have made rounds of layoffs, a sobering experience for an industry that was soaring high a year ago thanks to low-interest rates and ballooning property valuations.

PropTech, in particular, might be able to benefit from this new talent in the labor pool, With the recent softening of the job market in tech, there’s an opportunity to attract some of that tech talent into PropTech, which should help meaningfully increase diversity in the years ahead. However, PropTech isn’t immune to the same economic tightening that other industries are experiencing, so hiring in PropTech in the sector will slow this year, just like most other industry.

The real estate market is highly sensitive to fluctuations in the economy, and projected employment varies accordingly. If the economy comes back strong, employment in the property industry will grow with it to accommodate for the increase in activity. But if economic activity declines or interest rates continue to rise, the amount of work in the property industry will continue to drop, and the freelance market will grow. 

Bullpen, a provider of expert freelancers for commercial real estate firms, is gearing up to release its latest report on trends in commercial real estate freelancer pricing. While their report isn’t published just yet, we were lucky enough to get a glimpse at some of their preliminary data. “What we can tell you is that the quantity of people interested in freelance work has dramatically increased,” said Tyler Kastelberg, Bullpen’s CEO. With more workers seeking flexibility, career resilience and broader opportunities, all this new labor supply has created a bit more leverage for companies looking for freelance talent. Kastelberg is seeing overall asking prices for freelance work have dropped. “[We’re] not sure how much exactly, but we’re seeing more price concessions to win work,” he said.

Greater interest in freelance work opportunities and a rise in price concessions both point to a thriving freelance market and a more experienced labor pool to choose from. Continued Fed rate hikes and skittish investor sentiment might continue to spur the gig economy, even for some of the highest-paid positions. A tightening labor market means workers have to find work wherever they can, and a slowing economy will keep companies weary of long-term commitments. We continue to trend toward a gig economy, and real estate is no exception.

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