Pay-for-performance continues to drive compensation.

Pay for performance continues to drive compensation for key job positions in commercial real estate, with 62 percent of executives and mangers reporting that they receive some form of incentive pay, according to a nationwide benchmarking study released by the Building Owners and Managers Association (BOMA) International and Arthur Andersen.

The second annual study - Managing The Future: Benchmarking Compensation Trends in Commercial Real Estate - revealed that total compensation (including incentive pay) for the most senior property executives totaled an average of $118,600 nationally in 1993. Two-thrids of these executives received some form of cash incentive pay with the average amount at $25,000. Due to the lower salary levels, incentive pay was generally more prevalent for less senior management and supervisory positions. Incentives for these positins offered opportunities to improve overall compensation, particularly with base salary levels remaining almost unchanged from 1993 to 1994 for many positions. The highest pay increase was recorded by top regional financial managers and assistant regional managers, which averaged at 5 percent, while the majority of top property executives and leasing specialists earned no increase.

"Clearly, the commercial real estate industry remains committed to incentive pay," said Thomas B. McChesney, president of BOMA International. "Top property executives have less pay at risk, with base salary levels averaging $100,000. The majority of managers and specialists at lower pay levels have significant bonus opportunities based on performance."

Managers with responsibility for a larger number of properties, either regionally or in a metropolitan area, tended to have higher total cash compensation (base salary and incentives) than other positions. Top Regional Managers, typically with responsibility for more than 3 million square feet of space, last year earned an average total compensation of $95,785, with incentive pay at $15,000. Incentive pay patterns also varied widely by type of position, with leasing specialists receiving incentives amounting to 58 percent of base salary for average awards of $26,663.

Companies reported diverse methods of determining incentive pay. "We discovered that more than half of the respondents do not base incentive awards on company performance, but rather on other factors that include individual effort, discretionary evaluations and property performance," said Ellen S. Valles, an Arthur Andersen compensation and benefits expert who served as the firm's project manager for the study. "Most companies made awards in the form of annual bonuses to salaried executives. Leasing specialist is the only position involving extensive use of commissions."

Study Highlights

The study yielded a wealth of data analyzed by job position, years of experience, geographic area, type of company and properties managed, as well as demographic factors. Additional highlights include:

Health Care Insurance: Virtually all companies provide health care coverage to full-time employees, but nearly two-thirds said they are contemplating or have already taken steps to control insurance costs. Measures cited included increasing deductibles and boosting co-pay provisions. Companies surveyed nationally pay $2,100 on average for individual coverage and $5,458 for family coverage per employee.

Retirement Benefits: Virtually all companies (96 percent) provide retirement programs to employees, with 401 (k) - employee savings programs (67 percent) the most common form. Most of the companies with an employee savings program (95 percent) either match the employee savings or provide a contribution to all employees accounts, making retirement a joint effort between employers and employees.

Variations by Region and City: The survey revealed significant differences by region and city for various positions. Atlanta led all metropolitan areas in level of total compensation for top property executives, for example, with incentive awards also significantly above the national average. Companies located in the Southern region generally paid higher incentive awards and were ranked at the top in terms of total compensation for these executives. Companies located in New York City paid the highest total cash compensation for senior property managers. The Pacific Southwest was the region paying the highest total compensation to property managers, while San Francisco was at the top in pay by city. In total, city analyses covered 20 markets.

The comensation and benefits study was based on a nationwide survey of real estate management companies for 11 job positions, including executive, management and supervisory personnel. The final database reflects 1,908 responses from 204 companies in the United States and Canada.