The Continued Rise of the Real Estate MBA

Real estate is an important part of the finance sector and overall economy, which is one of the reasons why more business schools are creating real estate MBA programs. Rutgers launched its real estate MBA program two years ago and UCLA Anderson’s Ziman Center for Real Estate recently received a US$1 million grant to further its research efforts. Read on to learn about recent developments in the real estate MBA space as well as potential career paths open to graduates.

Real estate MBA programs continue to grow

While some schools, such as Columbia Business School and UC Berkeley-Haas, have included real estate in their MBA program for decades, several business schools have added real estate initiatives within the past decade. In a 2013 AACSB survey, 15% of schools reported having graduate or undergraduate real estate programs, an increase of 30% on what was available the previous decade. The University of Miami launched a real estate concentration in 2012, for instance. Two years later, in 2014, Rutgers launched its Center for Real Estate, which is headed up by Morris Davis.  

Prior to the creation of the Center for Real Estate, Rutgers Business School provided little real estate coverage in its curriculum. Now, real estate is an MBA concentration complete with minimum requirements and elective courses. While the fledgling program does not have many electives just yet, Davis says those already on offer are well-staffed by industry experts including some of New Jersey’s top real estate developers. Rutgers’ real estate program also has an advisory board of experts and CEOs who review the curriculum, as well as an Emerging Leaders Council made up of up-and-coming professionals who are involved in much of New Jersey’s real estate activity. Currently, Rutgers is the only business school that covers the Northern New Jersey real estate market, and they have plans to expand their coverage to the New York area.

Beyond the creation of new programs, one of the biggest developments in the real estate MBA landscape has been the creation of a new program to fuel faculty research at UCLA’s Ziman Center. Founded in February of last year with a US$1 million grant from the Gilbert Foundation, the Gilbert Program has provided the center with a funding stream for research in areas of real estate, finance and urban economics. The Gilbert Program has been a, “game changer,” states Stuart Gabriel, director of UCLA Anderson’s Ziman Center for Real Estate, and one which allows Ziman to conduct a, “myriad of research activity not available previously.” Research is an important component of UCLA’s real estate MBA program since Gabriel seeks to provide students with timely and compelling information. Real estate is also an ever-changing field – data changes and methodologies evolve, leading Gabriel to caution that, “you can’t bring last year’s information,” into the classroom.

The value of real estate

The rise of the real estate MBA raises two questions. Why does real estate deserve to have its own MBA specialization? Secondly, why are more schools adding real estate programs to their curriculum?

Real estate’s importance as a major economic sector justifies its status as an MBA specialization. “Real estate encompasses both the major lifetime purchase of households in the United States as well as very significant institutional and private investment activity,” states Gabriel.

Similarly, the University of Miami School of Business views real estate as an, “accepted asset class in the investment world,” according to one of the school’s finance professors, Andrea Heuson. Commercial real estate investment has become so important to institutional investors and foreign capital providers, “that anybody who is working in the investment field should be exposed to how real estate is analyzed,” adds Heuson. While there are many parallels between corporate valuation and real estate, there are enough differences between the two fields to justify treating real estate as a separate specialization.

Real estate has become an increasingly sophisticated activity, one that, as Gabriel points out, involves, “methodologies that are at the frontier of research activity in the academic sector but not yet always well diffused in the professional sector.” Gabriel feels that having an understanding of, and exposure to, treatment and analysis in real estate gives MBAs the opportunity to improve their capacity to contribute to the real estate workplace.

Why more business schools are creating real estate MBA programs

The creation of job opportunities is also one of main the reasons that schools are adding real estate programs. “Municipal markets – cities like Charlotte or Washington DC – all have great universities. All of those universities find that real estate is a good employment avenue for their students. They always want to place their students,” states Miami’s Heuson.

In addition, real estate is a localized market which varies by city, therefore, the real estate market you learn about can rest heavily on the location of your MBA program. According to Heuson, “If you want to understand the South Florida market, it doesn’t help to go to Stern in New York. You just aren’t going to learn the local nuances unless you’re actually in school there. It’s a location thing. I think that’s what’s prompted big, important schools to say ‘hey, we need some real estate classes because it’s becoming an important part of our local economy and it helps to place students.’”

The market-driven nature of MBA programs is another reason behind real estate MBA specializations at business school. “MBA programs understand that there’s student interest in this specialization and there is student placement opportunity in this specialization,” states UCLA’s Gabriel.

How real estate MBA curricula respond to changes in the market

The biggest changes to the real estate MBA curriculum Heuson has seen at the University of Miami have come as a result of the financial crisis. A particular influence was the new terminology and job roles that came about during that time period as well as the idea that real estate investments do not always work out. For example, distress debt wasn’t mentioned in classes prior to the crisis because, up until then, loans weren’t made with the expectation that they would have to take the property back. “The opportunistic side of the market has come to the surface and we need to cover that in our classes,” states Heuson.

UCLA Anderson has also changed their real estate curriculum in response to the economic crisis. “Our curriculum has recognized the importance of understanding all of the real estate antecedents and implications of the financial crisis, so we have a course that seeks to understand all of the capital markets issues and related securitization issues, as well as the rebuilding and policy associated with the financial crisis,” states Gabriel.

Entrepreneurial activity in real estate has been another inspiration for curriculum change at UCLA Anderson, since a course has been created in response to new entrepreneurial ventures in the sector. Anderson has also offered new opportunities around affordable housing development that fuses real estate development activity with interest and concern about the availability of affordable housing.

Learning how to use ARGUS, a software system which performs real estate valuations and cash flow analysis, is a required component of the real estate curriculum at both Rutgers and the University of Miami. Heuson feels that software has changed the real estate workspace because it allows people to perform real estate valuations at their kitchen table and to obtain sophisticated results. At Rutgers, every student spends two to three weeks studying how to use ARGUS, since Davis feels that it is a, “huge résumé selling-point,” for graduates.

Real estate career paths for MBAs

Well-trained UCLA Anderson graduates can use their degree towards a number of real estate career paths including investment banking, technical positions, mortgage-backed securities and housing. “Every graduating student with a real estate specialization from the UCLA Anderson School of Management has a choice of a large number of opportunities,” states Gabriel.

At the University of Miami, the MBAs who take real estate courses tend to specialize in capital markets. For example, a graduate may work on the real estate team for an investment banking firm or do equity research related to real estate investment trusts (REITs). In addition, many finance students at the University of Miami study real estate not because they want to make a full-time career out of it, but because they want to be prepared if they encounter it at some point during their career.

Real estate careers are also a good option for University of Miami graduates who want to remain in the region of South Florida. “Here in South Florida, real estate is such a crucial part of our economy that if you want to stay in South Florida, you have a better probability of getting a job in the real estate field compared to many others.” Heuson estimates that around 60% of University of Miami graduates stay in Miami where they take jobs doing capital market analysis for a family office, or with a commercial real estate broker, such as Cushman & Wakefield, or for a private equity group. By contrast, MBAs who want to work in investment banking or in MMAs will probably need to move to New York to find work.  

As the program at Rutgers is a more recent addition to its roster of MBA offerings, there aren’t quite as many career success stories yet. However, Davis says that every student who shows that they are serious about real estate careers gets placed. In fact, one of Rutgers’ professors, Kevin Riordan, specializes in matching real estate students with job opportunities.

Riordan recently helped Ken Gold, a career changer with a background in television production, start on his path towards a real estate career. Gold originally went into his MBA thinking he would go into consulting so that he could earn money to invest into his side business of real estate properties. During the last semester of his MBA program, he decided to take Davis’ ‘Real Estate Finance’ course in order to help him manage his real estate interests, and ultimately ended up switching his career focus to real estate.

Gold walked into Riordan’s office worried about his post-MBA career, and says that Riordan, “talked me off the ledge.” After Gold’s résumé was sent to Rutgers’ real estate advisory board, he had three job offers within a week. Gold is now a summer intern with Somerset Development and has an opportunity to convert this position to one of full-time employment. One of the major projects he is working on is Bell Works, which has transformed Holmdel, New Jersey’s former Bell Labs headquarters building into a retail, office and hotel space the size of the Empire State Building. Gold recently attended a broker meeting where he said he felt like he was reliving his course in real estate finance, because everything that came up in the meeting had been covered in Davis’ class.