The Rise of the Real Estate MBA

Real estate is now firmly established in the purview of business schools, but it seems many are moving to more deliberately target the sector.  According to Businessweek, an AACSB survey from last year revealed a 15% increase in the number of courses and concentrations in real estate.  

This increase in provision comes in response to a demand for a stronger, more specific focus, as Rutgers Business School stated as the reasoning behind hiring a new chair in real estate at the start of 2013.

The Portland State University School of Business Administration and the University of Miami School of Business are among the business schools that have entered the game of late. Launching its real estate MBA concentration in 2011, Portland State's program takes a holistic approach, covering other essential areas, such as finance, public policy and project development. The University of Miami, alongside the real estate concentration launched as part of the accelerated MBA program in May 2012, has a focused research program into past and anticipated future trends of the real estate industry, while also maintaining close ties with the business community.

However, real estate programs aren't really that new. Many traditional powerhouses offer well-established concentrations in the sector at MBA level. Soon after the post- World War II real estate boom, institutions such as the Haas School of Business at UC Berkeley, were already seeking to expand business education into the real estate sector, “[Immediately after the war], California realtors came to the university [with ambitions] to set up a college of real estate” explains Professor Emeritus Sherman Maisal in an interview with Ken Rosen, current chair for real estate and urban economics at the Haas School of Business. The Wharton School has had a concentration in real estate since 1985, while UNC Kenan-Flagler Business School and Columbia Business Schools also possess strong real estate programs.

These institutions have continuously changed and adapted their programs in-line with developing trends. Since the inception of its MBA concentration, the Wharton School has continuously increased the program's size and scope of its program, with related fields such as real estate law, development and finance entering the curriculum, while Columbia Business School has been “innovating [its] curriculum and building relationships with professionals in the real estate industry for more than 20 years,” according to Lynne Sagalyn, Earle W. Kazis and Benjamin Schore Professor of Real Estate at the school.

Fuelling the real estate MBA fire

Overall MBA trends within the industry have increasingly been directed towards the importance of applicable business skills in the post-financial crisis landscape. Business schools’ approach to real estate is no different. Having launched both their real estate MBA concentrations in the aftermath of the financial crisis, Portland State University and the University of Miami’s programs both possess strong practical components; the latter offering two internships along with a consulting project within their MBA, while the former also allows students to connect with the industry in other ways such as mentorships. This interplay between theory and practice has also been one of the key features the Kellogg School of Management  has stressed in its real estate MBA in recent years.

Post-financial crisis real estate, as the dean of Rutgers Business School, Glenn R. Shafer, explains here, demands a greater level of expertise among MBAs, a demand business education has sought to meet. “New demands for financial sophistication in real estate, along with expectations for sustainability and increasing regulation, have created an unmet demand in New Jersey for personnel trained in finance, accounting, and supply-chain management in the field of real estate”.

This new demand for personnel is triggering further investment at business school level, such as the US$1.5 million commitment from real estate investor Paul Profeta to Rutgers, towards a US$3 million total investment in the specialization. This money will provide a new real estate MBA concentration, new executive training, a new research center and more advanced resources and teaching. Other institutions are also meeting this demand in different ways. UNC Kenan-Flagler Business School established the KFBSF Real Estate Fund in 2007, allowing students from their MBA program to gain firsthand managerial experience in an investment fund and form connections with investors and developers.

However, demand from the real estate sector is not the only factor driving these trends, as desire among students has also gained momentum in the post-financial crisis business landscape, according to NYU Stern School of Business professor of real estate and capital markets Brian Lancaster. “With the Fed holding rates to a record low which is boosting all real estate values, combined with the disarray in both regulatory policy and markets, the excitement in the classroom was off the charts.” Paul Profeta also highlighted similar trends, “It’s become an attractive thing for some business professionals. The real estate industry is totally unregulated. It’s really a wild and woolly field. You live by your wits. That’s why it’s exciting to young professionals.”

Globalization and real estate

Real estate is naturally subject to the forces of globalization. Indeed,a recent article from the Vancouver Sun  highlighted the increasing interdependence between its real estate market and the global economy. “A torrent of capital from wealthy people in emerging markets (in China, Russia, the Middle East and Latin America) ... has flowed into the real estate markets of big cities in other countries, driving up prices and causing a luxury-construction boom…[and leading Vancouver into the heart of] one of the biggest trends in the past two decades….the rise of a truly global market in real estate,” explained real estate marketer Bob Rennie.

The globalization of the real estate market has led to deeper integration and connection between business schools internationally, both in terms of knowledge and practical links. IESE Business School, Spain, reacted to the effects of the US housing bubble burst across European economies, by focusing on developing economies. As such, the IESE MBA real estate concentration seeks to evaluate the markets from a global perspective, focusing on the unique characteristics of real estate in various global contexts. Practical links between institutions, such as HKUST Business School and Wisconsin School of Business, enable international students to benefit from the knowledge, expertise and resources available at institutions with more established real estate programs, to tackle the issues and opportunities of  globalization in the real estate market.

INSEAD launched a real estate finance and strategy MBA elective in 2005, and in 2008 it created its first fellowship, in partnership with the Cushman and Wakefield real estate services firm. This was in response to increased student demand. “There is a growing demand from our students for knowledge on real estate finance and indeed on the whole industry. The importance of real estate in today's investment market makes it a very relevant component in our MBA program. As the sector turns increasingly international, it becomes particularly attractive to INSEAD’s multinational student body,” explained Antonio Fatas, an economics professor at INSEAD, at the time.

Ultimately, as globalization shows no signs of slowing down, business schools continually evolve their courses in response to the global market, even in the often inward looking-US: “Real estate investment is a major factor in the development of the global economy,” says Rutgers Business School dean Shafer, while Lynne Sagalyn of Columbia Business School highlights the need for students to possess “sophisticated business and finance tools…[to excel] in an increasingly complex world in which decisions are made in an interdisciplinary and global context”.

Companies and organizations within the sector are keen to find talent, and where better than top business schools? “By establishing a core center of excellence for real estate within INSEAD we can reach top executives and managers from around the world,” explains Paul Bacon, CEO of Cushman & Wakefield EMEA, “enabling them to think more strategically about this asset class and to help them explore the critical role it plays within the corporate infrastructure.”