Personal Stories and Other Significant News

The Real Estate Collapse? It’ll Be in the Final

Posted on Friday, December 17, 2010

In 2008, when most Americans were fleeing the real estate market, David Mann was charging toward it. After selling a clothing manufacturing company in Manhattan that he had helped run, Mr. Mann, 32, decided to pursue a master’s degree in real estate development.
Last May he graduated from the Schack Institute of Real Estate at New York University and after an eight-and-a-half-month search, he finally landed a job.
“It took months of looking every day and applying to 300 positions, but I have finally found my dream job,” said Mr. Mann, who will be the project manager of a condominium development in Park Slope, Brooklyn.
In recent years, the real estate industry’s reputation has faltered as it shoulders much of the blame for causing the deepest recession in decades. Despite this drubbing, and the fact that jobs are still hard to come by, students like Mr. Mann are flocking to master’s programs in real estate, where the recession is seen as a teaching tool and a rich source of case studies.
Mr. Mann chose real estate at the suggestion of several childhood friends who worked in the industry. “It seemed like a smart move,” he said. And despite the subsequent long job search, he added, “it couldn’t have been a more interesting time to be in school. Every day the professors were trying to understand this new reality and share their insights with us. We were completely green and ignorant, and in some respects, so were they.”
For students considering a master’s in real estate, there are programs like the Schack Institute, mostly run out of schools of continuing education, where many students work full time and complete their coursework over a number of years. Several universities also offer intensive, full-time programs that vary in length from one to two years.
Though relatively new, the master’s degree in real estate is seen by employers as a viable alternative to an M.B.A., said James D. Kuhn, president of the real estate service company Newmark Knight Frank and the chairman of the advisory board at the Schack Institute. “It used to be that the only alternative was getting an M.B.A.,” Mr. Kuhn said, “but around 1995, with the advent of real estate investment trusts and debt securitizations, academic institutions began taking real estate more seriously.”
In a recession, many graduate schools report an uptick in applications as professionals who have lost jobs look to polish their résumés while they wait a return to the work force.
That trend is especially true in real estate, because of the industry’s boom and bust nature. “Students are very aware that real estate is a cyclical industry,” said David Funk, the director of the Program in Real Estate at Cornell University. “If they get the degree now and bolster their skills, they will graduate just in time to take advantage of a rebounding market.”
That was the strategy behind Chaeri Kim’s decision to enter the Schack Institute. “By the time I graduate in the spring, the market will be ready to start hiring,” said Ms. Kim, who is 28 and a native of South Korea. She was pursuing a degree in architecture before deciding she would have a better chance finding work as a developer.
One indication of rising interest among students is an increase in acceptance yields — the percentage of applicants accepted into a program who choose to enroll. At the School of Architecture, Planning and Preservation at Columbia, which offers a master’s degree in real estate development, this year was a record applicant-yield pool, said Vishaan Chakrabarti, the director of the real estate development program. In fact, the one-year program has begun accepting fewer students in expectation that a greater percentage of accepted students will choose to attend.
“It is extremely competitive,” said Mr. Chakrabarti, who left his position as an executive vice president of design and planning at the Related Companies 18 months ago to lead the Columbia program. Of the 94 students who graduated in May, 87 percent are now employed, he said.
Mindful of the real world, professors are integrating the recent market crash into curriculums. Christian L. Redfearn, an associate professor at the University of Southern California and the director of the graduate programs in real estate there, said there was a renewed emphasis on fundamentals.
“In the middle of the bubble, students kept wondering why they had to do all this research when it was so simple to flip a property for a profit,” Professor Redfearn said. “Now, it is much more fun to teach because not only are there all these great case studies to learn from, but the students are far more interested in understanding the basics.”
Hugh Kelly, a clinical associate professor of real estate at the Schack Institute, agreed with that assessment. “In easier times,” he said, “students were satisfied with just learning the techniques — what math or which software programs do they need to impress an employer?” Now, he said, they want to learn how to make good judgments.
At Cornell, Mr. Funk said, “we don’t want our curriculum swinging rapidly to cover the issues du jour, so we are offering short intensives that focus on contemporary trends,” adding that classes that teach asset allocations are also popular.
And the Massachusetts Institute of Technology, which established its Center for Real Estate in 1983, is placing a greater emphasis on “the role of systemic phenomena, things that reach beyond any one industry or asset class and put the whole system on an unsustainable path,” said David Geltner, director of M.I.T.’s master’s program in real estate development and the director of research at the Center for Real Estate. In other words, teaching what can go wrong.
The students now in graduate real estate courses have more experience and higher test scores than their predecessors, several institutions have found.
At the University of Southern California program, the average work experience of students has jumped to 6.6 years in 2010, compared with five years in 2003. In the last seven years, its acceptance yield has topped 70 percent from just 55 percent, while in the same period the Graduate Management Admission Test, or GMAT, test scores now average 652 compared with 630.
“In the last two years, the quality of our students has been the highest we have ever had,” Professor Redfearn said. “A lot of people who were entering real estate to make a quick buck have left, and those who remain in the field are deeply committed.”
A number of universities are following N.Y.U.’s lead and have begun offering real estate degrees at their schools for continuing education. Georgetown University began offering a master’s of professional studies in real estate as part of its School of Continuing Studies in 2008. “I’d say graduate degrees may be one of the fastest-growing areas of the real estate market right now,” said Charles Schilke, the associate dean for the program.
But not every program has escaped the downturn unscathed. At M.I.T., class size has dropped precipitously. Before 2009, classes were generally 35 students a year, but last year it plummeted to just 14 students. This year, that figure is back up to the mid-20s, Professor Geltner said. Reasons for that drop-off, he said, included the high cost of tuition, a lack of financial aid and the inability of many students to take time off from work in such uncertain economic times. While the cost, at $58,780 for the 2010-11 academic year, is roughly in line with the other private degree programs, “alas, I believe we don’t have nearly as much financial aid available” to help defray the cost, Professor Geltner said.

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