Real estate has long been considered a field of "real world" experience, requiring skills attainable primarily through the school of hard knocks, but a growing number of top-flight universities across the United States are setting up real estate programs and taking a serious academic approach to the subject of development.
The Massachusetts Institute of Technology recently opened a new Center of Real Estate Development offering a masters in real estate planning and focusing its research efforts on subjects such as projecting the nation's office space needs over the next decade and evaluating private-sector initiatives to develop low-income housing.
Kenneth Rosen, chairman of the real estate and urban economics program in the business school at the University of California at Berkeley, said that real estate as an academic field has blossomed over the past five years, with new programs starting around the country and older programs being "substantially beefed up."
"The single biggest reason for this development is that the big institutions -- insurance companies and banks -- are getting into real estate, and they need sophisticated people," said Rosen. He said that at the same time, real estate has become increasingly complex, with changing tax structures and new financing tools, developments that have attracted high-quality students to a field traditionally the arena of independent entrepreneurs.
The real estate development concentration in the Masters of Business Administration at Berkeley was revived in 1975 after nearly a 20-year lapse, and has since become a very popular area of study for Berkeley MBAs, second only to a concentration in straight finance, Rosen said.
Kerry Vandell, an associate professor of real estate and regional science at the Edwin L. Cox School of Business at Southern Methodist University in Dallas, said that an academic, analytical approach to real estate is becoming far more valuable in the development community as developers begin to rely more on market research than the old "wheeling and dealing" the field is famous for.
"Let's face it, several years ago there wasn't a lot of prestige attached to being a developer," said Vandell. "That has changed, however, as real estate has become a major industry and grown in complexity." Vandell said that a third of the incoming class of SMU business graduate students this year expressed an interest in taking real estate courses, a significant increase over previous years.
One real estate professor, William Zucker, chairman of the Real Estate Center of the Wharton School at the University of Pennsylvania, said that despite the increasing sophistication of the field, many of his students are attracted to real estate because of the entrepreneurial potential.
"Real estate is seen as one of the last vestiges of entrepreneurship in America, and as students experience real estate as more than numbers-crunching, they have gotten interested," Zucker said. "They view the field as offering the opportunity for great reward for the risk and the opportunity to go off and create something on their own."
Students studying real estate as part of an MBA program typically take management, finance, accounting, economics and investment courses and then add courses in real estate law, real estate taxes, development and appraisals. A number of the programs also include internships with developers to help students get experience in the field.
Real estate centers are being developed, however, not only to meet new demands from students. Center directors admit that some schools have pulled together programs because they also can be profitable for the school.
At the Berkeley center, 40 corporate sponsors contributing $10,000 each are members of the real estate center's board of directors, a position that gives the companies first shot at hiring graduates and suggesting research projects for the students in the program.
Rosen, who worked with the people setting up the MIT program, said the amount of money such a center could net a university had been a factor in the decision to go with real estate at MIT. MIT is actively recruiting corporate sponsors, with more than 60 already on its list of members, including the Gerald D. Hines Interests of Texas, Oxford Development Corp. of Bethesda and shopping center magnate Ernest W. Hahn. Even Samuel R. Pierce Jr., secretary of Housing and Urban Development, has joined the MIT cast of sponsors.
Vandell, whose program is working on setting up a board of directors similar to Berkeley's, said that one of the dangers is a conflict between appropriate academic research and pressure from sponsors to "handle all their immediate consulting needs."
"We've already turned down requests for research from corporations on the basis that it was not academically credible," said Vandell. "If we do set up a group of corporate sponsors, we will have to be very careful about the terms of the relationship they would have with the school."
Schools of real estate have a greater need for corporate sponsors than more traditional academic fields, said Vandell, because government foundations, such as the National Science Foundation, have been unwilling to fund real estate research. He said that while there has been some money available from a few real estate agencies, such as the Federal Home Loan Bank Board, most of the research has to be funded by corporations.
Vandell said that although his program recently received a $1.2 million endowment from former Dallas mayor and developer Robert Folsom, he sees the effort to create a corporate board of sponsors as necessary to generating adequate money for research.
Rosen said that one of the benefits of having corporate sponsors is that it gives developers, traditionally a competitive and tight-lipped group, a forum for getting together and discussing major industry trends.
While some of the real estate programs being started are housed in traditional planning departments, such as MIT's, most are springing up in business schools, reflecting the focus on finance and analysis.
"Real estate requires a lot of real world experience, that is true, but the way we see it, you can pick up experience and intuition once you hit the street," said Rosen. "What you can't get on the street is a good, solid background in finance, so that is what we give them here. Our students generally use this degree to get an entry-level job in a development firm."
Rosen and other real estate professors said, however, that the biggest current development in real estate centers is resistance among business school faculty to creating such centers.
Zucker, of Wharton, said the problem was primarily a "turf battle," while Rosen attributed it to the lack of quality real estate PhDs.
"Essentially, the faculties of these schools don't want to weaken their schools by allowing real estate people in," said Rosen. "The reason why there are so few real estate academics is that most bright young real estate students are eager to get out into the field and don't want to stay in the academic world." Rosen said that although Berkeley had 35 real estate graduates from the MBA program last year, there are only two real estate doctorate students.
Dwight Schar, president of NVHomes, a local medium-sized development company, and an example of the old-fashioned development entrepreneur, said that he "welcomes with delight" the emergence of real estate as an academic pursuit. "We need bright young people with a combination of business, finance and real estate," said Schar. "Our business is becoming more and more complex, and we need all types of skills. The age of the small builder who can do it all himself is almost gone."