The Long Road to REIT Diversity

Over the last three years, little by little—with hardly any attention or promotion—the boards of the biggest real-estate investment trusts have given new meaning to the idea of diversified leadership.

Once considered among the most insular and homogenous of sectors, REIT boards are moving forward in various ways. A new Korn Ferry study of the 100 largest publicly traded REITs shows marked gains in the number of new independent directors who are female or from racially or ethnically diverse backgrounds. In addition, more boards have been considering candidates outside of the real-estate sector.

In all, the study found ninety-six out of the 100 boards added one or more new directors since 2019, with 84% of those boards appointing at least one female director. In fact, women made up the majority of the new independent directors , accounting for 127 of the 231 new directorships, or 55%. Meanwhile, the report found that 87 new directors, or more than one-third, were racially or ethnically diverse. The data, observes Anthony LoPinto, global sector leader in Korn Ferry’s Real Estate practice, shows that REITs are “headed in the right direction” when it comes to board diversity. “It’s a sea change,” he says.

Like many other industries, REITs have come under pressure from investors, financial regulators, and lawmakers to diversify their boards and include more directors from underrepresented groups. Part of the challenge with REITs, however, is that—much like cable companies or sports teams—they often began as private, family-controlled organizations. And while their businesses may have grown and evolved (in tandem with the real estate market) over the last 30 years, for the most part their boards have not, says Julie Norris, a senior client partner in the Board and CEO Services practice at Korn Ferry. “Although progress is being made, there is still significant opportunity for REIT boards to bring more diverse perspectives into their boardrooms,” she says.

According to the study, women now make up more than 30% of directors on the boards of 50 of the 100 largest publicly traded REITs in the US. Black directors accounted for the majority of racially and ethnically diverse appointees, outnumbering Hispanic directors by a margin of 4 to 1 and Asian directors by an even wider 6-to-1 margin. Seventy-three percent of the 100 largest REITs appointed at least one racially or ethnically diverse director over the three-year span. That’s a significant ramp-up since 2020, when only 15% of REITs in the S&P 500 added a director from an underrepresented racial or ethnic group.

Experts say there is still a lot of work to be done. As Norris notes, if women account for more than 30% of directors at 50 of the 100 largest public REITs, that necessarily means that they account for less than one-third of the directors of the other half. From a governance perspective, the figure of 30% is significant because it aligns with the goal of a global campaign, begun in 2014 and achieved last year, to reach that level of female representation on the boards of S&P 100 companies. “REITs have come a long way in diversifying their boards, but there is still a long way to go,” says Norris.  

In terms of finding outside representation, experts say the changing real-estate environment—both before and since the pandemic—has convinced incumbent REIT leaders and nominating committees that new expertise is needed in a variety of areas, among them technology and marketing. The study found that more than 70% of new directors appointed since 2019 came from outside the real-estate sector. LoPinto notes that new directors Korn Ferry has recently placed on REIT boards come from such companies as Target, eBay, Rent the Runway, IAC, Petco, and Carnival, among others. 

LoPinto sees a correlation between the increase in female and racial representation on REIT boards and the need to bring on directors with new perspectives and experiences. As boards continue to get more strategic about succession planning, LoPinto expects to see more appointments of women and racially diverse candidates, including some from outside the real-estate industry. “Change is not only happening, but also accelerating,” he says.