By Jamal Lee (MultiFamilyExecutive.com Article) — No matter the type of multifamily you own, from luxury units to Class B multifamily, you’ve likely heard the term “corporate housing” or “temporary housing.” This refers to fully furnished and fully serviced temporary housing units available for short-lease terms. A few years ago, we saw this trend take the industry by storm, with employees on out-of-town business topping the list of reasons for high demand. Since then, its popularity has only risen. Corporate housing is now considered a viable option for many renters, including millennials and Generation Z looking to hold off on buying a home, empty nesters, seasonal travelers and expatriates, military and government personnel, and many more.
From 2014 to 2018 alone, corporate housing experienced a 12% combined annual growth rate from $64 billion to $101 billion, in comparison to the 3% hotels experienced in the same timeframe. With growth like this, many apartment owners are eager to expand as major players for corporate relocations—resulting in healthy competition within this market. However, in today’s climate owners are wise to take a deeper look at the trend to not only reap success but enhance its value for renters, major employers, and the general community.
Renter Misconceptions and Hot Markets
While out-of-town business employees are not the only renters interested in corporate housing, they still make up the majority. It’s been previously reported that professionals within the health and tech fields, such as traveling nurses and technicians, dominate the target market since they are likely to be on out-of-town business travel anywhere from three to nine months out of the year. However, looking more closely, we’ve found that interest is less derived from particular industries and more so determined by staple employers in a property’s area of operation.
For instance, we found that corporate housing in the Washington, D.C., metro area is particularly popular among contractors for government officials and military personnel. A few major employers contributing to this are the Food and Drug Administration and Holy Cross Hospital. In addition, there are a lot of renters in the area that are on temporary duty assignments for military branches like the Army, Air Force, and Coast Guard, contributing to the growing need for family and pet-friendly corporate housing units. However, not far away at our properties in Silver Spring, Md., employers such as the Occupational Safety and Health Administration and the Discovery Channel have led environmental workers to seek this form of housing as well.
Alexandria, Va., is another market attracting a “newer” demographic group seeking corporate housing. Due to its proximity to the D.C. area, Alexandria’s cost of living is rather high, causing local employers like the Alexandria City Public School System to struggle with hiring costs for qualified teachers and staff. The main concern? This particular school system wants its staff to live nearby to facilitate community involvement, but low wages and rents (reaching almost $4,000 a month with rent and parking fees alone) have forced educators to consider farther, cheaper districts.
To resolve this housing issue, we have partnered with the school district to provide a preferred employer program to its employees. Marketing materials were posted on the district’s website as well as posted signage in Alexandria to inform prospective employers about the housing option. Not only did we offer a lower deposit rate, but we also offered residents a monthly discount of 3% during their first year of rent. In doing so, we saw teachers save enough to live comfortably in the area for an average of two to three years.
Other markets corporate housing is bound to remain popular in include major metros and transient areas such as Atlanta, Houston, and Los Angeles.
Corporate housing today drives value for all parties involved. Apartment owners are guaranteed occupancy in otherwise vacant units and have the chance to build long-lasting relationships with major employers and local businesses.
Since employers have the option to either purchase leases directly from the property owner or have their employee named as the leaseholder, the owner receives the security of steady cash flow year-round. Owners also have full control in determining how many dedicated corporate units to lease per season, ensuring overturn is not an issue once leases expire. These options also enable employers to save between 10% and 15% in employee housing compared with paying for a 30-day-or-longer hotel stay.
Local furniture lease companies (Morgan Properties partners with companies like CORT) are thriving off of corporate housing, as owners work with them to ensure their units are filled with modern appliances and furniture. For example, there is an opportunity to establish freight packages, allowing residents to pick and choose their desired kitchenware, linen, and towels as well as larger furnishings. Furniture lenders also see cash flow directly from residents who choose to upgrade and purchase the furnishings included in their unit and from those who accrue damages as they are obligated to pay these at the end of their lease term.
Last, renters have the chance for a good deal on a hassle-free home away from home with fully furnished units and convenient amenities like the pool and gym, in a live, work, play community, which, importantly, allows local businesses like eateries and shopping centers to consistently cash in on visitor demand. Rent discounts and waived fees can also help lock in first responders in major metros, which is good for the apartment community and the community at large.
Corporate housing can be a win-win for everyone.