Could the corporate housing niche become the next sweet spot for real estate investors?
Corporate housing was growing into a strong niche at the end of the last housing boom. Now that the U.S. property market is on the rebound, could this niche be one of the most profitable market segments for real estate investors? If so, what does it look like, why will demand for this type of housing rocket, and who can help to increase profitability?
Corporate Housing 101
Facebook hit the headlines a few months ago with plans to develop its own residential housing, appropriately dubbed ‘Facebookville.’ Most companies in the current economy aren’t going to spring for building their own employee apartments, but according to surveys, more than half of employers do have budgets for significant sign on bonus and relocation packages. However, the type of corporate housing we are really talking about here is the wider niche, which services employees of big corporations as well as small business owners and regular individual professionals.
Like the recent rise in the extended stay space, ‘corporate housing’ units appear to be much like regular apartments. However, they are normally in slightly above average and newer communities and offer a variety of services targeted to the business user. This is blended with the feel of home and convenience of a hotel. Corporate housing may even provide fully furnished units, from appliances all the way down to the knives and forks.
Renters can come for a month or six without having to haul a whole household or splurge on these household items. Monthly rental agreements (sometimes even weekly) mean low move in and little hassle on entry or exit for both sides, while creating value for charging premium rates. Theoretically, many condo and multifamily apartment buildings could be converted into ‘corporate housing’ or new ones can be built where there is a lack of on market inventory.
America on the Move
America is on the move more than ever. New international in-migration and interstate migration will likely boom again as the economy improves, jobs are sought out and the market returns.
Technology and outsourcing are making the mobile lifestyle possible. More wealth and flexibility will encourage more individuals to test drive mini pre-retirements in new locations. A great deal of the population will increasingly be able to live and work wherever they like and relocate frequently. Obviously, the main restriction of the past has been expensive hotel stays without all the comforts and convenience of home or having to rent apartments and get locked into long leases.
Strategic Alliances & Tactics
This real estate investing niche offers numerous potential strategic partnerships and upsell opportunities, which can further increase ROI and income.
Corporations and local governments are increasingly seeking ways to attract great talent and this could be exactly what they are looking for. More residents also mean a better local economy for all. A corporate housing operation can also provide endless upsell and crossover opportunities for real estate investors. If you get residents as soon as they begin exploring your city, you are naturally the best resource to help them graduate to a long term apartment or buy a home too.