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corporate housing units in residential developments kimberly
Corporate housing – another perspective
Kimberly Smith
Corporate Housing Providers Association


In the United States, business lodging is generally referred to as corporate housing, however there are other terms used such as “temporary housing” or housing in various market segments, for example. insurance housing. All aspects of “furnished monthly housing” in the U.S. has seen an increase in demand over the last year and expectations and indicators point to increased demand in the next few years.

Corporate housing in the US has traditionally been divided into 4 supply segments:

• Service companies - these companies rent apartments, furnish and equip them, then offer the apartments as corporate housing rentals.

• Apartment companies – they own or manage large apartment complexes. These companies use some of their inventory as furnished corporate housing units.

• Management companies – which are real estate property management companies that manage properties owned and furnished by individual real estate investors.

• ‘By owner’ properties - where owners of furnished residential properties rent out their properties directly to travellers.

Corporate housing is a fluid and evolving industry as evidenced by the recent mergers and big project deals that have been in the headlines in the last few months. Moving forward, expanding and servicing new markets is prevalent throughout the industry. As business travel increases, so does the demand for housing.

However, as a result of the tight credit market, there is a significantly reduced supply of new hotels opening. This is just one opportunity for corporate housing to manage this spill-over demand and introduce more individuals and companies to this lodging choice.

Economic factors

There are two major economic factors affecting the U.S. corporate housing market: (1) Lack of access to development capital, and (2) Increased demand on apartment housing. As a direct result of the credit crunch from the past few years, developers have been unable to fund new hotel and apartment projects.

Demand for hotel rooms has continued to grow, and with no significant inventory hitting the market, the corporate housing industry has seen an increased demand from hotel overflow. Demand for apartments is also on the rise as homeownership has suffered in the U.S. and lack of new inventory has made apartment inventory hard to find and has caused rates to rise. Corporate housing providers are concerned about these inflationary market factors.

As recently featured on CNBC, another current trend impacting corporate housing providers is the re-emergence of the need for mobility. For years corporate housing was a part of any corporate relocation, but it later evolved into “lump sum” relocations where the employee could choose to stay in corporate housing or keep the cash.

Mobility

Today, the big question everyone is asking, “Is the lack of mobility one of primary factors stunting job growth?” As we move forward, how can corporate housing develop to better serve both the corporate relocation individual and the individual who just needs to move to find the next job and is no longer getting any relocation package

While we can never predict the future, we do know that corporate housing in the U.S. is growing and the industry anticipates reporting good growth and revenue numbers for 2011. Further, corporate housing providers anticipate continued demand in 2012, however, they are a bit worried about possible inflation of rental rates on unfurnished supplies and stand alert for possible new regulatory and tax challenges.

Corporate housing at a glance

• Revenues increased by approximately 7.4% to $2.47 billion annually.

• Corporate housing average rate was 1.3% higher than in 2009, at $115.88 in 2010.

• US corporate housing market is estimated at approximately 65,396 units.

• Corporate housing provider companies project a 3% increase in units in 2011.

• Washington DC is the largest market with 5,962 estimated units followed by Los Angeles, New York and Houston.

• Occupancy in the US corporate housing industry increased to 89.2% in 2010, up from 88.1% in 2009.

• Average stay in a US corporate housing unit was 83 nights in 2010, down from the all-time high of 92 nights in 2009.