If you’re in the real estate space, you may have heard the term “corporate housing” more and more in recent months.
In the past, corporate housing was a means to provide stable, but temporary, housing. This solution was typically only available in the form of extended stay hotel suites. But what professionals are looking for in terms of housing types, amenities, and interests has changed drastically over the years, especially with the impact the COVID-19 pandemic has had on daily life.
Today, there is a competitive market for apartment complexes, condo communities, and other properties providing corporate housing options. There are many, many investing strategies when it comes to real estate, and while corporate housing rentals are not uncommon, they are certainly disregarded by a large portion of investors.
What Is Corporate Housing?
While there may have been clear lines of delineation between different types of rentals in the past, today these segments blend and intersect in ways that provide ample opportunity for investors.
Short-term and long-term rentals, vacation lodging, and corporate housing used to be separate lanes, but we’ve seen increased competition in the corporate housing market from apartment complexes and condo communities. Even vacation properties are expanding their reach to attract both leisure and business clients.
Traveling professionals engaged in contract work, temporary projects, training programs, and other situations often prefer fully furnished housing that they can rent short-term and with flexibility. Whether corporate housing, a vacation rental, or another lodging type, these short-term housing solutions provide all of the comforts and amenities of home with the added benefits of flexible lease terms and features that traveling professionals require.
Corporate housing can go by many names:
- Executive apartments
- Serviced apartments
- Executive suites
- Corporate apartments
- Executive rentals
Why Corporate Rentals?
Both short- and long-term corporate housing opportunities can attract high-quality tenants and increase profits for investors who know what they’re doing. Corporate housing may be rented out directly to traveling professionals or to businesses to provide accommodations for employees.
Looking for an alternative to long and frequent hotel stays, corporate renters are typically looking for high-quality, fully furnished properties that provide everything necessary for them to do their job. Types of corporate renters might include:
- Military and government employees
- Medical professionals
- Business executives
- Consultants and contractors
- Corporate housing may have higher upfront costs, but typically outpaces long-term monthly rental rates in revenue.
- A high turnover rate allows more opportunity for inspection and routine maintenance, which is good for the longevity of your investment.
- Payment is often handled by the company or booking agent directly and not by the tenant, lowering the chance of rent being short or paid late.
- Generally speaking, corporate renters are respected business professionals that will be reliable, responsible tenants.
- While vacation rentals have seen an increase in regulations like occupancy tax, short-term rentals do not generally fall under the same obligations.
- Marketing vacancies is more of an ongoing process when compared to long-term rental agreements.
- Turnover activity is increased: tenant screening, lease signings, move-out inspections, cleaning, etc.
- Demand for corporate housing can fluctuate with the economy and seasons, similar to the vacation rental market.
Options for Investing
If you’re considering investing in a corporate housing opportunity, do your research and educate yourself on exactly what corporate renters are demanding. Consider all of the usual investment factors like location, walkability and transportation, curb appeal, and safety. Decide what level of service you’ll offer your corporate renters and furnish the property accordingly. Are you providing basic comfort lodging or going after the luxury market?
There are several roads to take when investing in corporate housing.
- Purchase a dedicated corporate housing complex. The most straightforward option is to invest in an entire complex that is already designed to cater to corporate housing needs, but it is typically also the most expensive option.
- Test your vacation rental as a corporate rental. If you already operate a vacation rental, it shouldn’t take too much time or effort to start offering the same property to the corporate housing market. What does your property offer that would appeal to traveling professionals or remote workers? Marketing your vacation rental as a short stay vs. leisure stay during the offseason in your location is a great way to test the waters.
- Convert an existing investment property into corporate housing. If you already own a single-family home, apartment complex, or condo property, consider turning units into corporate housing options as tenants move out.
The Changing Rental Market
The corporate housing segment continues to grow year over year, often outpacing the hotel market. As the COVID-19 pandemic causes remote work to become more widespread for businesses across the country, many renters are considering relocating to new cities and states (or already have).
More than 50% of Americans are working from home, and one study shows that three out of four remote workers would continue working remotely given the option, and two out of three would consider moving if given the continued flexibility. It’s projected that traditional rental housing will see vacancy rates increase as renters look for new opportunities, lower costs of living, and an escape from highly populated urban areas.
Investors looking for profitable, creative ways to diversify their portfolio should consider the benefits of corporate housing—especially as the new normal is changing. When managed correctly and marketed properly, corporate housing can be a great strategy to increase profits and mitigate loss.
Are you investing in corporate housing? Why or why not?
Tell us your thoughts in the comments.