We completely understand and empathize—you need apartments. And you need them now. You need them furnished, preferably with a lenient pet policy, strong internet, spare bedroom, and close to the office. But, as we’re sure you’ve heard, furnished apartments are tough to come by these days. This was the genesis behind hosting a “reverse” roundtable, where we invited mobility expert Eileen MacDonald, Global Mobility Partner at Thermo Fisher, to ask us some questions.
Craig Partin, Synergy’s EVP of Sales and Marketing, and Joan McCarthy Mack, Synergy’s VP of Global Supply Chain, joined Eileen for the wide-ranging conversation. The trio discussed current market conditions, tips and best practices for securing temporary apartments, alternative accommodation options, and what to look forward to as we approach 2022. While the conversation outlined the difficulties buyers now face in securing corporate housing, the threesome delivered an invigorated sense of positivity for what lies ahead.
Where Have All the Corporate Apartments Gone!
Current Market Conditions
First, let’s discuss the current market conditions and factors leading to the unprecedented supply compression we are currently experiencing.
+Home prices are appreciating at record rates
Factors at play:
- In the U.S., June set a record for the second straight month for year-over-year (YOY) home price appreciation (up 15% from 2020).
- In many markets, Wall-Street investors are buying up available inventory in cash to rent the properties out, locking many would-be home buyers out of the market.
- New home starts are not keeping pace with buyer demand.
- It is incredibly competitive and challenging to purchase a home right now. As a result, many would-be home buyers are staying in rentals longer, taking up apartment supply typically available for the extended-stay market. Moreover, given the complexities of purchasing a new home, many relocating employees are staying in their temporary accommodations longer, further compressing available supply.
+Three generations of renters are converging on the rental market driving occupancy to its highest levels in over 20 years
Factors at play:
- For the first time ever, there are three generations of people looking to rent, all at the same time.
- Apartment communities are choosing to rent a higher percentage of their inventory to the long-term renter to capitalize on the security of a 12-month lease. This shift in inventory allocation is further reducing supply availability for the extended-stay market.
+Severe lack of new apartment buildings/communities coming online
Factors at play:
- During the pandemic, construction on new apartment buildings/communities ceased.
- As stay-at-home and social distancing restrictions eased, severe shortages in building materials further delayed the development of new apartment buildings/communities.
- Further complicating matters, global supply chain bottlenecks and blocks caused further construction delays.
- On top of the record occupancy levels and general lack of accessible and affordable single-family residences for purchase, there aren’t enough new apartment buildings/communities coming online to help offset the spike in demand.
+Apartment buildings/communities reduced their “corporate caps” (i.e., the percentage of apartments within a given apartment building/community designated for corporate stays)
Factors at play:
- During the pandemic, many regional corporate housing providers failed to meet their lease obligations.
- Many corporate housing providers reduced their lease obligations and exposure as domestic and international travel abruptly stopped.
- As noted above, many apartment communities reduced their extended-stay inventory allocation to accommodate the increase in long-term lease demand.
- Not only are corporate-stay providers dealing with a surge in demand as return-to-office plans and policy take effect, but corporate-stay providers have less inventory to work with than they did pre-pandemic, as well as the inability to add apartments to their portfolios.
Overall, due to a highly competitive and difficult real estate market, three generations of renters in the market at once, the lack of new apartment buildings/communities being built, and reduced corporate caps—the extended-stay/corporate rental market is experiencing an unprecedented supply compression event.
The cumulative takeaway from this all—as rental demand quickly outpaces available supply, rent prices are skyrocketing. In the U.S. alone, June saw rents appreciate nationally at 9.2 percent in the last six months, which is staggering considering 2-3 percent is typical for a six-month period.
While it is tough to get a corporate apartment, it isn’t impossible. Furthermore, as we will get into later, compression events tend to speed progress and technological evolution. So, while we face headwinds in the immediate term, the horizon is painted with hues of extreme optimism as the pandemic proved; the corporate housing industry is a resilient and resourceful group of problem-solving professionals!
Big picture, it is essential buyers, partners, and suppliers work together to ensure seamless navigation over the next six to eight months.
To do so, here is a list of tips and best practices to ensure your housing program is best positioned to meet its required inventory needs.
- Request housing (or apartments) well in advance of your need to maximize options.
- Provide comprehensive booking details upfront to help minimize reservation timeframes while maximizing the likelihood of meeting your reservations requirements.
- When presented with options, please make decisions as soon as possible (12-24 hours is the recommended timeframe).
- Stagger your moves, if possible.
- Maintain flexibility in property type, location, and rate.
- Moreover, be open to discussing hybrid options such as hotels, extended-stay hotels, and vetted alternative accommodation models (e.g., VRBO, Airbnb, etc.)
- Maintain a rigorous vetting process for all options presented to your business travel and relocating population. As Eileen notes in the following clip, there are many factors to consider if you choose to go outside of your housing program’s vetted options.
- Set clear expectations with your experienced travelers ahead of the reservation process. Clear expectations will help them make an informed decision ahead of their business travel or relocation.
- Communicate transparently, openly, and often with your partners and suppliers. Synergy suggests a weekly check-in to ensure timely updates and contingency plans are in place as market conditions shift and adapt to travel and quarantine requirements.
- Build a detailed contingency plan in the event the selected alternative options don’t meet your housing program’s duty of care and guest experience standards.
As noted in the opening to the last section, innovative solutions are needed to ensure your housing program’s requirements remain compatible with current market conditions. As Craig outlines in the following clip, Synergy is working with a select group of clients to establish parameters around “auto-book” scenarios to alleviate delays in turn-around times impacting the ability to secure apartments.
Another innovative solution and option for buyers to help mitigate market ambiguity are “turn-key” apartments. As Craig shares in the following clip, a turn-key apartment is one or multiple apartments pre-procured for a contracted period. Occupancy levels are then managed by rotating your business travel or relocation professionals in and out of the units, minimizing downtime in the process.
Looking Forward (We got this!)
Yes, there are extreme difficulties in securing housing in today’s current market. However, it is important to remember—there is available housing for your business travel and relocating professionals, and we, Synergy, will find it for you. No matter what it takes. We just need to work together, like never before, to ensure we set ourselves up for success. The purpose of this piece and the corresponding discussion is to set clear expectations based on the conditions present and advise the best path forward for your housing program. Part of that process is being open, honest, and transparent about the realities we all face.
Overall, Synergy suggests following the three “P’s:”
- Pre-procure inventory whenever and wherever possible
Following the three “P’s” will set you up for success and ensure your housing program is best positioned to deal with the current challenges in the market. And as Eileen states in this clip, working together to make the best out of this bleak situation will be critical to our ability to move forward as an industry.
To Sum It Up
Craig says it best in the following clip.
To watch the entire conversation, please click here.