Corporate Housing is Essential to Welcome New Businesses and Residents

By Angela Healy

This article originally appeared in the May issue of REI-Ink Magazine. You can find the online version here. 

The spring housing market tends to be the real estate industry’s peak season, and this year looks to be no different. In an already booming market, the ongoing increase in consumer behavior patterns such as relocation, remote work, and inventory availability add even more impact.

Key consumer trends driving the real estate market will continue to do so and have led to a demand in corporate housing, making it a great time to invest in this growing industry. Specifically, investing in single family homes presents a prime opportunity to capitalize on the increase in demand for corporate housing as Americans move to smaller and more affordable markets.

Real Estate Market Drives Up Corporate Housing Demand 

Last year, home prices soared nearly 20% and 70% of homes were in bidding wars. The wide acceptance of remote work has allowed Americans to sell their homes in some of the country’s most expensive cities and move to up-and-coming ones, such as Nashville, Charlotte and Salt Lake City, giving them a bigger budget than locals.

In some of the hottest markets, transplants have up to 30% more to spend on homes than local buyers. This trend gives insight into ever increasing home prices, but also further high-lights the mounting pressure on some of the country’s most competitive cities for housing availability – particularly single-family homes.

Inventory is significantly lower now in comparison to recent years. Among over 300 housing markets across the country analyzed by Zillow, 254 of them have inventory levels that are down by more than 30%. That being said, a record one-third of Americans are still looking to relocate.

Many, especially families, are moving to smaller markets where they can have more opportunities, lower cost of living, and escape high urban areas as mortgage rates and increasing rent prices make affordable metros more attractive than ever.

As a result, the demand for corporate housing, especially fully-furnished, single-family residences, is on the rise without signs of slowing down. Many Americans are choosing to sell their homes and move into rentals to ensure they can make non-contingent offers on new properties and utilize corporate housing as an interim stay until finding their permanent home.

Given the limited inventory numbers, buyers are needing to wait longer to find their ideal buy, so a corporate housing option becomes that much more valuable. In today’s real estate environment where housing inventory remains at record lows and prices continuously surge, temporary housing is critical for city growth.

Behind the Trend

Individuals and families are not the only ones making a move. Businesses relocating to smaller-sized cities are scooping up corporate rentals for transitioning executives and employees, and families conducting full home remodels are leveraging these temporary stays as well. It is also projected that traditional, unfurnished rental housing will see vacancy rates go up as rental prices rise. If demand amongst tenants is to decrease, landlords and property managers may take advantage of the opportunity to get into the corporate housing market.

In addition to remote work and individuals moving by choice, business office relocations are also proving to be a key driving factor in demand for corporate housing for single family homes.

When a company seeks out a corporate relocation to a new city or is ready to expand to a new geographic location, there are several critical factors that are essential for consideration, whether moving within the current state or to another region of the country. Employee retention and recruitment is one of those important considerations. Companies are recognizing the long-term importance of remote work for retaining their workforce and the shift in preferences for employees to live and work closer to their homes and families.

Additionally, factors such as quality of life, cost of living, and education opportunities are increasingly carrying significant weight as part of businesses’ decisions on where to locate their operations.

As a result, smaller and medium sized cities are positioned for ongoing growth and economic development. However, to truly realize the benefits of these transformational business shifts, economic planners must recognize the importance of supporting relocating employees in the process. Corporate housing has proven to be a key component of the equation.

Investing in Single-Family, Corporate Housing

In addition to corporate relocation housing needs, this model is an attractive and needed option for families and individuals in a range of situations such as traveling for medical reasons, those on government or military assignments, or those moving to a new area before securing long term housing. Single family, fully-furnished properties are essential to enable urban growth and should not be overlooked by investors looking to capitalize on the demand for corporate housing.

Corporate housing is significantly different from short-term housing, and essential for cities poised to welcome new businesses and residents following the COVID-19 pandemic.

According to data from the Corporate Housing Providers Association’s (CHPA) Annual Report, both the international and U.S. corporate housing markets experienced significant increases in demand and revenue during Q3 and Q4 2021, with the U.S. market in particular skyrocketing and representing a large part of revenue during those quarters. Additionally, the vast majority of residences that make up the current industry and are most in demand are one and two-bedroom residences.

The corporate housing market segment continues to grow year after year, even outpacing the hotel market and traditional short-term residences. It is evident that there is a significant opportunity for investors to get involved with an industry that is well positioned for significant growth along with the already red-hot real estate market, especially as businesses keep accepting remote work and Americans continue to relocate for various reasons.

The ongoing growth of the corporate housing industry and the importance of maintaining this inventory in smaller cities and growing markets to welcome population growth make investing in single family homes in particular an optimal way to capitalize on investing in the corporate housing industry.

AvenueWest Global Logo