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CHBO Helps Investors Understand the Growing Corporate Apartment Industry

DENVER, October 20, 2015 - The corporate apartment industry has changed a great deal over the past few years, and with that change has come a great deal of growth. If you stayed in one of the temporary apartments that most corporations leased for their employees and/or contractors years ago, you probably don't have a very good perspective on how the industry has evolved. Today, instead of buying or renting the cheapest furnishings and the plainest units, corporations are looking for luxury apartment rentals that will really wow their employees.

Today’s corporations and professional workers looking for temporary apartments are on the lookout for the latest technology, the most comfortable furnishings, and the most convenient and attractive locations. These expectations aren’t all that’s changed about the corporate apartment industry, though.  

Increasing Demand for Corporate Housing

The first big change to note is the increase in demand for this kind of housing. Corporations are looking for better, more cost-efficient ways to compensate their employees for their work. More and more of them are paying to have their out-of-town employees stay in higher end temporary apartments for several weeks or months at a time. 

As a result, corporate housing is growing by leaps and bounds, and it is becoming a larger and larger part of the rental real estate market across the United States and around the world. 

Higher End Temporary Apartments Are More Attractive

A savvy investor today will look at this growing market and make a very strategic purchase. Instead of buying a smaller or lower end apartment, they will go with a luxury apartment in a district or neighborhood that is convenient to corporations in the area. Then they’ll buy a luxury apartment and:
  • Furnish it with updated appliances and furniture.
  • Include smart technology for the thermostat and other amenities.
  • Market it to corporations as a luxury corporate rental.

Know Your Renters and Tenants

Another thing that we can help investors understand is the question of who will be renting your properties. In this industry, your renters will almost always be corporations, but your tenants will be their employees or contractors. 

Property management for corporate temporary apartments can be tricky if the property management company does not have experience with this kind of property. Even if your property manager has this kind of experience, you can still run into a few unique challenges.

For example, if your renter is a corporation, you will not necessarily be able to run separate background checks on the actual tenants staying in your luxury apartment. However, that does not mean that you are left liable for any damage they do to the property. In fact, the corporation will be responsible for any damages, fees, or fines that the tenant accrues. 

In some cases, the property owner will do temporary leases on a luxury apartment directly to tenants. This allows you to know exactly who is living in your apartment and perform your own due diligence on all tenants, but it does have a tendency to create more gaps in your monthly cash flow. 

Lease Lengths and Terminations

Unlike other rental properties, temporary apartments like these do not always have set termination dates on their tenancy agreements. While a traditional residential lease is typically one to two years, and traditional commercial leases can start at five years and go up to twenty or more, that’s not the case with corporate apartments. 

Understanding exactly when you can terminate a tenancy agreement and who has rights to the property while the agreement is in effect will stand you in good stead as a property owner. Essentially, if you have a tenancy agreement directly with a tenant and the tenant is terminated from the corporation you’ve been working with, then – unless your agreement states otherwise – the tenant may still claim rights to the property until their agreement terminates. 

This is not the case if your agreement is with the corporation. If this is the case, the corporation will largely have the right to determine who can and cannot have access and rights to the property during the tenancy agreement. It’s important, whichever route you take, to ensure that your tenancy agreements have solid termination dates and that you understand exactly who may access your temporary apartments and who may terminate a tenancy.

Take Advantage of Higher Rental Rates

Finally, while there are a few pitfalls to avoid and details to navigate, renting a luxury apartment to a corporation for their corporate housing needs is a great way to collect higher rental rates than you could get for an unfurnished apartment. Furthermore, though tenancies tend to be shorter term in these temporary apartments, your agreement with the corporation governing those tenancies could be long term and very fruitful.

CHBO can help you understand how corporate housing and the luxury apartment industry has changed and the direction that the market is taking. With our help, you can see major returns on your real estate investment with temporary apartments for corporate tenants.

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Jeremy Blackburn

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