It’s no secret in the corporate relocation world that homeowner moves have become much scarcer. That’s a troubling reality for businesses that had come to depend on real estate commissions and referral fees generated by these prime customers and their employers.
Now’s a good time, though, to stop mourning those days of easy seller/buyer money. Let’s take a fresh look at the opportunities in these new demographics for brokerages to gain relocation clients and cement long-term relationships through new and enhanced services.
Among the most overlooked relocation market segments is the relocation renter, yet it is no small niche! Worldwide ERC’s latest Transfer Volume and Cost Survey (published 2012) reported that WERC members moved over 108,000 renters in the prior year – 59 percent of all WERC corporate moves. As the new majority of corporate relocations, renters comprise a customer base too big to overlook. Their corporate employers are hungry for better renter-service solutions, and those real estate firms that can provide them are best positioned to gain other corporate customers as well.
The Expanding Relocating Renter Population
Some of the factors affecting the increased proportion of corporate renters are obvious, but others are more subtle and useful. During our recent times of slow home sales, suppressed home values and limited mortgage availability, many homeowner transferees have been unwilling or unable to sell their homes, opting instead to retain them indefinitely and to rent rather than buy at their new destinations. Also, younger transferees who would in the past have seen their relocations as a chance to jump into homeownership have lately been reluctant to do so, with credit tightness, job insecurity and diminished investment return in glutted markets all affecting their decisions.
Shifts in corporate relocation programs are also generating a higher proportion of renters. Relocation assistance policies are overall less generous than was true a decade ago. Companies are more likely to base their assistance on the economic value of the job to be filled rather than on particular individual and family needs.
As a result, employees and new hires in entry-level and even mid-level jobs may be eligible for only limited corporate relocation assistance or just a lump-sum allowance. Access to real estate sale/purchase benefits is especially restricted because of their high costs. This pattern increases the proportion of renters in two ways: by making transfers more financially feasible for renter candidates than for homeowners; and by converting some transferring homeowners into renters because they lack company-paid real estate benefits.
Some of the increase in renters is demographically driven -- a younger work force, more women (now the majority of new-hire transfers), more singles, etc. However, part of the increase results from corporate administrative changes bringing into daylight many renter moves that historically were handled informally and “under the radar”. Employers in the past often handled their simplest moves locally -- maybe issuing a check and making a referral to a mover or broker. As employers have centralized mobility programs and expanded their outsourcing of mobility functions to their relocation management companies, they generally have tried to sweep all types of move management into the RMC conduit, which is ideal for their data capture and cost management purposes. These low-profile localized moves had been mostly of invisible renters, but now they are accounted for in the total transfer population.
Renters’ Established and Emerging Service Needs
Altogether, the relocating renter market is bigger and more diverse than ever. Major national relocation management companies struggle to serve this segment effectively because:
- Local rental market information is volatile with a short shelf life
- Corporate policies rarely dictate Renters’ use of RMC services
- Needs for standardization and contractual compliance are high
- In-market service partners are usually needed
- Revenue flows from renters are limited
Brokerages, on the other hand, can offer distinct advantages in renter services for a corporate employer:
- Ongoing rental market expertise, networks and databases for the served area
- Fast local access and response to employee searches and property availability
- Adaptability to both corporate-sponsored and consumer-type customers
- Relocation Director control of referral placements and service follow-through
- Competitive fee structure because of no RMC middle-man
Escorted Area Tours. A fundamental of renter services, tours meet the inbound transferee’s basic needs for orientation to the destination area and overall awareness of the variety of available rental housing and communities. Escorted by selected agents or RD staff, tours may be scaled in duration and customized by customer finances and preferences. Offering tours at different price points accommodates different corporate policy limits.
Candidate/Pre-Decision Services. More employers are providing up-front counseling and informational support, particularly for external new hires, to ensure that individuals make personally realistic decisions in considering a new position requiring relocation. Housing choices are important to this, so an offering of an individual needs analysis and report of suitable rental housing can be an attractive option for an employer recruiting a renter. Adding an escorted area tour in cases where a familiarization trip is authorized can create an appropriate executive-level package at a commensurate fee.
Rental Market Subscription Services. In numerous major metropolitan areas, corporate-quality rental properties are in very short supply, inhibiting inbound rental transfers. Companies based in these markets need to keep up with rental market information to support their staffing needs. A local broker can focus efforts on monitoring and reporting rental availability and trends on behalf of local employers, possibly generating some revenue from subscriptions but more importantly positioning the firm as the prime area resource for rental assistance, with the goal of gaining ongoing fee-paid rental service agreements. A website and/or mobile app for subscribers (corporate HR, Relocation or Recruiting) could enhance such an offering.
Corporate Housing Lease Management. Some employers have sustained traffic of relocating renters, short-term assignments and international assignees. The volume of rental units they require may be difficult to fulfill in a timely way, particularly in complex and short-supply rental market areas. Employers can alleviate this problem by directly leasing a number of rental properties, or even an entire multi-unit building, and outsourcing the sublease rental administration to a brokerage firm. The brokerage works directly with those employees authorized by the company, to place them in the most appropriate available units. Since the company controls the rental rates, this can be a convenient way to subsidize housing costs where desired. The brokerage derives fees from the ongoing property management, from the individual rental placements and from potential future transactions by tenants leaving the company units for other rented or purchased housing.
Other opportunities for relocating renter services can arise from unique conditions in a local area and from the special requirements of a particular employer. Brokers and Relocation Directors seeking new ways to engage corporate clients should consider starting this dialogue about renters and their challenges for employers. Aside from becoming a worthwhile enterprise in its own right, the renter services angle can be the key to retaining and regaining local corporate relocation relationships by tapping your own market resources and knowledge.
John B. Sculley, SCRP, is Vice President – Managing Director of RIS Consulting Group,johnsculley@rismedia.com.
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