“An Alternative Marketing Source—Increase Occupancy and Rental Income Simultaneously.” By Diane Steele
There is a lucrative market of potential renters searching for a property just like yours to live at– the corporate business market.
You may think businesses primarily rent corporate business apartments from communities that are large, have a corporate leasing team, or are a luxurious new property. This is not the case. In reality, if you can offer business clientele a clean apartment, superb service, a convenient location, affordability, a shorter lease term (usually 3 months minimum) and a commitment to making the relocation process go smoothly for all involved, you have what it takes!
In this economy, companies and businesses are searching for ways to reduce housing expenses for their temporary consultants, transferred and short term employees. In many cases, businesses have used hotels for their housing needs. Hotels charge businesses a negotiated per night rate of approximately $79-109, or $2,370 – $3,270 per month, depending upon the market.
If you take a moment to calculate what you could charge for a corporate apartment in your community and compare it to the cost of housing at hotels, the cost savings for corporations could add up to hundreds of dollars per month. It could also add up to hundreds of dollars in additional rent you could add to your property’s bottom line.
To establish a basic corporate apartment, you will need furniture, housewares, electric, telephone (with a long distance block), and cable. (There may be additional utilities or items specific to your community you will need to include.) Below is an example of expenses you will incur on a monthly basis for each apartment using this example.
Market Rent $900
Now here is where your company can make a substantial profit. Compare the monthly rates companies are paying at hotels per month ($2,370 – $3,270) to the above estimated price you need to charge for a corporate unit ($1,195.) The difference between the two is at minimum $1,000 per month. There is a lot of room for you to add a corporate premium to your rent after you cover your expenses. Adding the corporate rent premium would increase your rent and at the same time save companies hundreds of dollars in housing costs per month.
Surprisingly there are additional benefits to your community other than increased rent. Some of the benefits may include;
1. Easy and inexpensive turnover costs- Many of your corporate clients secure permanent residency in other parts of the country and live in their apartments on a part time basis. Therefore, wear and tear on the apartment is far less than with a normal 12 month apartment lease. (I have experienced this type of turnover to consist of a light touch up paint, carpet shampoo, spot cleaning and changing of the locks.)
2. Repeat Business and Referrals- After you have established a solid client base with local businesses, you will create a bond in which they will continue to call upon you with their corporate and business housing needs. You will also have established contacts between vendors, other communities and relocation establishments that will also refer corporate clients and businesses to you.
3. Increased Occupancy- You will increase your occupancy by filling apartments with business clientele vs. holding a vacant unit. You will also have the opportunity to convert short term leases into long term leases. Although some companies will initially ask for a 3 month lease, many often choose to renew several times afterward. In some instances, the apartment lease converts into a 6 or 12 month lease where the employee decides to relocate or is permanently placed in the area.
This all sounds great, but how do you know if this is right for your property? Where do you start? What do you charge? Well, you need to do some of homework. Here are a few places to start:
1. Call all corporate apartments in your neighborhood and surrounding area for prices, amenities and ideas. This will give you a feel for the market, what is available and what you need to offer to be competitive. This process will also give you a good idea of your property’s potential price point.
2. Call a few local hotels and ask what they charge for a 30 day stay or longer. Make sure you contact the extended stay hotels that cater to this type of corporate housing need.
3. Make calls to your necessary vendors (furniture rental companies, cable, etc.) to help you determine your overall costs. Remember to calculate installation and delivery charges into your costs.
4. Think about the type of apartment you have the largest inventory of or the type that is the hardest to move. This may be the apartment you feature for this situation.
5. Determine the number of apartments you are willing to rent on a possible short term basis at any given time of the year. You need to be careful here and remember to diversify your units. As you need to stagger the months your leases expire on your long term leases, you do the same with business corporate units. Resist the temptation if you come across it to move 25 corporate apartments in the same month and face the same 25 vacancies in three months. This is a formula for Short Term gain and Long Term stress.
6. Determine your competitive corporate rate. Make sure you are comfortable with this price and that others are willing to pay it. Ask for feedback from those you know in the apartment referral business about your program. They will be honest with you and let you know if they could send potential renters their way.
Now that you have a good idea of what you should charge, where do you find people to rent your apartments? Here are some quick ideas:
1. On a map, circle a 5 mile radius around your property. Take a few hours from your day when it may be slow and drive around to all areas included within this 5 mile radius and write down as many businesses as you can think of that may have housing needs. Look at both small and large businesses. Contact those businesses either by telemarketing or person cold calling. You can start with HR or any administrative assistant who may make housing arrangements for a company. Remember to ask for referrals if they don’t have any needs.
2. Go through your resident apartment files and determine where most people currently work. Pay special note to any residents who may be consultants or in IT. There is huge potential here.
3. Inform all of your vendors and referral services you are offering corporate apartments. Prepare a flyer with all of the necessary information for them to refer to in the near future.
4. Send out a letter to your current residents informing them of the corporate business apartments now available at your community. Offer a one time referral fee to anyone who refers their company to your community that ultimately results in a rental for you.
You have the opportunity to save companies money and offering their employees a comfortable home away from home. Companies are waiting for you to offer your property to them and rescue their employees from the four walls that are slowly closing in on them in their hotel rooms. (I moved an employee into an apartment after living in a hotel room for 3 years!)
With a little research and a little more work, there is great potential for you and your company to increase rent and occupancy simultaneously. Good luck!
Diane Steele is a sales and marketing professional located in the Minneapolis/St. Paul Minnesota area. She has worked in property management and related fields since 1988, specializing in increasing sales and occupancy quickly, corporate housing and property evaluations.