Whether it is because they desire a downtown loft in the heart of a major metropolis or recognize that they soon will move on to another assignment in another locale, a greater number transferees want to rent rather than buy a home. Hile examines how corporate and service provider relocation professionals are addressing the shifting demographics of transferee renters and their needs.

The relocation industry, traditionally built to meet the needs of homebuyers and the provision of many services through real estate agents, is in the midst of an evolution. Unlike a decade ago, most employees relocating for a job today choose to rent rather than buy a home.

In fact, more than half of employees permanently relocating and more than 90 percent of employees temporarily assigned to new locations in the United States are renters, according to the Worldwide ERC® 2006 Transfer Volume and Cost Survey. In 2005, 53 percent of relocated employees were renters. In addition, 25 percent of relocated employees were new hire renters.

The rental needs of these employees often do not fit traditional relocation industry practices designed for homebuyers.

Employee attitudes toward rentals also have evolved. Many mobile professionals prefer to rent to avoid the constraints and financial commitments of homeownership and to make moving to the next job easier. The “rent or buy” decision for employees, and required support from companies, also varies greatly depending on the geographic location and local housing market conditions. A move to New York, NY, is vastly different than a move to Indianapolis, IN.

Not only has the number of renters increased, but their interest in various lodging needs has expanded. In addition to apartment communities, many renters today also are interested in private rentals, such as lofts, duplexes, condos, and private homes. Not all sources are found through conventional means, such as apartment guides and multiple listing services.

A Catalyst for Change

The shift in homeownership has become a catalyst leading to a transformation in corporate policies and the relocation service industry to better provide support to ease the transition to a new location for employees and their families. In turn, additional opportunities are unfolding for relocation service providers to forge stronger relationships with providers of rental services.

For example, area orientation tours designed for renters from local specialists makes more sense for renters than a homebuying tour from a real estate agent. Local market knowledge, including awareness of available rental units and market-specific rental practices, is critical in many locations where occupancy rates may exceed 90 percent. Escorting renting employees or arranging self-directed tours in areas where no apartments are available is counterproductive to their needs to find a solution quickly.
Another example is that corporate policies designed for renters historically have assumed that employees are young and without families. However, employees and their families sometimes prefer to rent, and many relocating employees are single parents who may need twice as much assistance as a two-parent family, including transition support with school information and other family-oriented services. While real estate agents typically support these needs for homeowners, renters often have not had access to, or authorization from, corporate policies for these same services.

This evolution also is leading to new approaches from providers of rental lodging and services. For example, the needs of employees during a relocation or temporary assignment often do not coincide with typical one-year leases required for apartments. To meet the needs of a growing base of renters, savvy apartment management firms are recognizing the opportunity to bolster their revenues by forging stronger partnerships with mobility professionals. These firms are seizing new opportunities by providing a broader range of options, such as shorter-term leases and more unfurnished apartments, which cost significantly less to maintain. Relocating employees can either buy a few essential items or rent furniture.

Rental Needs and Business Opportunities Continue to Grow

The business case for relocation service providers and human resource (HR) professionals to meet the needs of renters will continue to gain momentum. Market conditions make it necessary for companies to deploy talent where it is needed, leading to more temporary assignments in addition to permanent relocations. With low unemployment rates and an anticipated shortage of workers as the Baby Boom generation retires, an even greater shortage of employees with critical skills is looming.

In many cases, any relocation of staff, including employees who intend to buy a home, will require two or more of the following lodging options: a hotel room, extended-stay accommodations, corporate housing, a short-term or long-term apartment, rental home, or a purchased home. Even employees who are buying homes often have need for extended rental accommodations during the transition.

As a result, companies are proactively taking a comprehensive view of their mobility programs, striking a balance between policies that attract and retain the best employees and cost-containment approaches that keep mobility programs within budget. Relocation policies have been designed carefully to meet a broad scope of needs for homebuyers, often through bundled services with a real estate agent. Today, many companies are recognizing and addressing the broad scope of needs required to ease the transition for renters and their families, which often require services provided by other sources.

The design of corporate relocation policies with a fresh look at the unique rental-related needs for employees is proving to be a corporate competitive advantage to recruit and retain high performance employees. Relocating to a new job in a new location brings stress along with excitement. The stress is magnified if families are involved. The scope and quality of transition services, including rental-related services, can create strong impressions and sense of loyalty about a company. The best solutions also specifically address local market demographics for renters because conditions, such as occupancy rates and costs, can vary widely among geographic locations.

Lump-sum reimbursement policies now are used across all levels of some organizations, not only just for new hires or lower-level employees. In fact, lump-sum reimbursements are used in more than 40 percent of relocations in the United States according to Runzheimer’s Survey and Analysis of Employee Relocation Policies and Costs. However, HR professionals are recognizing that without some level of assistance for lump-sum recipients, the policy can backfire.

Employees receiving lump-sum payments can feel as if they are on their own as they struggle to find the services they need. In addition, it is not unusual for employees to attempt to manage the transition frugally—perhaps to an extreme. This further compounds the potential to negatively affect productivity while the employee is focused on putting life—and perhaps the lives of family members—back together in a new location.

Outsourcing Support for Rental Services

There are inherent challenges in finding and integrating a broad range of services from multiple providers to more effectively support renters, as one size does not fit all. Widely varying local market conditions dictate the types of services required. For example, it is virtually impossible to get an apartment without a 12-month lease in New York, NY, but three-month leases are available in many smaller markets. A single corporate policy requires the flexibility to support services based on the wide range of market conditions.
Cobbling these services together from multiple providers often results in increased stress and decreased productivity for whomever assumes responsibility to find and coordinate these services.

Some companies have decided to provide employees with access to a rental specialist with in-depth knowledge of local market conditions who can work directly with each employee to assess needs, research solutions, and offer guidance throughout the entire process. Specialists committed to finding the best solution for each employee can help locate properties through private rentals, property managers, Internet search services, and even word of mouth, in addition to the traditional sources of rentals.

In addition to lodging, companies are embracing support for a broader array of services required at every stage of the relocation lifecycle. These include orientation tours, establishing utility services, renter’s insurance, job search assistance for spouses, and the like—virtually any service needed to help employees and their families begin living in new communities.

For employees and companies, reducing the stress of relocation is the primary benefit of working with a single service provider. Companies also appreciate the advantage of decreasing the amount of time and resources required to help employees and their families get settled into their new locations and more confidence in the consistent quality of services provided throughout the nation.

A single, trusted provider of rental relocation services can help support a company’s strategic recruitment and retention goals and, therefore, increase employee satisfaction and efficiently manage costs. Relocation specialists can provide services based on a company’s policies and provide the company with updates on the status and level of satisfaction for each employee.

The market shift also creates increasing pressure on the mobility industry to adapt and deliver exceptional customer service. For those service providers who do it well, the shift is a new and growing market opportunity. In fact, high employee ratings for customer service and satisfaction may be the single most important measure of a mobility program’s value.

HR professionals should consider several factors when evaluating outsourcing options to a single provider:

** access to best-in-class service partners throughout the entire relocation lifecycle—from lodging to a wide range of ancillary services to help employees and their families begin living in new communities;

** market reach and volume to create true flexibility that ensures the selection of reliable suppliers;

** performance-based selection and quality measurement of suppliers;

** local market expertise to ensure quality of services; and

** global capabilities to support the growing number of international relocations.

Flexibility is the key to success because the needs of each employee can vary widely. A large scope of services, whether through in-house capabilities or supplier partnerships, enables more flexibility in providing precisely the right services to meet the needs of employees to ensure the optimum customer satisfaction.

For the mobility industry, the shifting demographics of the renter is leading to a broader recognition that meeting the specific needs of renters is a critical strategy to recruit and retain talented employees.

Jon Hile is vice president of rental relocation services for CORT, Fairfax, VA. He can be reached at +1 703 968 8583 or e-mail jhile@cort1.com.