A Temporary Sure Thing : Apartment Owners Offering Rental Deals to Firms for Transfers
Reacting to a relatively soft rental market, an increasing number of county apartment owners are boosting their occupancy rates by courting corporations that need temporary quarters for employees new to the area.
Apartment complexes offer potential corporate clients lower rates than hotels, fully furnished, more spacious rooms and such amenities as maid service and resident tennis coaches.
In return, they enjoy the benefits of high-class clientele and a source of guaranteed monthly payments from short-term corporate leases.
Only within the last year have county apartment owners begun seriously promoting corporate rentals, according to Cheri Marshall, Costa Mesa-based producer of the Southern California Apartment Directory map and video.
“It used to be that (apartment owners) didn’t want to hassle with” additional responsibilities such as buying furniture, Marshall said.
“Their attitude was, ‘We don’t need the business,’ but as the market got softer they began to consider it,” she said.
Of the 260,000 apartment rental units in the county, more than 2,000 are geared to corporate lessees, said William Kraus, vice president of the Apartment Assn. of Orange County.
Five years ago, 300 to 400 of about 220,000 apartments in the county were rented to corporations, he said.
Many local apartment owners started to add corporate tenants to their more traditional, long-term, clientele as vacancy rates jumped from 1.9% at the end of 1986 to a peak of 4.3% in the summer of 1987. The vacancy rate is standing at 3.7%.
While most relocating employees live at hotels or motels, 7% stay at corporate-leased apartments or condominiums, according to Runzheimer Reports on Relocation, a monthly newsletter publishing research on the relocation industry.
Nearly half of the 140 companies responding to a national survey conducted last year transfer 100 to 500 employees annually. Those corporations paid for about 42 days of temporary accommodation for 90% of these relocating employees.
Most experts agreed that a major attraction of corporate leasing is the dependability of clients. “A big company has better credit,” Marshall said.
She cited Irvine-based Fluor Corp. as an example: “Having Fluor at the bottom of a contract, (rent for) a unit is guaranteed by the corporation.”
Also, netting corporate contracts makes for good advertising, giving apartment complexes free exposure to potential renters within the company, Marshall said.
Dorothy Gourley, a property management educator who heads an apartment marketing firm in Irvine and has written a book on setting up corporate rentals, said: “There’s become a definite market for corporate suites, especially once (apartment owners have) invested in house goods.”
She said more corporate housing has appeared in the county in the last year than in the previous five, especially “near the high-tech facilities, where they bring in people on a short-term basis; specialists, engineers.”
Jim Franklin, manager of employment and college relations for Rockwell International Corp.’s Autonetics Electronics Systems division in Anaheim, hunts for temporary housing for up to 35 employees a month. Three to four apartment complexes contact him yearly seeking corporate leases.
“We check them out, have them put together for us a package of costs (including amenities),” he said, then choose the complexes based on distance from their facility and the apartments’ neighborhood.
Of the 35 county apartment complexes featured in her video guide, 10 have set up corporate units. The other 25 have the means to supply housewares for a corporate client, even if they have no units set aside for that purpose.
Apartment owners who venture into corporate leases must be willing to spend the money to invest in house goods, have an interest in trying something new and usually already have fairly lavish recreational facilities, Gourley said.
Aside from maid service, homemaker kits and secure parking, Franklin’s criteria when considering apartment complexes include pools, spas, exercise rooms, meeting rooms, barbecue areas and tennis courts.
“The logistics will knock you out,” said Steve Dorman, vice president of Costa Mesa-based Arnel Management Co., which owns 19 apartment complexes in the county, including the Cape Apartments near South Coast Plaza in Costa Mesa. Arnel started a corporate leasing program three years ago and this spring hired a relocation salesperson to market its corporate leasing option.
The Oakwood Apartments blazed the trail for county corporate leasing a decade ago.
“About 10 years ago, we began to get frequent requests from corporate personnel directors, asking if we could provide linens and maid service,” said Larry Carlin, marketing senior vice president for Oakwood. “We realized then that there was a tremendous potential in the corporate housing marketplace.”
Half the 27,000 apartments in the Los Angeles development-management firm’s 50 rental properties nationally are leased by corporations for employees who stay on average one to two months, said Randy Schultz, public relations director for Oakwood’s parent company, R&B; Enterprises.
According to Regis J. Sheehan, the Virginia-based consultant economist for the National Apartment Assn. in Washington, the popularity of allowing short-term leases was boosted five years ago with overbuilding of apartments in such Southwestern states as Texas. Vacancies proliferated, then “the oil crisis put the nail in the coffin,” he said, spurring owners to find alternate ways to fill rooms.
The same script of overbuilding is being played out on a smaller scale in Orange County, which has grown “from an almost all-bedroom economy to a corporate employment base,” Sheehan said.
He said a lot of building has been going on in the county recently, swelling the apartment supply.
“With 5% to 7% vacancies, we start looking for options to maximize the property,” Gourley said.
An official of Newport Beach-based Regis Home Corp. shared that view. The firm plans to add more corporate units to its 22 county complexes within a month because “vacancy is up all over,” Vice President Tim Gleason said.
Whether “the corporate part (survives) would depend on how soft, unsoft the market is,” said Steve Dorman of Arnel, which started a corporate program three years ago.
Although the market has begun to harden, there are those like Kraus of the county apartment association who believe that a secure niche has been carved.
“As long as the area is attractive to corporate expansion and relocation, there’ll be a demand for corporate rentals,” he said.
RENTALS FOR CORPORATE CLIENTS
A sample of county apartment complexes that seek corporate clients, and their monthly rates.
Monthly rate Monthly rate Complex 1 bedroom 2 bedrooms Park Newport, Newport Beach $1,420 $1,895 Country Woods, Brea $1,200 $1,500 South Coast Apts., Santa Ana $1,235 $1,550 Oakwood Apts., Anaheim $1,175 $1,540 Oakwood Apts., Newport Beach $1,375 $1,775 Heritage Point, Irvine $1,125 $1,375 The Cape Apts., Costa Mesa $1,150 $1,475 Seaside Meadows, Laguna Niguel $1,220 $1,465 Sundance Apts, Fountain Valley $975 $1,220
Source: Southern California Apartment Directory
