THE PAST FEW YEARS haven't been great for apartment owners. Turns out corporate housing companies have had it just as bad.

And that doesn't bode well for apartment owners who use third-party corporate housing providers to fill excess inventory.

“We got hit hard because they got hit hard,” says Kai Weber , vice president of marketing for Chicago-based AMLI Residential , which recently closed down its corporate rentals division and chose instead to outsource the administration of its corporate housing units to third-party providers such as Marriott .

Like conventional apartments, corporate housing units mirror the economy. When things are good, people rent apartments and businesses move people around. When things aren't so good, neither happens.

Ultimately, this means that, while corporate housing can be a nice side business, it's no hedge against a downturn. And with its different management demands, it sometimes makes sense for apartment owners to farm out corporate housing altogether.

Intensely Hands-On

Managing corporate housing isn't like running apartments; the needs and demands are different. Just ask Marshall Rosen , managing director and CEO of The Solomon Organization , a Summit, N.J.-based apartment and corporate housing owner with 10,000 units, roughly 1 percent to 1.5 percent corporate rentals. Solomon provides bedding, cookware, water, fresh fruit, and crackers to its temporary residents. “They can live there two, three, or four days, and they don't have to go to the supermarket,” Rosen says.

But Rosen says one size doesn't necessarily fit all in the corporate world. Solomon has footholds near major corporate facilities for companies such as Penske Trucking and Automotive , IBM , and GE .

The company serves two major types of corporate clients: the high-level executive and the trainee, who is often from overseas and on location for a six- to nine-month training program. “The executive is looking for a higher level than the trainee coming in from overseas,” Rosen says.

For apartment owners, there's also more turnover to manage. “In the majority of cases, we try to keep leases to less than six months,” says Sean Worker , CEO of Reston, Va.-based B ridgeStreet Worldwide , one of the largest corporate housing providers in the country. “At any one time, most of our inventory is less than six months."

On the plus side, apartment operators aren't having to absorb all of the usual turn costs. “We have exposure because potentially we turn more units since the length of stay is shorter,” Weber says. “We have more costs, but we're not changing out fixtures or doing types of different upgrades."

The Great Slowdown

BridgeStreet Worldwide, which has about 4,000 units in its own portfolio, can add 15,000 additional units at any time from its network of major apartment operators including Alexandria, Va.-based AvalonBay Communities and Atlanta-based Post Properties.

The demand often depends on the economy and how many available apartments are already on the market.

Over the past few years, Worker has seen demand fall. In 2010, however, revenue jumped 35 percent. “We're a lag industry,” he says. “Where some industries saw the fall-off in the middle of '08, we saw it fall off in the beginning of '09. They can't withdraw people that quickly, so they gradually peter out."

Rosen, too, has seen Penske, IBM, and GE all retrench but says his diversified portfolio helped protect him. “The corporate housing market had to pull back as corporate budgets that relate to moving people around have been moved in-house,” he says.

In some areas of the country, the slowdown in corporate rentals continues. In three Texas markets—Beaumont, Dallas, and Houston—Houston-based apartment and corporate housing manager Asset Plus Cos. has seen things fall off since the Gulf Coast oil spill. In some properties, the company would usually have 20 to 25 corporate rentals at any given time. Now, it's down to five to seven units rented to corporate customers.

“We're seeing a big decline in corporate leases,” says Stephanie Graves , training and marketing director for Asset Plus. “Companies that have done corporate leases for a long time are pulling people out, and they're not replacing them."

But not all sectors of corporate housing are being hit as hard. Matthew B. Foster , general manager of TDY Lodging , a service that specializes in advertising corporate lodging for temporary duty personnel near military installations and cities, all within government per diem rates, has seen steady business even through the downturn.

“The DOD budget doesn't fluctuate much,” Foster says. “A lot of companies have cut back on their corporate travel.

We haven't seen that in our industry."

Stepping Outside

Considering the management effort needed to run a corporate housing group—coupled with the unsteady demand equation—it's not hard to see why a company like AMLI chose to use thirdparty providers to rent out it's corporate housing units.

Under its AMLI Corporate Homes banner, it had an entire team devoted to the furnished, corporate housing business. But with capable corporate housing specialists out there, the company decided recently to farm out its corporate housing business.

“Besides the overhead of managing it internally, there's an expertise,” Weber says.

“Corporate housing is a business in and of itself. Being able to partner with some great corporate housing providers allows us to accept as many as 5 percent to 10 percent of our overall count at any given time or as few as we'd like without having to signifi- cantly add or decrease our overhead."

That sort of flexibility helps apartment owners take advantage of the short-term corporate housing market when they need to fill units, but gives them the flexibility when conventional renters, who opt for longer leases, come in.

Despite this, some larger apartment firms still have a branded presence in corporate housing. Chicago-based Equity Residential has its Equity Corporate Housing ; Atlanta-based Gables Residential has its Gables Corporate Accommodations . Even smaller firms like The Solomon Organization take on their own corporate housing.

“At the end of the day, there is a premium in what we can charge [from managing our own corporate housing],” Rosen says. “It adds to our bottom line."

And, as 2010 has progressed, Rosen says he's seen the benefit of being involved in corporate housing and managing his own corporate portfolio. “We've clearly seen, in 2010, a recovery in the corporate sector,” Rosen says. “It has started to expand again."