Outsourcing, globalization, the World Wide Web, the European Union and free trade agreements are elements of a rising connectedness between people and economies in many nations.

The real estate relocation industry is tapping into this trend by providing services that allow corporations to expand their frontiers through the transfer of employees to and from other countries, and real estate companies are also increasing their reach to chase relocation-related business around the globe.

The list of worldwide relocation service providers has ties to some major real estate brands: Cartus is a subsidiary of Realogy Corp., formerly a part of Cendant Corp.; Prudential Relocation is a subsidiary of Prudential Financial; Weichert Relocation Services is affiliated with Weichert Real Estate; GMAC Global Relocation Services is affiliated with GMAC Real Estate; and RE/MAX operates RE/MAX Relocation. Many other real estate brokerage companies have created divisions focusing on relocation business, too.

The relocation industry is thriving both in the United States and abroad, and major relocation companies are constantly battling for new clients on a global basis. This fierce competition for corporate business has led relocation companies to reduce service costs to corporate clients over time while relying more on higher fees for referred business to real estate professionals and other third-party service providers. Some real estate professionals say the higher fees can threaten service levels for relocating consumers.

While positioning for more international business, major relocation companies are also facing a changing U.S. real estate market that could lead to greater domestic demands for comprehensive services.

While employee transfers within the United States are still the bread-and-butter for U.S.-based relocation firms, about 43 percent of corporate relocation firms transfer employees between countries, according to a 2006 survey by Atlas World Group Inc., a transportation company, and 39 percent of firms reported an increase in the number of international relocations in 2005 compared to 2004. And 30 percent of respondents to the Atlas survey said they expected to see an increase in the volume of international relocation business in 2006. This 39th annual Atlas Corporate Relocation Survey is based on a survey of 421 relocation professionals.

Domestic relocation business is growing slightly while international business has rebounded strongly after a post-Sept. 11 lull, said Cris Collie, executive vice president for Worldwide ERC, a membership organization for relocation professionals.

“Global is growing faster year-over-year now. It’s on a real strong hockey-stick kind of growth,” he said. “It’s not just U.S. expatriates, it is growth within the (international) regions. Australians are moving into Thailand, Singaporeans into mainland China. Business has just become global business. You need to have a physical footprint (internationally).” And with global economic growth, more foreigners are moving to the United States, Collie said.

The average cost to move an employee is $70,000, he noted, which “is still a lot less expensive than it is to hire and train someone.”

Sandy Taraszki, executive director for the Worldwide ERC Coalition, a part of Worldwide ERC, said, “Relocation departments have become a much more important part of the real estate firms that are really in a growth mode.” While global business can provide opportunity for real estate companies, it also requires a new set of skills. “With (globalization) comes the challenges of understanding that you’re dealing with different customers, personalities and people,” she said.

A survey on referral and relocation activity in 2005, conducted by the National Association of Realtors and Worldwide ERC, found that about 40 percent of real estate firms participate in some type of referral program, with most of those firms participating in employer relocation programs, and 46 percent of large firms participate in referral programs including relocation programs. That survey, conducted in June 2005, included responses from 1,217 real estate professionals.

Also, about 80 percent of firms that have relocation departments reported that the department is profitable, according to the survey. Relocation companies can receive fees from corporations and government agencies for services, and also earn money based on referral fees to third-party service providers including real estate brokerage companies, moving companies and title companies, among others.

Realogy, a real estate company that operates Cartus, one of the largest relocation service providers in the nation, reported increased revenues of $40 million in 2005 compared with 2004 for its relocation business, and had $26 million in incremental relocation referral fees “primarily due to a 13 percent increase domestically in the average fee per referral and a 3 percent increase in referral volume” compared to the prior year, according to a Realogy financial report.

In 2004, the relocation services segment reported a $43 million increase in revenues compared to 2003, “primarily due to a $30 million increase in referral fees principally resulting from a 14 percent increase domestically in the average fee per referral and an 8 percent increase in referral volume.”

Cartus has about 1,200 active corporate and government clients. The company reported $12 million in incremental management fees and commissions in 2005 due to an increase in international transaction volume.

Cartus participates in about 120,000 relocations in over 140 countries each year, according to a Realogy financial report, and Cartus has delivered about 37,900 relocation referrals to Realogy-affiliated franchisees and 15,200 referral transactions to company-owned real estate offices, according to annual statistics.

While some companies outsource relocation services to companies such as Cartus, others handle relocation services in-house. About 55 percent of companies outsourced relocation services in 2005, according to the Atlas report, compared to 63 percent in 2004 and 66 percent in 2003. Real estate services were the most popular among outsourced relocation-related services in 2005, according to the Atlas report.

The volume of domestic employee transfers has risen every year since 2002, according to a survey by Worldwide ERC, with an expected 14 percent rise in domestic transfers in 2006 compared to 2005. In 2005, respondents to the ERC survey reported that 53 percent of relocated employees were renters and 47 percent were homeowners. And the Atlas study found that about 28 percent of responding firms expected relocation volumes to increase in 2006 while 31 percent expect relocation budgets to increase.

A 2004 study by the American Moving and Storage Association found that Washington, D.C., ranked as the most active U.S. metro area for moves, with 40,000 inbound and outbound moves. The Phoenix and Mesa, Ariz., area was next on the list with 10,000 moves.

Worldwide ERC and relocation company Primacy Relocation in May named Louisville, Ky., Evansville, Ind., and Athens, Ga., as the best cities for relocating families among large, medium and small U.S. metro areas in 2006.

Internationally, the United States, United Kingdom and China are among the most active destinations for relocation activity, according to a “Global Relocation Trends” report released last year by GMAC Global Relocation Services.

That report, based on a survey of 125 relocation professionals, found that United States was selected as the most active location for employee relocations by 19 percent of respondents, followed by United Kingdom with 17 percent, China with 9 percent, Germany with 5 percent and Belgium with 5 percent. “In the history of the survey, the United Kingdom has always been the top destination,” and the United Kingdom and China have always ranked among the top six destinations, the report states.

About 46 percent of the companies represented by survey respondents have a headquarters outside of the U.S. — and this high rate of participation by non-U.S.-based companies may explain the difference in the latest survey, the report states.

Eleven percent of respondents named the United States as the nation with the most significant reduction in relocation activity compared to the previous year, followed by the United Kingdom with 8 percent, Germany with 7 percent and Italy with 6 percent. “As the most frequently cited destination for expatriate assignments … it is not surprising that the United States also experienced noticeable reductions in expatriate activity,” the report states.

About 23 percent of respondents ranked China as the most common new destination for relocations, followed by India with 12 percent and Singapore with 4 percent. “China always has been the most commonly cited emerging destination,” according to the report.

About 47 percent of responding relocation professionals believe the number of expatriates increased in 2004, while 54 percent expected the number to increase in 2005, according to the GMAC report. About 35 percent expected no change in the expatriate population in 2005, while 11 percent expected a decrease.

Judy Pogue, president for the Real Living brokerage company’s relocation business, said, “Technology is key, particularly with global relocation,” as the Internet can provide instant access to information to assist relocating employees. “The information is right there at their fingertips — all the information they need about their company’s policies, about what’s being offered to them,” she said.

Pogue said she expects a gradual increase in global relocation business. Currently, about 85 percent of the company’s relocation business is domestic and 15 percent is international, she said.

Source:

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