For foreign companies in New York, it's a huge cost of doing business: Employees move to the city or come here on assignment, and the company has to put them up in temporary corporate housing that routinely exceeds $4,000 a month.
But a growing number of foreign firms are buying up high-end Manhattan condos and taking on the role of landlord themselves, brokers say. The companies, many from Europe and Asia, say the strategy makes perfect sense because of the booming Manhattan real estate market and the favorable exchange rate.
"The companies used to say, we're only going to have people here for so long, so there's no need to purchase. But now there is a change from that direction," said Daniel Baum, chief operating officer of The Real Estate Group NY. "They think, even if our people aren't there, this is a good investment opportunity for us in New York City."
The trend mirrors what is happening in the larger New York real estate market among foreign buyers. With their currencies hitting record highs against the sliding U.S. dollar, Europeans are snatching up Manhattan apartments and essentially getting twice the value because of the exchange rate.
The New York real estate market has been on a roll for a number of years, despite the turmoil around the country. The average price of a home in Manhattan in 2007 cost $1.26 million, up 11 percent from the previous year, according to the Real Estate Board of New York.
But for some overseas companies, New York is a relative bargain. A survey last year showed that New York was the 15th most expensive city in the world, behind places like London and Moscow.
Foreigners are purchasing nearly twice as much property here as they were two years ago, helping the city survive the nationwide housing crisis, real estate watchers say.
"The exchange rate has really made the economics one of the driving factors here in the condo market," said Jonathan Miller, executive vice president and director of research at real estate research company Radar Logic.
Now the trend is spreading into the corporate world.
The Real Estate Group NY sold four condos and made plans to sell eight more to an Irish investment firm for corporate housing in 2007. The Corcoran Group is working with a South Korean company hoping to buy blocks of apartments downtown for employees, and it is discussing options with various Moscow firms.
The circumstances couldn't be better for overseas companies who regularly have employees in the city on business. Rather than paying more than $4,000 per month in rent for condos in Midtown and the Financial District, they are opting to purchase units for $1 million a piece and allowing the brokers to sublet when their employees are not around, helping subsidize the high cost of the apartments.
"It's a win-win for them, if they've got to move people here anyway and housing prices are so good. And there's a weak dollar. They can kill two birds with one stone," Baum said.
Neal Sroka, a broker at The Corcoran Group, said an increasing number of his clients would rather have an empty apartment in the city with the option of subletting to one of the ever-growing number of interested renters, than pay rent for employees on short trips.
And hotels aren't a cheap option for companies either, with mid-range hotels costing $200 to $300 per night.
Many also see it as an investment in a booming market, with a strong chance that their investment will hold up better than real estate in other cities.
"The companies want to save money, but they are also interested in investing in the future, putting their money where they feel it's going to be safe," Baum said.
