The impact of property turmoil on global mobility

Rising rents, increasing inflation, a jump in the cost of living and a shortage of housing supply are all presenting challenges for assignees and their families relocating across the globe. Marianne Curphey looks at how global mobility teams are rising to the challenge, and what the future might hold.

Marianne Curphey

25 September 2023

This article is taken from the Winter 2023/24 issue of

Think Global People magazine

Click on the cover to access the digital edition.

View your copy of the Winter 2023 issue of Think Global People magazine.

With international travel on the rise, borders reopening, and companies starting projects that were put on hold during the pandemic, there has been a resurgence in assignments and relocations. However, demand for rentals is outstripping supply in many major cities around the globe.“The pre-pandemic assignee lifestyle is making a comeback in 2023, says Vicky Woods, Client Services Director for Europe at Crown World Mobility. “Yet the landscape for those seeking overseas assignments has shifted dramatically, particularly when it comes to housing.”She says the UK in particular presents a multitude of challenges for new assignees. The demand for rental properties in the UK has surged, leading to an overwhelming scarcity of available options. This issue is not limited to London; cities like Manchester, Leeds, and Glasgow are also affected. “Several factors have contributed to this shortage, including disruptions in the construction sector due to lockdown measures, economic instability, interest rate increases, and a shift towards short-term rental agreements,” she says. The result is a fast-paced market where properties come and go quickly, leaving little room for assignees to be selective. “In this climate, relocating to the UK presents a myriad of hurdles,” she says.This lack of housing supply creates a stressful house-hunting process for mobility managers and assignees. Unlike before, assignees cannot expect agencies to arrange numerous property viewings in a short timeframe.Securing a property in the UK also comes with challenges. Rent rates have skyrocketed, with landlords seeking substantial increases due to rising interest rates. Special conditions like repainting walls or adding furniture can be difficult to negotiate, as these costs typically fall on tenants. Deposit disputes require a formal and complex process, involving evidence submission and adjudication.

European cities see strong rental demand

Alec Smith, Manager, Benefits & Daily Rates at ECA International, which provides insight into increased mortgage rates and the effect of rent prices on remote working, says the greatest annual rent increases between 2022 and 2023 were seen in London (14%), Glasgow (14%) and Manchester (13%).“While a recovery in demand for city-living and international relocations continues to exert upward pressures on rental costs in many locations around the world, new pressures have come into effect in 2023 and are accelerating price increases in multiple cities,” he says.Raised interest rates imposed by central banks around the world have seen landlords increase rents to cover higher mortgage repayment costs, and many would-be-buyers have been forced to rent longer and delay purchasing properties until more favourable financial conditions return.Some of the highest rental increases in Europe have been in Valencia (18%), Barcelona (17%) and Milan (8%). A growing technology sector and an influx of Ukrainian nationals has seen property availability in Berlin tighten, and rental prices increase by 13% since 2022. Likewise, cities across Poland have experienced added demand for rented accommodation following Russia’s invasion of Ukraine and recorded double-digit percentage rent increases in a six-month period: Krakow (21%), Gdansk (18%) and Warsaw (14%), he says.

International assignees struggle to find suitable accommodation in London

The situation is particularly challenging in London. Katie Stedman, DSP Manager at Santa Fe Relocation, says that companies were just no prepared for the average London rental increase last year of 17%.“It was a stark contrast to 2020 and 2021, where we were able to negotiate good offers for our clients,” she explains. “This year clients were not expecting the increases and their assignees were landing with a budget that was really set for 2022. Along with the increase in the cost of living, this has meant that we have had to manage client expectations and to explain that a lot of people can't afford to be 15 minutes from the office anymore.”She says that prior to COVID, a one-bedroom apartment in London might attract a rent of £1,500, but has now risen to £2,200 per month. The type of assignee has now changed, too, with companies looking to focus on moving more senior staff and spending budget on strategic moves such as new project launches or setting up a head office. This is instead of bringing in graduates to provide them with international experience.With this comes the challenge of finding suitable accommodation for C suite assignees. Many of these clients favour St John’s Wood and South Kensington in London, and want to house their families near prestigious international schools. However, family homes in these areas attract rents of £17,000 to £20,000 a month, which is now up to £5,000 a month more than pre-COVID levels.“Assignees are contributing more to their rental allowance to get what they want,” she says. “On the other hand, companies are not considering buying residential property because although property prices are falling, mortgage rates have increased to six to 8 per cent. Some assignees are keen to buy privately, but UK red tape and a lack of a credit rating can work against them.”In general, there is a lower level of turnover in rental properties, and companies are trying to negotiate a small rental increase rather than having to go out onto the open market and look for a new property for their staff, she says. Cities like Manchester and Bristol are also facing a rental shortage and strong rent rises.Simon Johnston, CEO of Icon Relocation, says companies are looking for cost efficiencies and most major markets around the world have a mismatch between supply and demand.“We are still seeing relocations at the top level of business,” he says. “They are often board level, senior executives, or staff who are critical to business function.”

What does the future hold for office space in major cities?

Another key trend is the streamlining of offices in key locations as companies decide how they are going to use prime office space in the future.“Most employers are probably will be reducing the amount of office space that they occupied by about 20%, but that process takes time to unravel because of long term leases,” says Liam Bailey, Global Head of Knight Frank's Research Department. “Businesses are focusing on better quality space and using offices for advertising, marketing, networking and raining, rather than just a workplace,” he says.The residential sales market in London has slowed down due to interest rates and the increasing cost of mortgages. Yet while there has been a 20% drop in sales activity over the past year, the rental market is running very hot.“People are returning to the city after COVID, which has fed into strong rental demand, but there is also a shortage in supply,” he says. “Private landlords are exiting the market for various reasons, primarily around legislation, which is impacting their ability to kind of make the exercise profitable.”During the pandemic there was a three year gap where new build volumes slumped, work on construction sites stopped, and there was a significant disruption in supply chain.“Our data suggests that London rents overall are up 30% In the last two years, with rent rises in central London, up by 45%,” he says. “This comes after rents fell by about 15% to 20% in 2020.”Most developed markets have experienced similar picture as the UK, given the rapid rise in interest rates in the US, the EU, Australia and New Zealand.“In our recent survey on Global Rental markets we saw rents rising globally at around three times pre-pandemic rates,” he says. “This is due to a lack of new build stock, strong demand, and people returning to cities driving up rental prices and is a consistent picture across Singapore, New York, London and other big cities.”Jonathan Beech is Managing Director, Migrate UK, a law firm specialising solely in immigration law for businesses experiencing skills shortages in tech, finance and engineering.He says there is still strong activity in relocation in the tech and healthcare markets, but that most assignments are still sponsor-led because of the complexity around working visas in the UK.“There hasn't been any clear kind of long term plan to fill the current skill shortages,” he says. “Tech is the biggest industry we are dealing with at present, with experts coming into the UK from India. There is also the emergence of Sub Saharan Africa which is providing a lot of experts in health care.”The current situation, therefore, is challenging for mobility managers who are trying to balance budgets and employee expectations, while negotiating a path through a fast-moving rental market around the globe.“In the midst of an assignee housing shortage worldwide, mobility managers and HR leaders must support employees along their relocation journey,” says Vicky Woods of Crown Global Mobility.“From managing assignee expectations and making them aware that they may have to make sacrifices when it comes to their requirements, to setting out reasonable budgets, there are ways for mobility managers and HR leaders to ease the strain. Ultimately, with the right approach and a degree of flexibility, challenges within the housing market can be overcome.”

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