Relocation experts can have all sorts of uses for foreign professionals just arriving in China. Their services are becoming more competitive, too

----By Olivier Serbrock

Moving to China is a daunting prospect for many an expatriate. In a country whose language, writing, customs and forms of social interaction could scarcely be more different from those of Europe or America, it is essential that overseas hires get settled into their new lives in China as soon as possible. Foreign companies with high-level employees overseas have a strong interest in making sure they are comfortable away from home, as difficulty adjusting can mean they have to repeat the exercise over and over again.

Most companies lack the resources to handle the task of acclimatising their people to new environments in-house. Fortunately, a growing cohort of relocation firms in China have exactly this as their speciality. These companies manage everything from home and school searches to city orientations and cross-cultural training. Of the hundreds of thousands of expatriates in China, at least half have used their services - and are likely grateful.

The top concern on most companies' relocation budgets is the cost of housing. A house in China that a recently arrived employee feels happy with will likely cost more money than back home - expatriates' housing allowances typically lie between US$2,000 and US$12,000. Each employee's home needs a security deposit, an expense that for some larger companies can mean millions of dollars alone. It can take months - sometimes up to two years - to retrieve outstanding security deposits, since utility bills usually come a few months after the tenant has left. It is therefore crucial that the collection of security deposits is managed well, lest hundreds of thousands of dollars be written off. Landlords and developers use delay tactics in handing back deposits whenever possible - post-checkout negotiations about who should pay for which damages are very common.

The key target market for relocation companies is, naturally, foreign companies. Since 2003, China has experienced strong double-digit growth in inbound moves every year and as a result the relocation business has been growing. Big international companies are the biggest customers of relocation companies since relocation services do not come cheap. A person moving to China of his own accord with an average income and average savings will not want to pay US$750 for a school search or US$3,000 for cross-cultural training. City orientations and home searches go for around the same price.

Two-horse race, for now

Two main players dominate the market at present, Santa Fe Relocation Services and Sirva Relocation. With offices in over 15 cities stretching from Hong Kong up to Shenzhen and with its own in-house real estate division in the largest cities like Beijing and Shanghai and also its core business being household goods moving, Santa Fe has a major advantage over its competitors.

The other major player in China is Sirva Relocation, part of Allied Pickfords, one of the largest moving companies in the world. Sirva subcontracts local real estate agencies to provide stock for their home searches and it's these local real estate companies that play a large role in international relocation companies' home searches since they tend to have an advantage in local knowledge. Other competitors are Pricoa and Crowne Movers, an international moving company with its own real estate division and relocation services.

International real estate companies like Knight Frank Petty, CB Richard Ellis, DTZ and Jones Lang LaSalle are all gunning for big corporate accounts and often their clients will change to a different vendor if key performance indicators are not met or simply because they go shopping for a cheaper deal. The large multinational corporations are the big fish for relocation companies to catch. If a relocation company gets exclusive rights to provide relocation services then this can produce a multi-million-dollar deal.

There are several challenges for relocation companies in China and one of them is to successfully manage clients' service expectations. An expatriate quickly becomes frustrated and angry with the amount of time that is needed for things to happen. From the signing of the lease of his property to getting someone to fix the leaking air conditioner, it all takes much longer than what they're used to. This is where relocation consultants must do their best to push the responsible parties in delivering on time.

Another key challenge is maintaining staff turnover at a minimum. Chinese companies in general have this problem and foreign companies still rely on a large base of local hires to fill many positions. Another large challenge is finding expatriate staff to show the expatriate customers around the city to find homes, schools and to do city orientations. A lot of miscommunication can occur between the expatriate client and the local relocation consultant due to cultural differences and simply because of a language gap. Western business practices are needed to properly manage these clients' expectations and therefore foreign management is also essential in the running of these relocation companies. The ideal relocation consultant would be an expat as well who could speak Mandarin fluently, however, management would have to decide on spending more on expat staff salary instead of using local hires.

Move toward competition?

As more foreigners enter China working for foreign companies, foreign real estate companies will increasingly want a piece of the relocation pie. Since almost all relocation companies rely on real estate companies for property stock they should be wary of international real estate agents and consultancies, as they will likely want to create their own relocation departments.

Clients want to feel that relocation companies are doing their best to negotiate the lowest rental price possible for all their employees' properties and moreover, they want to see it in the form of reports detailing an employee's housing allowance, the asking rental for his chosen property and also the agreed rental price at the time of lease signing. In addition, the more employees they move into China, the shorter the time they want spent on retrieving security deposits.

Over the next few years, China will be letting in the investment banks due to changing laws and as a result this is expected to drive up housing prices in luxury villa compounds and apartment towers by as much as 25 percent. The reason is quite simple: banking employees make more money than other employees and have larger housing allowances as a result. Property developers and private landlords alike will exploit this and raise their rents. As China continues to grow, so do its roads, airports and train tracks, connecting as much as possible making it more appealing for foreign companies to build their factories and manufacturing plants out in the countryside where land and labour are cheaper.

Two things are safe to predict as China continues to open its doors to foreign companies looking to setup operations. Relocation companies will continue to generate tens of millions of dollars in revenue with each passing year, and China-green foreigners will be able to make the transition fairly painlessly.