CREJ - Multifamily Properties Quarterly - July 2015
Imagine tenants walking through the door of a luxury rental unit to find everything just the way they like it. The door opens with a fingerprint on a smart-phone, favorite music is playing, window blinds automatically block the late-afternoon sun and the temperature is perfect. Now imagine the building owner is able to charge premium rates, minimize turnover, meet energy conservation measures, and remotely monitor security or vandalism concerns – while bringing in eager tenants. And the best part is the technology pays for itself. Sounds like multiunit utopia, doesn’t it? Yet these are the benefits of today’s smart-home boom. And by planning for smart-home needs during the build phase, multifamily properties can be equipped to meet interactive home needs well into the future. Smart-Home Technology Love it or hate it, most of us, especially affluent tenants, rely on electronic devices for everything from work to navigation to entertainment. A December Pew study found that 85 percent of U.S. young adults, and all adults with incomes over $75,000, own a smart-phone. These millions of consumers depend on apps to navigate their daily lives. In fact, millennials in particular no longer regard apps as a privilege, but rather an expectation – and they want every other aspect of their home to be just as easy. Connected smart technology, collectively known as the Internet of Things, or IoT, pours into the marketplace at an astonishing rate. In the past, home automation was considered a luxury or a Jetsons-inspired fantasy, but soon it will be the standard for everyone, especially in the high-end rental market. By 2022, experts predict there will be more than 500 connected devices in a typical American home. The market for smart-home products is growing at a rate of 17 percent per year, and is expected to reach more than $58 billion by 2020. Where Does Multifamily Fit In? Residents of single-family and multifamily homes alike want amenities that make their lives easier while providing peace of mind. From remote access to security systems, to automatic energy-saving settings, to one-touch control for the perfect wake-up or movie night scene, the connected home provides the ultimate convenience. In a competitive marketplace, automated multifamily units can give developers the upper hand. In fact, buyers and renters are 85 percent more likely to choose an automated unit over a non-automated unit. This is especially true for the millennial generation who now expect automation trends that support multitasking, and other technology, to follow them to their next apartment. And yet multifamily apartment buildings are woefully behind in adopting – and adapting to – the smart-home trend. While smart homes have been on the rise for a decade, the multifamily market just got on board in the last couple of years with a few forward-thinking “early adopter” commercial developers bringing the trend to cities like Denver. Of course, part of this is due to the demands of scale. But developers who jump on board the smart-home trend now have a crucial edge in attracting sophisticated, high-end tenants. Benefits for Developers It’s easy to see how residents could be sold on the convenience and luxury of smart-home living, but smart homes also benefit developers, from energy savings to increasingly efficient property management. For builders, developers and managers, the benefits of smart-home amenities in a multiunit building include: Tenant appeal. Nothing says “latest and greatest” like smart-home technology. These days, everyone offers granite countertops and hardwood floors. For busy professionals who seek out high-end leasing, smart features seal the deal. Energy savings. Presence and proximity sensors, motion detectors, and linked thermostats and lighting controls mean that more than ever, utilities can be used only when residents need them. In a large building, savings add up dramatically, and support regulatory compliance with conservation measures. Management ease. Smart technology allows property management to monitor unoccupied units. With a few taps of a keyboard, managers can verify windows and doors are secure, adjust temperature prior to a showing and monitor for movement. These smart tools apply to a building’s public spaces, too. Simplified notifications. With smart technology, management can send information to tenants’ devices – from package delivery notices to safety alerts. No more tacky flyers or questionable contractors on the property; and no more debates about whether someone received a notice by mail or email. Feasibility on a Multiunit Scale How does a commercial developer make smart technology feasible at this level? Making a building “smart” requires little additional space. These items can help: Planning. One key is to integrate smart features into construction. A company with strong expertise in designing and installing smart technology can anticipate tomorrow’s needs and help future-proof the building’s smart amenities. Yet even for retrofits of historic buildings, the right partner can make smart-home workable. Wiring. Copper wiring, long the standard of excellence, is being replaced by fiber, which can carry data loads that significant smart features throughout a multiunit structure demand. Infrastructure. Many smart features operate by proximity, often via wireless Internet, Bluetooth or protocols designed specifically for connected homes, like Z-Wave and ZigBee. We’ve all had the experience of watching a smart-phone seek connection in a bunker-like arena. Planning ahead can avoid obstacles to wireless transmission that are maddening for tenants. The connected home is becoming the standard. Buyers and renters are expecting it, and developers are starting to deliver. Soon, most multifamily properties will offer a connected home controlled by one single app – and tenants will not only embrace it, they will love it.