Many of us could not imagine a single day-or even minute-without checking our phones. We’ve become so addicted to Facebook, Twitter and email that we put every detail of our lives on social media.
So, how does this impact the multifamily industry? Real estate touches everything we do. It’s the economics of the physical space. It literally shapes our lives by defining the environment in which we live and do business. Not surprisingly, real estate tech, also known as PropTech, has officially been on the rise over the past few years. Investments in PropTech grew 63% in 2017 to over $12 billion.
What is PropTech
PropTech is the collective term used to describe a technology innovation set to disrupt the real estate market. This would include innovations in investing, developing, managing, appraising, selling, renovating, and living in buildings.
PropTech’s Global Opportunity
In a blog post, Pete Flint, founder of Trulia and now a venture capitalist, tries to capture the magnitude of the opportunity:
“Tech has done a lot in the last few decades to revolutionize flows of information (Google), communication (Facebook, Apple), goods (Amazon), capital (PayPal, Venmo), and transportation (Lyft, Uber). But real estate is larger than all of those categories combined, and the transformation that real estate tech could bring to our lives is larger, more profound than you might think.”
Flint continues to quantify the probable impact in real numbers; In 2017, residential real estate in the US alone was worth $31.8 trillion in the first half of 2019. Venture investment in PropTech has hit $12.9 billion in the first half of 2019, that’s already more than all of 2017, which saw a record of $12.7 billion in PropTech.
His VC firm believes the real estate industry will be impacted in three key areas:
- Alternative transaction models
- Alternative living models
- Innovations in construction and development
In other words, buying, selling, building and living-every step of the real estate lifecycle-will be disrupted by PropTech.
PropTech’s Impact on Multifamily
“Rent burden is increasingly affecting young people. If tech innovation typically happens with young people first, young people’s single biggest expense is rent, then the residential rental space is potentially the mother of all markets.”
Like the industry as a whole, the multifamily market will see hundreds of unique PropTech innovations in the coming years. Here are three that developers should follow now:
1. Multifamily Smart Building Technology
Set to become the standard for multifamily developments, smart buildings-built with IoT (Internet of Things) infrastructure, automated building systems, software and smart devices-will plummet the cost of powering and managing buildings.
Smart building technology will collect and analyze building data, considerably reducing energy and maintenance costs. Smart devices from thermostats to smart glass, give tenants control over their environment, reducing costs in small ways, every day.
2. Smart Living Amenities in Multifamily
As the rental market heats up, developers are looking for any competitive edge they can find. Believe it or not, smart living amenities, are more popular than updated kitchens and pools. Today renters are looking for a connected living space which includes:
- WiFi as an Amenity; apartments are providing subscription plans to allow residents to purchase WiFi directly from their phone
- Car-sharing and bike-sharing; stations on site that give residents easy access to shared mobility
- Resident dashboards/portals for managing everything from rent to on-demand services to transportation
In addition, smart apartment tech and AI can be integrated into CRM systems which would enable a prospective resident to chat about rental prices, unit availability, organize a self-tour, and lease the apartment all without needing to interact with staff until move-in. The technology would extend beyond move-in day by allowing residents to have the option to book other amenities such as dog walking, apartment cleanings, and maintenance appointments, all through their phones.
Not only do smart apartments benefit the residents, they also benefit property managers by allowing them to improve their efficiencies. Relying on technology to market new properties or collect rent allows the property manager more time to focus on improving the experience of the community.
3. Smart Living for Multifamily Construction and Development Tools
Property owners and managers are not the only ones using PropTech; the companies that build and develop commercial properties are also jumping on the trend. Developers are now starting to use software that analyze the land and determines what the best possible configuration and structure can be built to maximize its ROI. And, construction companies are using technologies to increase supply chain efficiency and reduce costs by creating a design-build model that reduces or eliminates the number of people working on an individual project.
PropTech can’t simply be ignored. It’s here, and it’s here to stay for the foreseeable future. Being complacent or trying to act as if PropTech isn’t a factor in the industry could end up being a costly mistake. Smart investors and builders will embrace its power to cut cost while attracting tenant and/or buyers with smart living amenities they are looking for.