Tech Checks Into Multifamily
Technology can help the multifamily sector continue its strong performance as the U.S. emerges from the pandemic.
The multifamily sector remains extremely robust - and a recent article in Forbes explained it in plain language: “Because people always need housing, multifamily properties historically perform better than other commercial real estate classes. In contrast to office and retail, which ebb and flow dramatically with supply-and-demand cycles, multifamily typically remains stable and often continues to grow when other parts of the market contract.” Property technology in multifamily is creating not only exciting new amenities and services, but also completely new models. (For more on multifamily's outlook, see the cover story, pg. 24.)
Tenant Engagement Apps. Although tenant engagement apps have been mostly focused on other areas of CRE, there is a growing number of players that are entering the multifamily space. Companies like RiseBuilding have been around for some time now and provide platforms that offer services like access control, visitor management, package solutions, and operational efficiencies. One company recently launched its product, Sugar, with a slightly different focus. While Sugar offers traditional services like access control and visitor management, its primary focus is building community. According to founder and CEO Fatima Dicko, “Community engagement is more important now than ever before. As residents spend more time at home, the demand for products that enhance in-building experiences will continue to grow. Properties that are able to offer unique community experiences to potential residents will become more competitive.”
The next wave of advancements in multifamily will most likely take place inside residential units.
In a similar vein, another proptech company, HILO, provides a service that works across CRE and multifamily, with a Tenant Experience Network that connects people to their building community, neighborhood, and city. The program allows people to access rewards, content, services, and other residents - whether they are in the office, working from home, or mid-commute.
Hardware. While a significant amount of money is going into tenant engagement apps, providers typically require hardware to provide services like access control and visitor management. Access control is one of the most important features to increase usage of these platforms. For example, a tenant can order food delivery through most engagement apps, yet chances are that they will just go directly through DoorDash or Grubhub if they don't have a compelling reason to open the app. Access control provides a necessary utility - like needing the app to enter the building and even to unlock the door to your unit. So, by embedding access into the tenant app, you increase the residents' reliance on it - which in theory should lead to adoption of other app-based services.
There are primarily two types of hardware manufacturers: those that integrate with other solutions like third-party access control providers and those that are end-to-end and choose not to integrate. ButterflyMX is an example of an open system. Their intercom offers robust two-way audio/video communication, allowing residents to speak with visitors and unlock doors from their cell phone. Although ButterflyMX has their own end-to-end solution, they allow integrations to third-party systems as well. An example of a solution that chooses not to integrate with third parties is Latch, which offers a suite of proprietary wireless locks and intercom. Although its operating system integrates with in-unit solutions like Google and Honeywell, the hardware does not currently integrate with third-party tenant apps or other access control solutions.
Integrations and Acquisitions. As technology continues to expand into multifamily and different types of services are introduced, a turf war is brewing for the precious real estate on the home pages of residents' cell phones. Every service provider has its own app, so the last thing that a resident is going to do is use one app to unlock their door, another to let visitors in, yet another to pay their rent, one more to enter a maintenance ticket, and so on. Requiring a different app for every service removes the efficiencies that the technologies were intended to create. To solve this, companies often expand their offering to encompass more services - take a property management company that starts to offer tenant amenities, for example. Since both services are so different from each other, the expanded offerings are often subpar in quality compared to other companies that specialize in it. That leaves two possibilities to provide higher quality and functionality: integration and acquisitions.
While a significant amount of money is going into tenant engagement apps, providers typically require hardware to provide services like access control and visitor management. Access control is one of the most important features to increase usage of these platforms.
Multifamily Operating Systems. An operating system could be an essential tool in the multifamily space - a single interface that acts as the system of record, while tightly integrating with best-in-class providers of other services. The companies that I believe are the most likely to succeed in this area are the property management solutions mainly due to their existing penetration, the stickiness of their products, and the deep pockets of the leaders in that space. Latch announced in September that they are building a multifamily OS, and although that sounds like a significant undertaking for the 7-year-old company, the firm has a massive war chest of recently raised cash to make this happen.
Because everyone wants to be the system of record and the branded app that customers use, you end up with a situation where companies try to be everything to everyone instead of playing their role in the ecosystem. The other scenario which is equally as likely is that industry giants will continue acquiring companies that offer complementary services and build a true end-to-end solution of the industry's best offerings. Yardi has completed over a dozen acquisitions in the last 10 years, and RealPage has acquired ClickPay, SimpleBills, Buildium, Modern Message, and Stratis since 2018.
The next wave of advancements in multifamily will most likely take place inside residential units. Amazon is testing services like grocery delivery where the delivery driver enters your apartment and puts your food away in your refrigerator. The biggest test is whether or not residents can get comfortable with a stranger entering their home. Time will tell, but I'm willing to bet that they will. (Just think, 10 years ago, would you have imagined getting into a stranger's car before Uber quickly made this the norm?) Assuming we can get comfortable with situations that were previously unfamiliar or uncomfortable, the possibilities for future proptech services are endless.