A Virtual Certainty: How the Pandemic Hastened Tech Adoption in the Multifamily Space

Written by Michael Zaransky Posted On Sunday, 02 August 2020 05:00

In many important ways the multifamily real estate sector, in its zeal to provide its residents with the best possible amenities, anticipated the coronavirus pandemic. Such things as virtual tours, smart technology and online payments made social distancing possible before it became a necessity.

Yet it’s only a start. It is expected that as the pandemic wears on, tech’s impact will be felt even more in this space -- potentially in areas like contact tracing, though that carries with it privacy and security concerns -- and that when this health crisis subsides, the innovation boom will continue unabated.

Consider that in 2019, some $12 billion was invested in multifamily technology. Consider that 21 percent of those occupying multiple-dwelling units own at least one smart-home device, and that the number of such devices is expected to increase from 25.9 million in 2019 to 65 million by 2023. Typical of this trend is a Scottsdale, Ariz.-based firm that deals in such technology, SmartRent. It reported 600 percent year-over-year growth in 2019, raised $60 million in a funding round completed in May 2020 and expects its expansion to continue this year, despite the pandemic.

And again, this technology offers some distinct advantages when social distancing is of such importance. A Chicago-based company called Rentgrata, for instance, created a peer-to-peer messaging system in 2016 that allowed prospective tenants to contact residents. No face-to-face meetings were required; everything was online, and anonymous. Not surprisingly, the most common question asked by prospects was along the lines of, “How do you like living here?” That came up 29 percent of the time, far ahead of questions about utilities, pets, community and noise.

Then there is the matter of virtual tours. While 52 percent of the renters surveyed by the online apartment listing service Zumper said that despite the pandemic they still preferred in-person tours, Google concluded that 67 percent would like to see more virtual tours, and according to the National Multifamily Housing Council 14 percent would rent an apartment without setting foot in it first. That has led multifamily property owners and managers to adjust their marketing strategies. More and more they are including such tours on their websites, in their emails and in their social-media posts. Moreover, the expectation is that virtual reality -- projected to be a $209 billion business by 2022 -- will make these tours more immersive than ever in the years to come.

While these trends were in the works long before the pandemic, multifamily owners had to adjust in other, non-technology-related ways, once the full scope of the crisis became apparent. Common areas, exercise rooms and pools had to be closed out of fear of infection, and there is some expectation that adjustments will have to be made, once the threat subsides -- that, specifically, exercise equipment will have to be spaced out or moved outside when possible. Or that partitions will become commonplace in common areas, to make allowances for the remote work that is expected to continue.

However things shake out, the multifamily sector is likely to come through this health crisis (and accompanying economic slump) at least as well as other commercial real estate classes, as was the case during the 2001 and 2008-09 downturns. Yes, some tweaks will be necessary. But multifamily demand is there, especially among Millennials and Generation Xers, who have largely spurned homeownership to date. It is largely a matter of staying the course and continuing to meet the needs of these tech-savvy generations.

That means continuing to provide such things as smart locks, HVAC systems and lights. It means making use of facial recognition and voice activation. Down the road, we will also surely see more implementation of data-driven personalized resident services, where devices learn of residents’ preferences. We will also see increased use of blockchain, which will smooth out the processes of leasing and rent collection. All of this will lead to buildings that operate more efficiently and improve the tenant experience, which in turn increase retention rates and attract new prospects.

Sce Pike, founder and CEO of IOTAS, Inc., a Portland, Ore.-based developer of smart home technology, writes for Forbes that she sides with the individual in such matters, while at the same time acknowledging that the matter of data ownership is a tricky one when it comes to multifamily properties. The example she cited was one where a tenant’s actions lead to a leak or other structural issue; does it follow that the resident still owns the data collected by some sensor or other? She doesn’t pretend to have an answer, but allows that the conversation about privacy is “quickly evolving,” and that multifamily owners would do well to “set the standards and do right by their residents and protect their residents’ data.”

Simply put, it is clear that technology is going to be a greater and great part of the multifamily picture -- that it has had a positive impact during the pandemic and will continue to do so in the years ahead. At the same time, there are some delicate matters to consider, some questions that need to be met head-on.

The caveat, however, is not a small one: With so much data being generated, who will own it? Who will have access to it? Such privacy issues have been raised anew during the pandemic, in the face of calls for contact tracing, and led the ACLU to issue a statement in April wondering whether that practice will “invade privacy without producing commensurate benefits.”

 
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