Alex, can I get “What is a Smart Home” for $1,000? More often than not,…
Alex, can I get “What is a Smart Home” for $1,000?
More often than not, you’ll hear that a smart home is a connected thermostat, door lock or some sort of security feature, and light bulbs. And that they are all controlled with an app. Or with voice commands through Amazon Echo, Google Home, Apple Homekit, Samsung SmartThings, or something else.
Smart Home. Internet of Things. Home Automation. Artificial Intelligence. Machine Learning. Technology, Big Data. Pairing. Hub. These buzz words all describe the quickly changing landscape of living and technology influence on our day-to-day routine and decisions.
It seems that Internet of Things (IoT) is this generation’s version of the late ‘90s dot com era. It’s so buzzy, that everyone seems to be a part of the industry…and not at all, all at the same time. IoT has brought us the smart home as the next “it” thing…but the definition of what “it” is somewhat vague. And “it” varies amongst your everyday person, people in the industry, and the real estate market
But is a smart home the sleek looking hardware, the software, voice control, AI, or all the above? Matt Fisher from Streetlights Residential says, “A smart apartment/building is a self-aware space.” But what exactly does that mean?
Well, the true definition of “smart home” is: “A residence that has appliances, lighting, heating, air conditioning, TVs, computers, entertainment audio & video systems, security, and camera systems that are capable of communicating with one another and can be controlled remotely by a time schedule, from any room in your house,” etc…
That definition is quite broad. But according to Ben Hoglund, Asset Manager with New Street Properties, renters and owners “are interested in their experience. It just needs to work.” But what is “it.” We still need to figure out what that experience is.
When one thinks of smart homes or smart apartments (the space I work in), you need to first understand how one open platform can make it easier for a single user to be connected to their living space.
“It’s not about one certain piece of hardware that matters,” says Sce Pike, CEO of IOTAS, “Don’t focus on the hardware, it’ll get commoditized.”
Tom Woodcock, NW Regional Director of Bisnow quipped, “the smart apartment is an apartment’s ability to make life easier with integration of AI and behavior recognition.”
So let’s dive deeper. And for the purpose of this article, we’ll focus on the multi-family apartment space, or MDU’s.
The Force Is With The Millennials
Smart home tech is among the hottest trends in the multifamily industry right now. But why?
Smart-home features such as smartphone-managed lighting are giving renters a greater sense of control and energy savings. It’s also providing data to the property managers to improve decision making, cut labor costs, control vacant units, and more.
“Millennial renters aren’t going to be scared off by technology. They already know how it works…and they like it,” says Pike. In fact, according to a new study from Bailey Brand Consulting, 74% of Millennials believe technology makes their lives easier. And since Millennials currently make up the largest group of renters, it’s a good idea to focus on efforts that appeal to them.
While the classic trope of “location, location, location” still matters. Apartments need to have a nice walkability score, be close to public transit, and more. But data based applications have the potential to add new ways for the MDU sector to create value for renters, differentiate from competitors, and find new sources of revenue.
IoT applications aim to grow margins and enable features such as dramatically more efficient building operations, enhanced tenant relationships, along with new revenue generation opportunities. Think of the increasingly popular smart thermostats that intuitively adjust temperature, humidity, and light based on a resident’s preferences and climatic conditions. Building-wide control, seamless product integration, and management also influence the smarts desired.
Convenience is key, but no one wants a disconcerting level of automation in the one place you’re supposed to be totally relaxed.
Okay, now that you understand the “whys” of smart technology, let’s focus on the “what.” What are the wide range of options? Here’s a list of some of the most desirable technology that will boost the IQ of your apartment building and attract renters:
You can look at Smart Thermostats, Light Programming and Control, Smart Outlets, Voice Control Smart Home Hubs, Smart Locks, Smart CO2 detectors and alarms that send alerts to smartphones, Security systems with remote monitoring and viewing, Smart TVs and home entertainment systems, Remote controlled window blinds, Smart Kitchen Appliances, Smart shower heads. The list is endless.
However, most of these devices speak a different language from one another. Sometimes they speak their own proprietary language, so integrating a different device into another platform is often difficult, especially with the plethora of devices across an entire property.
“We strongly prefer to use a system with non-proprietary hardware,” says Hoglund. Eric Rogers with Goodman Real Estate adds on that, “The software connecting everything is most important.”
Thus, while consumer IoT devices have drawn the most media attention, it is enterprise-level adoption and integration of the technology that will likely have the bigger impact on industry. Indeed, the MDU space is uniquely positioned to implement the technology, using IoT-enabled platforms to make building and apartment performance more efficient while also using sensor-generated data to enhance building user experience. Gartner’s recent SmartCity forecasts highlight the potential: “Smart commercial buildings will be the highest user of Internet of Things (IoT) until 2017, after which smart homes will take the lead with just over 1 billion connected things in 2018.”
“As these new technologies become more popular and commonplace, one would expect even more innovative and data-demanding ones to take their place” Says Sce Pike, “machine learning makes any platform more responsive and predictive.” This is the key to defining the smart home. Data and automation.
Leading The Charge – The Keys Of Integration
So, how is the real estate community responding to this smart technology growth and integration? According to Philip Morgan, President of Morgan Group, “It is early for the Multi-Family market but there is a definite buzz and in couple years most new development sites will have smart features.” Retrofit properties will be the following suit just to keep up and stay relevant. But the harsh reality is that, “Most investment partners, banks, and other lenders don’t fully understand “smart technology.” But the biggest obstacle is “this technology changes far too quickly to monitor for most developers/owners to track or determine differences in features and benefits,” according to Fisher.
As these new technologies become more popular and commonplace, many expect even more innovative and data-demanding ones to take their place. Internet speed and potentially building wide high speed gigabyte/second is becoming the norm….and represents a significant infrastructural expenditure. Hoglund states, “Everyone is talking about this, but there is a great deal of uncertainty on how to make it happen and how to communicate the benefits in a manner that will deliver the returns needed to justify the investment.” So, yes, defining the smart home is one important tool, but how do the metrics play out? Russ Cranston with Honeywell has seen that “renters are likely to stay in their apartment longer as convenience is key for them. Smart gives them that comfort and convenience which also leads to higher rents for the owners.” That’s a definite plus and those numbers (rental premiums) are still being vetted out across markets and regions.
According to Morgan, “Developers have to be cognizant that today’s technology could easily become yesterday’s old gadgets by the time the property is built.” Yes, the scariest part for many developers is that they are building long-term assets in a world where technology is advancing so rapidly. “On the one hand we want to provide the latest and greatest technologies to our residents, but on the other hand, there’s a good chance that the technology we put in might be obsolete in a short period of time,” says Morgan. This is an ongoing challenge in determining what technologies are the right fit to incorporate into any development to create greater NOI (Net Operating Income). Which led Woodcock to quip that developers are “cautiously baffled” by the options out in the market. Plus, there is a chasm of understanding and education of the hardware and software differentiation. Fisher agrees, stating, “Although the fit, finish, and sustainability of the hardware is key, the software controlling these components needs to be well thought out to give the end user true autonomy of their platform.”
Companies designing and selling smart home tech constantly search for ways to introduce their products to more consumers and make the much-hyped Internet of Things go mainstream.
I believe that properties don’t necessarily have to understand how technology works in order to start capitalizing on the benefits it can provide to your apartment community. Software is key and “it” just needs to sync with the lives of the almighty Millennials and Generation Z renters.
“Only 35% of millennials own homes,” says IOTAS founder Sce Pike. “Plus, it’s so expensive to outfit a home with all this technology. A lot of people are aggregating third party devices and putting it together, but I don’t think they’re giving consumers the complete home experience, or in our case, the complete apartment.”
Generation Z (90’s babies) has quickly become the largest generation since the Baby Boomers while millennials are the largest with their purchasing power about to surpass the boomers. That makes this generation extremely important to the rental market as many are just now reaching the age to seek and obtain housing independent of their parents. They are the first generation to live their entire lives in a world of smart phones, internet connectivity and social media. This is their normal. So, delivering on this unique generation’s demands and expectations early on will be critical. And with an ever-growing saturation in multifamily communities across the nation, customer experience differentiators will be key. Given their connectivity, Generation Z is used to getting what they want, when they want it. Renting is no different.
What is a smart apartment?
Having all the bells and whistles, sure. But automatic hardware and software upgrades are a must. Connectivity and data combined with smart monitoring systems and machine learning which saves on energy costs over the long run, is another. Implementation of a property-wide system is mandatory. Plug & Play readiness for renters is necessary which means no purchase or confusion of set up. It’s also “properties lowering installation costs on new buildings due to streamlining, and, residents, who can enjoy the benefits of the technology with a free app download instead of a sizable down payment on devices, can adjust preferences, which they can theoretically save and take with them to their next apartment,” says Pike. Yes, your preferences should follow you around.
“…adjust preferences, which they can take with them to their next apartment,” – Sce Pike
As property managers and ownership groups continue to leverage people’s affinity for mobile and on-demand technology in creative new ways, it is impossible to anticipate all the exciting ways technology will alter the multifamily industry, but we all see significant developments pertaining to internet, infrastructure, voice and mobile being imminent. Enabling and packaging the data via enterprise level integration and functionality is key to the smart home and smart building. Future renters desire this. Property Managers need this. Retailers are all over this. In the end, the smart home is less about the hardware and more about the software integration and data. But they are all important. Eric Rogers with Goodman Real Estate keeps it simple stating, “A smart home is an automated and efficient home that adapts to your lifestyle.” Simple albeit complex. I think the definition of smart home will continue to redefine itself as we move forward.
Hop on board…this will be a fun ride!