The phrase ‘smart technology’ has become somewhat loaded lately. It can be used to describe a multitude of functions completed by or with assistance from technology, but what does ‘smart’ really mean? There are many different types of smart technology that affect different industries. As it relates to smart homes, does it mean devices that learn behaviors and patterns that help manage your daily needs? Or does it mean changing the thermostat and turning on a light through an app or via voice control? The answer: it can be both.
How ‘smart’ is defined often differs from person to person. Keeping this in mind, how should property owners and operators assess smart technology in multi-family CRE builds? The answer lies in choosing a flexible platform. Having a platform that can be tailored to work within the needs of any type of community, whether Class A, B, or C, will allow you to ensure a targeted return on your investment.
The expansion of the I-10 Loop 202 interchange in Arizona is a perfect example of how defining smart can vary. Set for completion in 2019, the expansion “should increase demand for new/updated rental housing along its corridors over the next few years,” according to Alon Shnitzer, Globe St. The impact means an increased demand for Class A builds in an area that was traditionally reserved for class B and C properties. By choosing a platform that will allow for a rolling retrofit on these class B and C properties, property owners and operators can maintain a competitive edge without having to waste money remodeling the entire property. Noninvasive upgrades will also help mitigate the need to offer rent concessions in these class B and C properties in order to stay competitive with the new class A builds. For these class B and C apartments, smart may only be limited to devices within the unit, e.g. lights, outlets, locks, and thermostats, in order to maximize rent premiums without pricing out traditional B and C class renters. On the contrary, for other properties, in particular class A properties, smart might extend to beyond the front door and into common spaces, gyms, and building management.
The expansion of the I-10 has brought new class A builds to the area, but how can properties set themselves apart from other class A options? The trend of renters wanting the traditional full suite of amenities, from gyms to dog washing stations, is over. Renters want amenities that simplify their life, whether that is being able to issue temporary door-codes for dog walkers, or knowing that all the lights are off when they’re out of town for the weekend. Giving community members a sense of personalization and control gives the amenity a tangible value to your resident. Not only will residents see value in having complete oversight of their apartment, but will also have actual monetary savings in utilities.
The rental market is softening with the massive influx of new Class A builds flooding many markets in 2018. According to Mike Aiken, VP at Fogelman Properties, “With large supply deliveries in major markets, we’ll continue to witness the residual effects of softness, especially in the boom submarkets and Class A asset space.” Choosing the correct amenities that provide opportunities for value added rent increases and property differentiation over multiple renting cycles enables predictable returns on invest, even during economic downturns. The option to have smart technology not only attracts young renters, but also attracts the growing “empty-nester” population. Having amenities that meet the needs of the multiple types of renters will set properties apart, both in today’s market and tomorrow’s.