For prospective renters, a building equipped with smart home automation technology fromScottsdale, Arizona–based technology firm SmartRent may enable them to schedule a tour online, verify their identity, and then unlock the unit’s Bluetooth-enabled smart lock to allow them to take a look around without needing a rental agent to be present. And once they move in, the company’s technology platform can enable the residents to control their lights and thermostat remotely or let an Uber Eats employee enter through the building’s front door to deliver a meal, all through a simple-to-use app.
“It adds a level of convenience that residents love,” says SmartRent founder and chief executive Lucas Haldeman, who notes that the company’s smart home platform provides benefits for building owners as well. Tenants may be willing to pay $35 or $40 more per month in rent for a smart apartment, for example, once they learn that they might save even more money on their air-conditioning costs through the ability to adjust their smart thermostat remotely. Beyond that, SmartRent’s platform enables managers to monitor and control the property more efficiently through a website or mobile app that allows them to check the status of work orders for repairs or verify that cars in the parking lot belong to authorized users.
SmartRent is one of numerous companies aiming to transform the multifamily residential segment of commercial real estate through use of property technology, or proptech, a catch-all term that encompasses a variety of software and technology platforms that provide greater efficiency and new capabilities, all designed to improve how buildings are bought, sold, operated, and managed.
Industry observers say proptech is just starting to make inroads in the multifamily segment, where it could have transformational impact. Already, some apartment building owners are using cloud-based systems to manage their buildings’ energy use and maintenance needs through their phones, as well as analytic platforms that gather vast amounts of financial data from properties in their portfolios to aid in strategic decision-making. Also being used are websites and mobile apps that enable renters to sign leases, pay their rent, or communicate with their landlords with a few taps on a keyboard or screen. On the cutting edge, proptech pioneers also are looking to fundamentally alter the relationship between owners and tenants by delivering new types of services and customer perks.
Phases of Proptech Evolution
In recent years, venture capital firms have been pumping money into proptech, and even though investment dropped by 38 percent in the tumultuous economic climate of 2022, they still invested $19.8 billion in proptech startups, according to a recent report by the Center for Real Estate Technology & Innovation. It is unclear how much of that amount is being used to fund multifamily residential innovations. But Jeremy Kaner, a general partner at Olive Tree Ventures, an early-stage venture capital firm and arm of real estate investment firm Olive Tree Holdings, sees proptech for apartment buildings as having an impact comparable to the disruption of the banking and financial services sector by financial technology.
“Over 60 percent of global net worth is stored in real estate, not banks,” Kaner notes. “You have massive payments—$500 billion in annual rent payments in 2021 just in the U.S.” The difference, he says, is that “one sector has been revolutionized by technology and went from banking in a branch to mobile banking on your phone.” Multifamily residential, in comparison, is still in what he sees as the game’s early innings.
Third Wave
Even so, multifamily residential proptech already has gone through several evolutionary stages, says Jeff Adler, vice president of Yardi Matrix, a commercial real estate market intelligence company and part of software company Yardi Systems.
The first wave included what Adler describes as business-to-business applications that automate back-office operations and improve efficiency while reducing staffing costs. Next came a wave of business-to-consumer applications to improve the renter experience, including websites and mobile apps that enabled basic functions—from filling out a lease application to paying rent or making maintenance requests—to be carried out online through websites and mobile apps.
“Business-to-consumer proptech got a huge lift due to COVID-19,” Adler says. “You were forced to go online because you couldn’t rely on an in-person interaction.” In addition, he notes, a new generation of younger renters, who grew up with smartphones and wi-fi, “is very comfortable with an increased digital presence in their lives.”
Adler now foresees a third wave in which buildings are wired to gather enormous amounts of data, which will allow building owners to monitor operations in real time and gain new insights about how their properties are used and find ways to create additional value. “This is more acute in the commercial space, but now it’s also spreading in the residential space, where you have sensors on the water heater, you have sensors on the HVAC system, the thermostat is talking, the smart locks are talking,” Adler says. Such information can enable owners to optimize and cut fast-rising expenses.
Apartment managers also conceivably could use the sort of people-counting sensors installed in office buildings to gather anonymous data on how much tenants are actually using various amenity spaces, says an article on the website of Homebase, a smart building solutions provider. That could help managers better provide what tenants want. Jason Diamond, an Atlanta-based digital practice manager for architecture firm Perkins & Will, says developers increasingly gather as much predictive data as they can during the design process. He sees a rising trend of using software to visualize operating data across an entire portfolio of buildings. “Once you have a lot of properties and they’re spread out all over the place, or even if they’re concentrated, you gravitate toward a modernized system of capturing all that data,” he says.
Using Data to Streamline Transactions
Dealpath, a proptech company with dual headquarters in San Francisco and New York City, has carved out a lucrative niche by creating software that enables real estate firms to manage the mountains of data involved in investment decisions.
When the company started out nine years ago, “we saw two fundamental challenges in real estate,” says cofounder and chief executive officer Mike Sroka. First, there was no common data structure, he says, meaning “professionals and teams and firms had to spend a lot of time, money, and energy monitoring a variety of data sources and manually trying to compile and format that information, which almost instantly was lost again in spreadsheets and emails.” That problem was compounded by the complex workflows for transactions, which required collaboration among different internal teams.
Since then, Dealpath’s information management platform has supported $10 trillion in transactions, and clients are able to evaluate 20 percent more deals than previously, with 30 percent fewer errors in underwriting and due diligence, Sroka says. Dealpath initially focused narrowly on single-tenant net lease retail transactions then gradually expanded to other property types, including multifamily residential, and into development projects and financing.
“Investors have become more sophisticated,” notes Craig Leibowitz, the New York–based director of innovation and insight advisory for real estate services firm Avison Young, which has a proptech analytics platform that its employees use to help clients acquire and manage multifamily residential assets. “There’s a much greater reliance upon data science and analytics to inform a decision,” he says. Avison Young enables its clients to dig deep into details, including the proximity of a multifamily building to nearby office towers, recreation, green spaces, dining, and nightlife. By adding that information to core real estate fundamentals, “you have a pretty dynamic picture of where some of those opportunities may reside,” he says.
At the business-to-consumer level, Calgary, Canada–based Ownly, which has been compared to a real estate version of Shopify, focuses on streamlining home purchases and enabling homebuyers to do everything from securing a mortgage to choosing the architectural style and even pick out details such as cabinetry and flooring on a single platform. Cofounder and chief executive officer Jason Hardy sees what he calls “a massive opportunity” in streamlining the sale of units in multifamily buildings, which has been hurt by recent economic conditions in which buyers are harder to come by and may have difficulty qualifying for mortgages.
“The piece that we’re really focused upon right now is providing real-time insights into the buying power and capability of a potential buyer, and then giving that power to the seller,” Hardy says. “It allows them to deal with what we call ‘verified buyers.’”Polling to Guide Developers’ Decisions
James Moore, cofounder and chief operating officer of Washington, D.C.–based proptech startup RCKRBX, thinks multifamily residential developers making decisions about what to build too often are forced to rely on backwards-looking data—marketplace trends detailing how an area or specific buildings in that area performed. “A lot of the development in software has been building better mousetraps to help people get new insights out of very similar data,” he says.
RCKRBX aims to disrupt the multifamily residential segment by taking a radically different approach—applying the sort of opinion research techniques used by political campaigns.
“You’re now really able to model out how that new project or repositioned asset ultimately is going to perform,” says Michael Broder, RCKRBX cofounder, president, and chief executive officer. “You’re now able to hear directly from those populations who are most likely to consider and choose that particular project in that particular submarket and understand where those rent rates and demand levels are, and what is really accretive to those factors, based on what’s important to those populations.”
A developer can use the polling data in RCKRBX’s platform to look at a geographic area and see how a project would appeal to survey participants there, whose income level, age, and demographic characteristics have been verified.
It is possible to drill down to details such as the room size and configuration of apartments, building amenities, and even the finishes that would appeal to potential renters—enabling developers to decide whether to spend their budget to install hardwood floors, go with a rooftop sundeck instead of a swimming pool, or provide concierge service or fitness programming. The company has started a gradual rollout of its platform, which eventually will be available nationwide.
Rewards Points for Renters
Kaner sees proptech as a way to improve multifamily residential’s basic execution. “The crux of it is how to get the best tenants in and keep those tenants happy and paying their rent on time, and getting them to renew,” he says.
Stake, a startup backed by Olive Tree, aims to take that even further—reshaping the financial relationship between landlords and tenants by providing cash-back rewards in exchange for paying rent on time or renewing leases early. Rowland Hobbs, company cofounder and CEO, says it is time for landlords to try an approach that has worked for credit card companies, airlines, and retailers such as Walmart.
With data accessible through the New York City–based startup’s dashboard, “it becomes a pretty simple equation: here’s how much cash back to get the action that you want from your renters,” Hobbs says. The cash-back benefits are coupled with other financial services that Stake provides to tenants. Through a partner bank, Stake offers free checking accounts and debit cards, and even reports on-time rent payments to credit bureaus to help tenants build their creditworthiness. The startup also provides salary advances to tenants. “It’s like, hey, we know your paychecks are coming in, we see them every month,” Hobbs says. “And that means [tenants] can pay their rent or other bills earlier.”
Using Stake’s dashboard, landlords can even customize their incentives—tailoring them to reduce delinquency rates for studio apartments or the time needed to rent three-bedroom units, Hobbs says. Moreover, the financial benefits provide a way to differentiate a building from others on the same block.
More such innovations are likely on the way. “It’s such a blue ocean of opportunity,” says Ian Bel, managing principal and chief executive of Olive Tree Holdings and a strategic adviser to Stake. “We don’t think there’s one killer app that’s the panacea of the industry. We think there are a lot of killer apps.”
