By Joe Bousquin (MultiFamilyExecutive.com Article) — As director of operations at Baton Rouge, La.-based A.C. Lewis Management, Mackenzie Sanders sees her job in no uncertain terms.
“We’re in the middle of an amenity war, and brand-new properties hold the high ground,” says Sanders, who operates 1,749 apartment units across 11 communities, which are 40 years old on average. “Technology is one area where we can get the upper hand because it’s relatively easy to retrofit units with smart home systems.”
By installing features like smart locks, thermostats, lights, and door and window sensors in those existing units, Sanders has been able to gain her own ground in that amenity war, in the name of higher rents—a bump of 4%, on average, for those units.
And with a dashboard to control it all, she’s also gained operational efficiencies, such as reducing maintenance ticket completion times 5% by granting access to personnel remotely and lowering her utility bills 15% by managing use at vacant units.
Over five years, Sanders calculates her investment for those smart home features will run her approximately $84,000. But her projected return will come in at 30%, about triple the industry standard of a 10% return for capital improvements.
“Now, a lot of our residents tell us they’re not sure how they’ll ever be able to live without smart home technology again,” Sanders says.
Leveling the New-Old Playing Field
A.C. Lewis’ experience with installing smart home technology and operational features at existing properties illustrates the firepower of retrofits in multifamily’s ever-escalating amenity war. While brand-new properties coming out of the ground in the last several years are chock-full of tech goodies to wow prospects, installing technology at existing communities can help operators keep up in the tech arms race, too, without overspending.
Operators who have walked this road say that to be successful, you need to ensure your technology backbone is robust enough to handle the extra load of the new gadgets, confirm that the devices will integrate with your existing systems, and know why you’re installing the technology choices you make, so you don’t get blinded by the dizzying array of IoT options that are being pitched to apartment operators today.
First, Look Within
Testing your existing technology infrastructure is one of the first steps you need to take to up your tech game at existing properties.
“The first hurdle is the physical analysis. You need to determine if your existing wiring is sufficient to deliver all these high-speed services,” says Joe Lubeck, CEO of Tampa, Fla.-based American Landmark, which operates 28,000 units and has worked with technology providers to install smart locks, USB outlet chargers, and package locker systems at its properties. “You want to ensure that you can deliver the same facilities and amenities that any new building can, ideally at a slightly lower price point.”
To limit disruptions for residents while completing upgrades, he holds town hall meetings with residents to set expectations and highlight the benefits of the upgrades. “And keep to your timetable,” Lubeck says. “If you tell a resident you’re going to change their lock on Thursday at 8 a.m., you need to be there on Thursday at 8 a.m.”
Integrating Tech at Existing Properties
Making sure the tech providers you partner with can do what they say is critical, as well.
“Due diligence is very important when it comes to technology,” says Jeff Kok, chief innovation officer at Dallas-based Mill Creek Residential, which counts 19,700 units in its portfolio. “You don’t want to rush into a decision before you have fully vetted it.”
For example, Kok says many tech amenities being hawked to operators today have slick displays to wow residents and property professionals alike. But when it comes to deploying them at existing properties, they may not yet be battle tested.
“They create a great user interface, so it looks nice,” Kok says. “But on the back end, they haven’t always fully developed the integrations they’re promising. A big gap our industry faces today is a lot of things are being installed based on marketing, and not based on true technical capability.”
Take the case of access control and smart locks. Putting in a new system at an existing building can cost anywhere from $200 to $500 per door, a price that will cut into a capital improvement budget quickly when multiplied over a 300-unit property. But it’s not just about making sure the locks on the front door work in tandem with those on the apartment unit. It’s also all the steps in between.
“It’s about how do we make the most seamless experience for people coming into the building, and what that means,” Kok explains. “You want to make sure the parking garage, the main entry to the building, the common area access doors, the elevator, and the unit doors all connect into one singular system. At 95% of communities today, that’s not the case.”
To ensure that integration, Kok recommends talking to technology providers’ references to get an unvarnished account of other apartment operators’ actual experiences going through an upgrade.
Just Do It
But while testing the backbone of your community and ensuring integration is paramount, others say just making a commitment to maintaining your tech arsenal is critical for operators of today’s existing apartment buildings.
“Let’s say you’re looking at a 300-unit building, which at $300,000 a unit cost approximately $100 million to build,” says Jon Paul Perez, vice president of Miami-based Related Group, which has developed 90,000 units since 1979. “To do a lock upgrade at $300 per apartment, you’re looking at adding $100,000 to that property. But that’s just one-tenth of 1% of your overall cost. You just need to do it. You need to spend that hundred grand in order to get the highest rents in the market.”
For Sanders at A.C. Lewis, who worked with a third-party smart tech provider to get her older properties up to speed, relying on the firm’s expertise helped her rollout go more smoothly. “It comes down to finding the right technology partner,” Sanders says. “We don’t want to get into the IT or technical support business, so having a partner with local resources plays a big part in our success.”
And because the partner offered a financing program, it helped her fund those upgrades, a critical differentiator when going to battle with brand-new buildings.
“New builds have the benefit of including the cost of amenities in their original financing, which isn’t the case with existing properties like ours,” Sanders says. “Finding the right smart home technology partner with a good financing option leveled the playing field for us.”
Sounds like a good plan for winning the battle in the amenities arms race, without losing the war.