Consumer demand and profitability both point to an improving business case for smart home technology in rental properties.
By Nick Murosky (MultiFamilyExecutive.com Article) — Smart home technology trends are the “talk of the town” among home owners and home buyers. It’s not infrequent for them to come up regularly in conversations about the different gadgets being used, including “discussions” at home with Echo and Alexa, the dollars saved with smart thermostats, how cameras and smart doorbells provide a new level of security while at home or away, a new level of managing food shopping lists, or how music and entertainment experiences are evolving by requests!
According to data from Statista, in 2019, more than 33% of U.S. homes will have some type of smart home technology. And this number is expected to grow to more than 50% by 2023. Revenue generated in the category is at $27.24B now and is expected to exceed $44.79B in 2023.
Smart home technology has been largely targeted towards wealthy consumers in single-family homes, as this target market is easier to penetrate than other markets like multifamily, which presents a different set of challenges. That said, Navigant Research points out that multifamily is beginning to emerge as an extremely viable market for smart home technology, as building owners and managers are looking to differentiate their buildings and align their offerings with what buyers and renters want.
Historically, millennials comprise the largest share of the smart-home market, followed closely by Generation Xers and those aged 55 and older, according to a Coldwell Banker report. When you align trends in multifamily housing and the growth it is experiencing as younger families choose to rent over buying a starter home, multifamily builders and developers are rushing to deliver smart home packages.
Smart home technology includes a number of different devices, each delivering different levels of functionality. In checking several data sources, it seems most home buyers today are using or want to have smart home devices in the following areas of the home:
- smart speakers and entertainment systems
- door devices – locks, doorbells, etc.
- security devices and sensors
From the multifamily builder and developer perspective, smart home technologies provide a great opportunity to deliver some unique benefits, like maintaining control of vacant units, streamlining security intelligence and costs, and using analytics and data collection to better align properties to the renters’ or buyers’ needs. There are also recurring revenue dollars that can be garnered from tenants through the use of a smart home system.
For example, there are opportunities in the multifamily setting for an additional monthly fee to use the Smart Home System, while having access to support teams. These can be added as their own P&Ls into the revenue model and/or ongoing service, and can also include maintenance costs to use the system.
In addition, there is valuable data that can be utilized by the owner/developer to better align their buildings, i.e. HVAC, electrical, lighting usage, etc., and opportunities for owners/developers to utilize data garnered thru the systems to help leverage other properties.
To justify the costs of smart home technologies and ensure this recurring revenue, multifamily managers and/or developers can do A-B testing with smart home models versus non-smart home models to see if revenues differ. This is one solution for justifying the ROI for the developer/builder. Developers also hold their vendors in the rental category accountable. Many vendors talk about the returns that the developers can attain by putting in their systems, but developers must forge true partnerships and create a structure to incentivize them with additional compensation when their efforts result from more revenue from tenants. They can’t simply rely on case studies and marketing. Instead, developers should approach manufacturers and service providers to partner and establish a revenue share agreement as a proof of concept to assure the initiative increases revenue and works as expected.
Also, developers should work with smart home technology manufacturers that are established and have a proven track record. There are several advantages to using established manufacturers. First, this results in efficiencies in the integration of various systems, apps and tools. Second, established manufacturers will have a wide array of products with varying price ranges. For example, Lutron has their QS line of products which are meant for larger homes with tremendous amounts of lighting loads, but they also have their Caseta line, which is meant for medium to smaller homes with less than 50 light loads and more geared for the DIYer. With the mass market adoption of voice assistants, the DIY line of products from established manufacturers has become more and more affordable. Overall, here is a list of reasons why working with established manufacturers is paramount:
- Wide range of products
- Wide range of price ranges, and not necessarily all high
- Get all the benefits of technology in a complete range of products
- Get all the benefits of support
- Get benefits of “working with” multiple platforms (Alexa, Google, Apple Home Kit, Samsung Smart Things, Alarm.com and others)
- Product availability
- Product durability
- Warranty and peace of mind
- Good installation Instructions
- Tend not to have failures
Delivery of smart home technology to multifamily buildings requires an integration professional with knowledge of related devices, who can also coordinate the technology with the building operating system. Typically, this is done using software packages specifically designed for the integration. It’s not just about engaging numerous devices —in a multifamily setting, the devices require integration. Many multifamily builders and developers are challenged to find the right integration professional with the right software and systems approach. There are also challenges associated with ongoing support, maintenance, and updates that builders and developers need to address.
There are a number of ways that builders and developers are overcoming integration challenges and ensuring optimal delivery of smart home technology:
- Established training protocols and modules that provide consistent and accurate information on all products and installation services
- Quality products from quality manufacturers; no failed devices, downtime, excessive troubleshooting, or service calls
- Systems designed to include device monitoring
Though the multi-family smart home market is still in its early stages, there are a number of players currently deploying multi-family integrated software-based solutions. In July 2018, Google, Nest, Dwelo, and Alliance Residential announced a partnership to install a technology package in 25,000 luxury apartments, representing the largest rollout ever in the country, according to Navigant research. As benchmarks are established for these large rollouts, it is expected that many of the challenges will be overcome and smart home technology will rapidly become a standard in specific types of multifamily buildings.
This article appears as it was originally published on our sister site, www.hiveforhousing.com.
This article was co-authored by Energy Squad, an integrated smart home solutions company.