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The future of apartment tech

At NAA’s recent Apartmentalize conference in Denver, the future of apartment tech was the subject of several of the educational session. Here is a summary of some of what was presented.

Setting a focus

The Apartmentalize conference is a huge event with over 11,000 attendees, 1,400 exhibitors and 80 educational sessions. While it is an excellent forum for gathering information on a variety of topics, it would take an army of attendees to take it all in. Consequently, Multihousing Pro elected to focus on the future of apartment tech.

10 innovations in 10 years

An early session sought to identify 10 technologies which may have the greatest impact on the operation of multifamily housing in the coming 10 years. The technologies are:

Augmented and virtual reality. Virtual reality in particular is expected to impact operations by enabling virtual self-guided tours of the property. It is expected to increase the trend of residents signing leases for properties that they have never actually visited.

Autonomous vehicles. Not only should operators consider having pick up and drop off points for automated vehicles, but they may also be able to reduce their parking area since a lot optimized for autonomous vehicles can park cars more densely than can a lot designed for human drivers. Autonomous flying vehicles are also coming.

Delivery via drone or robot. This is being done in hotels today. Drone delivery of food will soon be available in Dallas and San Diego.

Battery power – both for cars and for local energy storage. Batteries can be used along with solar panels to provide power to your building when the sun is not shining. The popularity of electric cars will drive demand for charging stations at multifamily properties. Electric scooters and electric-motor-assisted bicycles will also require charging outlets to be available. Providing charging options should be a chargeable amenity and therefore a source of ancillary revenue for the property.

New money – cryptocurrencies. These may provide alternative rent payment systems.

Artificial Intelligence. AI is seen as an enabler of other technologies such as chatbots, smart building management and facial recognition. Chatbots are already in wide use. At one property, a chatbot was rated the number one customer service rep by users. Facial recognition is also being implemented both to identify customers and to do criminal background checks. Facial recognition systems also can track an individual as he walks around a property.

Gig economy – residents can be both users and providers. Gig workers may not have traditional income documentation. People working from home may want a den or office available.

Social media as customer service. Consumers expect instant response when they post to social media. Operators need to respond to all comments and know when to take their interaction with a resident off of the public forum.

Smart home technology. Communities are being built with connected devices to provide real time remote monitoring. The data collected provides the basis for implementing predictive maintenance. Voice assistants will increasingly be used by residents to interact with the property, as by reserving facilities or scheduling rent payments.

Automation. The presenter played a tape of a Google Assistant calling a salon to schedule a hair cut appointment. It is likely that the woman who answered the phone had no idea that she was speaking with a computer. Listening to it was both wonderful and creepy at the same time. In any case, bots are expected to automate more functions as time goes on. By 2029, 25 to 35 percent of leasing transactions are expected to be done without a leasing agent, and a quarter of maintenance requests are expected to be called in by machines.

Futurecasting apartment tech

A later session took a look at apartment tech that may be implemented in the next few years. While the shorter time horizon pared the list of technologies somewhat, it should come as no surprise that many of the same technologies were discussed. Technologies that were highlighted in this session were artificial intelligence/business intelligence (AI/BI), chatbots and smart home features.

AI/BI is expected to impact all areas of the multifamily housing business from influencing what projects get built with which features, to improving operational efficiencies, to enabling predictive maintenance.

Chatbots are expected to off-load some of the more tedious functions from apartment staff. These include providing routine information to potential residents who call into the site, to taking maintenance requests from current residents. Chatbots are expected to free up staff to focus on providing the best possible experience to residents.

Smart home technologies, including smart locks, lights and thermostats, will increasingly be considered features that residents expect you to provide. Multifamily operators will have to develop policies regarding residents bringing their own devices onto the property. Keeping responsibility for integrating these devices with residents is key.

To support all of this new apartment tech, good internet connections are required. Focusing on your communications infrastructure is one of the best things that you can do to future-proof your property.

With great power comes great responsibility

A concern raised in this session involved the privacy issues raised by smart apartment tech. Specifically, the California Consumer Protection Act (CCPA) was brought up both for its requirements on data protection and also for its requirements that businesses holding data on a consumer be able to purge that data from their system if requested to do so by the consumer. Similar requirements are expected to soon be put in place across the country.

If you missed the conference, the NAA sells a product called Rewind, which includes videos of most of the education sessions. It is available here.

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The Next Wave of Innovation: Automation, Artificial Intelligence and Blockchain

A primary focus of the 2018 NMHC Spring Board of Directors Meeting was the impact emerging technologies like automation, artificial intelligence and decentralized ledger systems (blockchain) will have on the multifamily industry over the coming years.

Donald Davidoff, President of D2 Demand Solutions moderated a session focusing on AI with Wayblazer’s CEO Noreen Henry and IBM Watson’s Neil Sahota. Davidoff has been exploring the potential roles that AI could play in the apartment sector and noted that he sees a number of opportunities, including in marketing, hiring, service requests, smart home controls, pricing valuations, concierge tour guides, chat bots, call coaching and security.

When considering how to most effectively deploy new technologies, Wayblazer’s Henry recommended that apartment owners and managers “start with specific, concrete areas where it (AI) can have a significant impact. These areas need to those that have good data that you can use to train AI such as maintenance requests and calls. IBM’s Sahota agreed with the “start small” approach, noting that adopters of AI shouldn’t underestimate the need for training. Owners and managers will need to teach machines the basics and for that companies will need the subject matter experts to educate them.

The session concluded with Davidoff asking the ever-present question when it comes to AI automation – what will happen to today’s jobs? Sahota noted that “the jobs of tomorrow are going to require all new skill sets. The goal of AI and robotics is to take more of a role in administrative tasks and free up individuals for critical thinking. AI will upend industries and we, as a society, need to start grappling with the consequences that entails.”

In addition to AI, another session delved into what Blockchain is and why it is relevant to the multifamily industry. The panel was moderated by Stephanie Furhman of Greystar. Industry experts, James Conrad Johnson of Oaken Innovations, Gerald Reihsen III of Reihsen & Associates and Kyle Wood of Perkins Cole were the panel speakers.

The discussion began with defining Blockchain. Blockchain is a digital record keeper that publicly records transactions in a block and links to similar blocks of transactions chronologically – hence creating a chain. The panel noted a recent Forbes article, which explained that industries that use a lot of paper for record keeping would be affected the most initially. Because the multifamily industry is one of these industries (because of leasing, real estate transactions, etc.), it could be greatly impacted.

The panel also discussed various ramifications of implementing this technology – one of them being issues of privacy and security. Reihsen pointed out that the data stored with Blockchain can be encrypted and there are various applications that can be used with it to keep that data private and secure. The panel elaborated on this by explaining that Blockchains are generally permissioned and private. They prioritize identity over anonymity, selective endorsement over proof of work and assets over cryptocurrency.

To close, the panel illustrated a scenario in which Blockchain could be used in the multifamily industry. Blockchain could assist during the leasing process to help to generate a credit score for potential residents. “Although [multifamily] residents may not know it, Blockchain will change user experience,” Johnson explained. They also listed utilities, property acquisition and MLS as other potential multifamily areas that could be affected.

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Six Areas of Real Estate Tech Set to Grow

Real estate tech investment has gotten serious. Venture capital invested in the space tripled from 2016 to 2017, buoyed by major investments in co-working giant WeWork and brokerage Compass. Excluding those mega deals, real estate tech firms raised around $7.7 billion last year. This compares to less than $500 million just a few years ago.

During the 2018 NMHC Annual Meeting, a panel discussion brought three real estate tech investors together to discuss where the money was going in commercial real estate and how it might affect the multifamily industry. The discussion, moderated by Randall Jenson, CFO of Berkadia, included participants Clelia Warburg Peters, co-founder and partner at MetaProp; Jacob Mienert, analyst with Navitas Capital; and John Helm, managing director at RETV Management.

Panelists discussed the growth of investment in the sector. Noting that start-ups had already pillaged most every other tech investment category, RETV’s Helm said investors saw the real estate sector as the “last frontier in venture investing.”

Moreover, despite the significant investment growth, panelist said the market was far from tapped out, noting that in 2016 there was roughly $70 billion in venture capital floating around and yet just $2.5 billion found its way into real estate tech. “We’re still relatively under invested,” said Helm.

“The broader venture capital community has discovered real estate tech,” added Warburg Peters, “But the smartest money is coming from the people sitting at the intersection of new tech and legacy real estate know-how.” 

To that end, the group noted a lot of interest in trying to leverage artificial intelligence (AI) and predictive analytics to improve efficiency and transparency in business decision-making. More specifically, the group identified six areas of focus for real estate tech investors and providers. 

Leasing. Everyone loves the idea of AI-powered chat bots, around-the-clock digital rental agents that can help start a customer relationship by answering simple questions and providing common information. But beyond that, real estate tech investors are looking more closely at companies that use web-based software to essentially scrape social media outlets for data that can pre-qualify prospects. 

Helm said such digital solutions help accelerate the sales cycle by pre-populating pertinent information, reducing the need for manual data entry. Moreover, by automating the process based on a set of universal pre-qualifying guidelines, real estate companies may be able to reduce Fair Housing-related risk. “It’s better because you can put in decision rules and have a safer system,” he said. 

Warburg Peters added that investors are also seeing opportunities in short-term rental platforms like Airbnb or Home Away. She noted the emergence companies like Flip, a subletting platform, in creating a more liquidity marketplace for leases. “But that’s the Wild Wild West,” she said. “It’s still unregulated. But a lot of younger people aren’t interested in making even a one-year commitment.”

Investment analysis. Similarly, investors are very interested in companies that are working to harness data in the public domain-everything from geospatial data to consumer data to zoning regs and beyond-to help identify, evaluate and close potential real estate deals faster.

Warburg Peters said that investors’ interest in these solutions “is very focused on retail right now.” Many are looking for solutions that can essentially predict the value of a retail site as well as provide critical insights on everything from identifying the right retail client and optimizing the site for retail down to determining which corner you should be on.

However, she said she was also interested in companies like Envelope, which “focused more on the enormous regulatory burden that is borne particularly in urban environments.” This could include zoning restrictions, subsidized housing requirements, air rights and more. “What used to take months and millions of dollars in lawyer fees can be done in hours or a few days,” she explained.

Construction. For Navitas Capital’s Mienert, the construction space is an area ripe for tech disruption and that’s where his company has focused a lot of its dollars. The company invested in Katerra, a tech company that aims to drive efficiencies through the design, development and construction process to drastically reduce the time it takes to bring apartments to market.

“This is a really unique company that is changing multifamily,” said Mienert.

While there’s been some controversy around how solid the company’s reported $3 billion pipeline is, the panel agreed that there were opportunities to better leverage technology in the construction space. Panelization and pre-fab construction and more efficient supply chain managements are areas in need of tech investments, but panelists also noted how tech advances are fueling growth in arbitrage companies-Why Hotel being an example-that can help stabilize properties faster, reducing financing risk and carrying costs. 

Amenitization. Real estate tech investors are also intrigued by companies that use technology to enhance the resident living experience, be it through a network of service providers or crowd sourcing for insights into the most desired amenity packages. Top picks include companies like Hello Alfred that allow residents to digitally outsource household chores. “I also really like tech companies that are focused on bringing activities to unused space in a building,” added Warburg Peters.

Some are making the case that short-term rentals could be considered an amenity, both as on-site hotel space for visiting guests and as income-producing amenity for residents. Helm noted that there are still investor concerns about how these companies can perform over the course of a full real estate cycle.

“The regulatory environment is still very scary,” he added. “There are a number of municipalities like Berlin, where they just kicked Airbnb out of the city.” However, he also noted that many of these companies have already evolved, allowing property owners to set limits and have more control over the process.

Smart homes. Without a doubt, real estate tech investors are seeing huge potential in the smart home space. However, it’s not just about satisfying young millennials need for more consumer technology. Investors also are interested in smart home operating systems that can deliver value to the property owners, be it through additional revenue, cost savings, operational efficiencies or transparency.

For Mienert, “it’s really about finding centralized solutions that are already pre-installed,” he said. That’s why he’s looking at companies like Iotas, which provide a turnkey suite of networked smart home products that provide data and learning to the property owner on the back end. He provided an example of a Class B property in Texas where the company was able to boost rents $45 a month by installing smart thermostats, locks and Alexa in the units. “We were able to get the integration of all the functionalities without having to install anything,” he said.

Brokerage businesses. With no real automated approach to automated valuations, the panelists saw a big opportunity for real estate technology in the businesses operating under brokerage models, with the appraisal, insurance and mortgage industries being obvious starting places. All also saw the emergence of Blockchain technology, which offers a digitized, decentralized public ledger of transactions, as potentially revolutionary in the so-called “PropTech” and “FinTech” spaces.

Several said that they had made investments in online real estate insurance and appraisal companies, as these areas of the finance and transaction market have largely been untouched by tech advancement. “CBRE probably has a couple hundred appraisers and like five tech people,” noted one panelists.

The idea is that technology can help automate some of the more vanilla-flavored transactions, whether they be small or simple executions; the end results would be speedier and more consistent results. “High complexity deals will need human intervention,” explained Warburg Peters, “But those folks still need a strong tech background.”

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