Remember when you needed a key to unlock your apartment door? Or had to call the maintenance supervisor to fix a leaky faucet? Quaint days, right?
Today, apartment residents want to access their communities through key fobs and smartphones and make maintenance requests 24/7. They want to pay rent and renew leases via convenient apps. And we in the multifamily property business want to make that and more available through the expanding world of proptech.
Proptech, or property technology, encompasses the digital tools we use to buy, sell, market, and manage real estate. It’s a $24 billion industry, according to Statista, and growing. By 2032, proptech could be an $86.5 billion industry.
Some estimates place the number of proptech companies and startups at 10,000, and I feel like they’ve all pitched us. That’s been going on for five years but has intensified over the last two, as proptech firms bring more cool stuff online.
AI, cloud computing, Big Data and the Internet of Things (IoT) are making multifamily properties more frictionless for operators and residents, improving experiences for all parties. And there’s more to come. Here’s what intrigues me about proptech in 2023.
The expanding promise of data
Robust market data is essential to operate a thriving multifamily complex. We subscribe to industry-leading providers that deliver a broad range of data, from average rents and occupancy levels to year-over-year rent growth and availability levels.
That data is growing more detailed and more local. Good data providers can extract research from regional markets and sub-markets, allowing us to drill into the local experience. We’re also able to build custom data reports based on geography, structure types, rents, and many other criteria.
AI platforms are turning this data into actionable insight. Some of the most intriguing proptech firms combine traditional data, such as vacancy rates, with nontraditional data, such as proximity to highly rated restaurants on Yelp. These tools help us better identify desirable properties, improve how we market them, and determine proper rent models. The combination of data and automation gives us not only real-time property views but also glimpses of the future, driving clearer decisions.
This represents good business. According to McKinsey, digital tools can help real estate firms increase net operating income by 10 percent. Automating these processes has freed us to focus on generating leads, meeting clients, and brand-building. I look forward to leveraging these already invaluable data tools even further.
Proptech for property management
Automation has made property management more efficient for operators and more convenient for residents. We employ CRM software to manage nearly every aspect of the rental process, from applications and showings to lease signings to payments. Everything is digital from a management perspective, which wasn’t the case as recently as five years ago.
But as we adopted more of these technologies during the pandemic, prospective residents and renters welcomed them into their experience. We can streamline the application and rental agreement process with smart contracts. Residents have one-touch options to pay rent. When their AC goes out at 2 a.m., renters can schedule service via a phone app, rather than waiting until morning to call.
The best property management software bundles all these services into a user-friendly platform that benefits residents and management. The next phase involves service. I’m interested in how proptech companies incorporate AI and chatbots that enable residents and management to communicate anytime and anywhere. Those tools also are changing how we show apartments, which is another intriguing development.
VR’s growing role in real estate
AR (augmented reality) and VR (virtual reality) could produce a combined $31.1 billion in revenue this year, according to Statista, and have redefined real estate. Prospective renters demand the ability to take virtual property tours or view 3D renderings and digital stagings before seeing the space in person. Some prospective renters become residents without even visiting a property.
VR has accelerated the lease cycle, allowing people to view and apply for a specific apartment on their schedule. Proptech companies are crafting immersive virtual visits through professional videography, drone footage, and interactive tours.
These tools streamline the process of showing, renting and selling properties for all parties. They’re also user-focused, giving renters more choice over where they live. Now, residents are asking for more choices regarding how they live as well.
Proptech and the resident experience
Apartment residents can access a growing set of tools to create a more convenient living space. As mentioned, key fobs and smartphone access are replacing traditional keyed entry, allowing for multiple layers of property security and convenience. Nobody has to fret about lockouts or service fees to access their home.
These represent essential service needs, but residents also desire more lifestyle benefits that proptech can afford. For instance, we’re exploring smart devices such as Nest thermostats and IoT appliances in new construction. Like homeowners, apartment residents want more smartphone control of their environment. These tools also could provide predictive and possibly online maintenance options.
In addition, some exciting new proptech companies are building private-label services for amenities such as off-site storage and laundry pickup. At higher-end properties, digital concierges can make travel and restaurant reservations and offer unique entertainment experiences. The possibilities are endless.
Proptech will continue to transform real estate across the rental, operational and residential journey, particularly as we develop more creative ways to deploy it. Recently, McKinsey commissioned a study using traditional and nontraditional data to forecast rental rates for multifamily buildings in Seattle over a three-year term. The machine-learning model’s accuracy rate was above 90 percent.
Imagine how we’ll continue to improve the multifamily real estate experience through the flourishing world of proptech.
Michael H. Zaransky is the founder and managing principal of MZ Capital Partners in Northbrook, Illinois. Founded in 2005, the company deals in multifamily properties.