The real estate industry has undergone several years of rapid transformation. Since the onset of the COVID-19 pandemic, property managers across the multifamily and single-family rental segments have faced rapidly changing conditions. One of the main results for the profession has been that emerging trends have quickly become table stakes in today’s residential market. From macro-level economics to the shifting expectations of the resident experience, today’s successful managers are adapting and becoming more tech-savvy and resilient, serving as stewards of innovation in residential property management. This ability to adapt no longer differentiates the best property managers from all the rest; it’s becoming what’s required to manage properties to their fullest potential.
The pandemic has led to many changes in the real estate market, and one of the most profound results has been the rapid and sustained adoption of property technology (Proptech). While Proptech is by no means new, these technology applications that were once considered “nice to have” have become “need to have” solutions to compete with other properties and best meet ever-changing market needs.
What is new is the pace of change. Since 2020, venture capital investments in property management technology have accelerated at breakneck speed. The industry has begun to see property managers take significant steps in adopting new technologies, and those managers are now enjoying the financial and operational benefits of those solutions.
According to data from the Center for Real Estate Technology & Innovation (CRETI), since 2019, $9.3 billion has been invested into Proptech research and development by venture capitalist investors. This has driven innovations in rent payment solutions, space utilization, resident experience, sales and marketing, and more.
However, the speed at which the Proptech sector is evolving only amplifies the need for new, creative solutions in our global digital economy. The rental market is experiencing ongoing disruption, and promoting affordability and equitability remain major trends impacting private and public markets.
Affordable and equitable housing has been among the hottest topics since the onset of the pandemic. Across the U.S., rental prices have soared over the past year, with some cities experiencing average price increases of up to 40%, according to Redfin data. While many people are struggling with the decision of moving to a new city or paying much higher housing costs, the price hikes have left renters stunned. As a result, many Proptech innovators and entrepreneurs have turned their interest to the rental market, where the promise of introducing new technology can transform the rental housing market to create a more affordable experience for renters.
Below are the top five emerging trends in Proptech that managers are embracing to navigate the challenges of meeting owners’ goals while improving affordability and access for renters.
The leasing process is very straightforward; however, the renter-manager relationship is not. With rents rising and median wages remaining flat, renters are finding that this relationship has the potential to become adversarial rather than collaborative. Leading managers have turned their leasing strategy into a more “renter-centric” process to attract and retain renters while also improving the property’s brand image. Today, leading Proptech companies leverage innovative consumer interactions and services to create a better experience for managers and renters.
“Over time, we’ve seen the resident paradigm move from simply transactional to more experiential, as people crave an elevated, holistic customer experience right where they live,” says Paige Pitcher, head of strategic partnerships at Moderne Ventures, a venture capital firm that invests in Proptech companies. “Whether it’s having access to concierge-style services from Hello Alfred, high-end furniture alternatives from Kaiyo, or even health insurance benefits through companies like Stride, these amenities are becoming increasingly vital to attract and retain residents.”
Tech-enabled security deposits
The upfront cost of a security deposit makes it the largest capital expenditure for most renters. In some cases, renters are now expected to securitize as much as three months’ rent for a 12- to 24-month lease. Locking in this much of their working capital can easily create a financial hardship for the renter. However, leading property managers and leasing teams have looked to new and innovative security deposit models to be more renter-friendly. Top Proptech companies are leveraging cutting-edge security and insurance models to create a better renter experience and alleviate the financial hardship of a large security deposit.
“Tech-enabled zero-security-deposit solutions can provide a serious advantage to multifamily property managers,” says Constance Friedman, founder and managing partner at Moderne Ventures. “By implementing such solutions, they can increase annual NOI and build their reputation. For example, LeaseLock has helped some of its partners increase NOI (net operating income) by almost $200,000 per property per year. This comes from the boost in qualified applications when marketing apartments as zero-deposit units, decreasing bad debt and administrative costs, and adding meaningful ancillary revenue.”
The resident screening process has been one of the most widely debated topics over the past few years. Historically, credit checks were used as a proxy for rent collection, creating a “tenant risk profile.” However, today’s leading Proptech companies are leveraging cutting-edge banking technology to create a better risk profile of applicants based on a broader set of factors, including historical rent payments, creating a new apples-to-apples comparison.
“A new wave of companies is disrupting this status quo by introducing alternative processes to create more accurate and equitable tenant risk profiles for potential renters. Many of these rely on open banking, leveraging the growing Fintech infrastructure that has emerged over the last decade, which allows screening companies to get a more holistic picture of an applicant’s finances,” says Jenny Song, principal at Navitas Capital, a venture capital firm focused on technology and innovation in the real estate and construction industries. “Property owners benefit by increasing their screening accuracy and reducing instances of fraud, and they may also be able to lease up their buildings by expanding the pool of qualified potential residents.”
Building connectivity has become one of the most essential amenities in the modern work movement. Since the onset of the pandemic, more people have been working from home than ever before. The increase in at-home work is placing real pressure on building operations and owner-managers. To meet the demands of today’s residents, property managers have looked to modernize their building connectivity to create a more seamless resident experience.
“Home is the new office, and offering high-quality connectivity has become table stakes,” says Elie Finegold, managing director at Crow Holdings, a real estate investment and development firm. “Connectivity presents an opportunity for multifamily owners to monetize what is now an essential service and compete directly with the big telecommunication providers. In turn, they can capitalize on that value-add within the real estate asset itself. So, technology like managed Wi-Fi services provides this core revenue opportunity as well as a platform for adding more connected service offerings in the future.”
Loyalty and rewards programs
The multifamily sector has been borrowing from the hospitality industry for nearly a decade. As multifamily and hospitality continue to drift closer together, many owner-operators have embraced a “hotelification” model, similar to a loyalty or rewards program, like Marriot Bonvoy, to increase lease renewals and resident satisfaction.
“Resident rewards platforms are becoming a new industry standard because they help renters build credit or redeem points while building owners incentivize desired renter behavior—whether that’s paying the rent on time or using less water and electricity,” says Pitcher. “By providing rewards that customers want in categories like travel, food, shopping, and more, companies like Piñata, Esusu, and Bilt are helping to create customer stickiness and loyalty between renters and their buildings.”
What’s essential for property managers to take away is that although the pandemic was the immediate catalyst for much of the recent growth in Proptech adoption, many of the shifts in renter expectations are here to stay. Because of larger macro-level uncertainty and lingering concerns of a recession, ensuring your management teams are equipped with the right Proptech tools will help position your properties to thrive.