Customer Centricity will be at the heart of winning the next big battle for Multifamily. These 6 trends will impact whether you succeed or fail in the coming decade.
The business of Multifamily is going to be an even more lucrative one in the next decade: apartment demand from changing lifestyle preferences, an aging population, and increased immigration are all driving demand-side economics in the industry. To meet demand, America needs to build 4.6M new apartments by 2030 or more than 328,000 units annually according to Hoyt Advisory Services (HAS) in a new research report commissioned by the NMHC and NAA.
Source: We Are Apartments, a partnership of the NAA & NMHC
But while supply may be constrained in the coming years, the flood of new apartment inventory across the country is already starting to fuel hotter competition in the race to acquire new renters. And with more than 1 in 2 residents moving out of market-rate communities annually, — a 53% resident turnover rate in 2016 according to the NAA — that retention rate is only likely to get worse over the next decade with more apartment inventory coming into the market and almost infinite consumer access to what’s available next door.
Forrester declared it “The Age of the Customer” seven years ago, and we are all well aware the Apartment industry takes its time to catch up to global trends; but the time has come, and those businesses that don’t adapt to the new age will be overtaken by businesses that do.
"We are witnessing a complete disruption in end-to-end customer experience. We ask if the entire multifamily industry pyramid can continue to provide product viewed largely as a commodity. Enterprises that are successful are looking to build dialogue and emotional engagement with their customer in ways that express their story in authentic, emotional and memorable experiences."
Rohit Anand
Principal, KTGY Architecture + Planning
Source: NMHC. "Disruption: How Demographics, Psychographics And Technology Are Bringing Multifamily To The Brink Of A Design Revolution." January 2018.
TREND #1Hotel-Level
Amenities
Will Radically Shift the
Apartment Experience
TREND #2Short-Term
Leasing
Will Be A Key Revenue
Driver in Urban Markets
TREND #3Real-Time Property Operations
Will Become More than
Just a Buzz Phrase
TREND #4Vertically Integrated
Software Solutions
Will Replace Monolithic,
Single Provider Systems
TREND #5Deep
Personalization
Will Have a Profound Impact
on Marketing & Design
TREND #6Brand
Reputation
Will Regain Its Seat at the Table for Owners & Operators
TREND #1 : Hotel-Level Amenities Will Radically Shift the Apartment Experience
In early March, I attended the 2018 Multifamily Technology and Entrepreneurship Conference (MTEC) in San Francisco. The conference started with a property tour of 33 Tehama Street, a new development from Hines and Invesco. The building features a well-designed amenity collection that spans the entire top floor of the building, complete with open-air bocce ball court. On its website, the property promises “personalized services that cater to modern city living,” including valet parking, 24-hour attended lobby, onsite concierge services, and the Hello Alfred service — an all-in-one app for grocery delivery, pet care, house cleaning, travel planning and more.
With Millennials expected to be the largest generation in the country by 2019 at 73 million strong, catering to their expectations is essential to attract and retain them as residents — which means providing a seamless services experience that looks more like hotel-living than traditional apartment living. This trend is not likely to slow with 78% of Millenials and 65% of all renters feeling their lives are “so hectic” they look for ways to make life easier. And with developments like 33 Tehama commanding $5800 monthly for a two-bedroom unit, embracing this trend promises to deliver substantial revenue per unit to Multifamily owners and operators.
Source: 33 Tehama website
TREND #2 : Short-Term Leasing Will Be A Key Revenue Driver in Urban Markets
Multifamily owners and operators have traditionally opposed residents listing their apartments on short-term marketplaces like Airbnb, but with the dismissal of the AIMCO lawsuit against Airbnb in California in January this year, the industry is waking up to the fact that this trend may be here to stay, and certain forward-thinking companies are incorporating short-term rentals into their apartment communities. According to an industry insider, some top Multifamily managers have allocated up to 15% of their managed units permanently to short-term rentals. And it’s no wonder with the financial uplift short-term rentals can play in both lease-up and stabilized buildings. According to Chris Herndon, co-founder of The Guild speaking at MTEC 2018, short-term rentals in lease-up buildings reduce carrying costs by $2,000,000 and increase occupancy in stabilized buildings from 80% to 95%.
But incorporating short-term rentals into your apartment mix places tremendous strain on your onsite staff, who are suddenly required to manage a large number of guests turn styling in and out of the community and needing constant white-glove attention. So it’s not surprising the number of companies offering professionally managed, short-term rentals in apartment buildings has exploded. From Stay Alfred, WhyHotel, ApartmentJet, to many more, these companies offer residents the ability to take advantage of 5-star services not typically offered in apartment buildings. For owners, they provide an additional source of income, guest background checks, and noise and amenities monitoring.
Sometime in the near future, the most customer-centric Multifamily owners will permit residents to lease their apartments through an owner-managed service. This isn’t even a bold statement considering 49% of renters under 25 are interested in the opportunity according to NMHC’s latest survey. Short-term rentals provide additional income to residents and owners alike, and a key differentiator from more traditional apartment communities. In urban markets where tourism fuels a major portion of the economy, short-term rentals will act as an important channel for apartment marketing efforts, fueling word-of-mouth referrals for both short-term and long-term units.
TREND #3 : Real-Time Property Operations Will Become More than Just a Buzz Phrase
Hotel-level amenities are critical to attract prospective renters, but to seal the deal and retain residents for the long haul, you’ll need every one of your property personnel at all your apartment communities to master the fundamentals of customer service and quality assurance.
"Sure, the location of a community or its glittering array of amenities will draw apartment shoppers initially, but in the end, the leasing team that builds trust, credibility, and rapport with customers looking for a new apartment home is the team that will succeed in getting both new leases and renewals—with rent increases—signed."
Melanie G. French
Executive Vice President, Cortland Partners
Source: MFE. "The Key to Attracting and Retaining Tenants." January 2015.
In her MFE article on attracting and retaining tenants, Melanie French, Executive Vice President of Cortland Partners, #32 on the 2017 NMHC 50 Largest Apartment Managers list, maintains that the onsite team that builds trust, credibility, and rapport with residents, is the one that will close prospects and renew leases most successfully. And the #1 key to developing that trust, credibility and rapport comes down to a simple tactic: keep your property “Spick-and-Span” — from your property’s monument sign, to the flowers outside the leasing office, to your model apartments and vacant units, to whether the door gaskets inside the refrigerators are clean. “Attention to details such as cleanliness sends a powerful subliminal message to potential and current residents alike that you will take care of them.”
Quality assurance is the ultimate customer-obsessed strategy, but how do you ensure that property staff are maintaining standards remotely from the corporate office? That’s where real-time property operations changes the current paradigm. Previously, it was impossible to have real-time visibility to property conditions or benchmark performance because the data collected was on paper, filed away at the property or misplaced; and there was no way to compare and reward top performers reliably because the data collected was not standardized. With a mobile inspection platform like HappyCo, data collection is standardized, available in real-time, and actionable.
"Since implementing HappyCo, we’ve seen an almost 10% increase in the Quarterly Property Inspection scores over the last year — giving us confidence our properties are maintained at even higher levels of quality due to property staff paying more attention to details and to the more comprehensive inspection walks made possible by the HappyCo software."
Leisl Spurlin
Senior Regional Manager, GoldOller Real Estate Investments
Source: The Luxe at Bartram Park, Jacksonville, Florida: A GoldOller Real Estate Investments community.
TREND #4 : Vertically Integrated Software Solutions Will Replace Monolithic, Single Provider Systems
During the MTEC 2018 panel “Internal Innovators and the Multifamily Process,” Andrew Silverman, Vice President of Operations at Veritas Investments, shared that his company reviews two new technology products weekly, and that their current technology stack includes 30 to 40 vertically integrated software solutions, including Yardi and Salesforce. Being able to easily integrate emerging software solutions into a flexible technology stack will position property management companies to best take advantage of the tools that put customers front and center.
"At Veritas, we recognize that new technology solutions are coming to market rapidly and we need the technical and operational ability to efficiently evaluate for both value add and connectivity with our broader platform. Our ability to quickly assess and deploy software that best addresses a particular opportunity is a competitive advantage we continually seek as we work to enhance our operations and upgrade the experience for our residents."
Andrew Silverman
Vice President of Operations, Veritas Investments
In very recent times, access to data that lives in property management software systems like RealPage and Yardi, and moving that data between vendor systems have frustrated property management companies. But there’s good news in 2018: “Times are changing,” proclaims Kerry Kirby, Founder and CEO of 365 Connect, in his recent webcast, Multifamily Housing Tech Trends Emerging in 2018. “Property management companies have been pushing to get better access to their data as they want to explore these emerging technologies.”
"My prediction for 2018 is that we’re going to see the big software providers step up provide more open APIs to other critical data sets, as property managers are going to continue to push for data access to utilize emerging technologies."
Kerry W. Kirby
Founder and CEO, 365 Connect
Source: MultifamilyBiz.com. "Multifamily Housing Tech Trends Emerging in 2018."
Incumbents like MRI Software and disruptors like Resman are leading the way. Resman works with 150+ vendor partners, and MRI has designed its flexible platform based on a strong belief that vertical solutions ultimately best serve residents, which translates into sustained, growing revenues for Multifamily owners and operators.
"[With] an open, flexible software platform ...if done right, you can achieve a software infrastructure that’s perfectly tailored to meet your organization’s individual needs. No single vendor could possibly create a software platform that meets the dizzying array of demands facing organizations managing any complex operation. And if a single vendor tries to be everything to everyone, many of its functional areas simply aren’t going to make the grade, because the company lacks the domain expertise of a more focused software developer."
Brian Zrimsek
Industry Principal, MRI Software
Source: DataCenter Knowledge. "The Rise of the Open Software Platform." August 2017
TREND #5 : Deep Personalization Will Have a Profound Impact on Marketing & Design
Personalization isn’t a new phenomenon in marketing. But up until recently, marketing efforts were mostly limited to “shallow” personalization — primarily static data variables inserted into marketing communications, like first name in an email or a birthday email triggered via marketing automation. In contrast, deep personalization uses AI and big data to empower marketers to design customized offers for prospects and customers that perfectly match their preferences — Amazon’s shopping experience or Netflix’s suggestion UI are powerful models of this new personalization model.
"The crux of deep personalization is the use of data, lots of data, and the use of machine learning to find and learn underlying patterns that define the very complex lives and journeys of customers. More recently, however, the use of machine learning and artificial intelligence algorithms (in tandem with cloud and big data technology) is increasing our ability to understand, predict, and act on more complex patterns of customer behavior and preferences."
Patrick Stroh, Ph.D.
Vice President, Data Science / Decision Analysis, BRUNNER
Source: MediaPost. "Deep Personalization: The Next Step In CRM Effectiveness." July 2017.
Deep personalization will allow Multifamily operators to customize their marketing efforts in ways not possible previously — integrating data you’ve collected during the leasing process through the entire resident lifecycle. To do so successfully, you’ll need to outfit your properties with centralized software tools that integrate data from all parts of the customer journey. Companies like Amenify offer amenity services under the community’s brand, so apartment managers collect resident lifestyle buying information on dog walking, apartment cleaning, personal training, or in-home massage, enabling Multifamily operators to better understand their residents’ preferences and ultimately capture more resident wallet share.
But the impact of personalization will expand beyond marketing to community and unit design. In a January 2018 report by NMHC, “Disruption: How Demographics, Psychographics And Technology Are Bringing Multifamily To The Brink Of A Design Revolution,” several trends are emerging that will impact how developers configure new apartment communities. The shift in demographics will challenge the 1- and 2-bedroom typical layout, as demand for larger units will be fueled by immigrant, multigenerational and Hispanic households — by 2024 immigration will surpass internal population growth, and Hispanic households will account for 55% of total population growth. In addition, the rise of telecommuting — 43% of workers in the U.S. do some tecommuniting according to Gallup — and the sharing economy will have a direct impact on the delineation of public versus private space, with more residents interested in community spaces that foster interaction and deliver on experiences.
"You see this in many new mixed-use developments, where there are public greens for farmers markets, outdoor exercise, movie nights, or spaces for pop-up stores and community gatherings. Creating a sense of greater community may be a meaningful point of differentiation valued by many renters."
Karen Hollinger
Vice President of Corporate Initiatives, AvalonBay Communities
Source: NMHC. "Disruption: How Demographics, Psychographics And Technology Are Bringing Multifamily To The Brink Of A Design Revolution." January 2018.
The Case Building, a Westdale property, “Putting the Style back into Lifestyle” with resident lobby cocktail bar, pool, and coworking lounge.
TREND #6 : Brand Reputation Will Regain Its Seat at the Table for Owners & Operators
"One thing we know for sure is that every resident is different. They will form loyalties with the brands that can meet their needs dynamically."
Everett Lynn
Founder and CEO, Amenify
Source: Franco Faraudo, Propmodo. "Technology and Personalization are Finally Changing the Apartment Rental Experience." February 2018.
As apartments shift from a commodity to an experience, brand reputation suddenly comes back into the spotlight. And it’s not just about your property brand anymore, but the owner and operator behind it. Consider Disney — they have multiple brands and entertainment properties around the world, but every guest knows they’ve entered a Walt Disney property when she enters that magic kingdom. My prediction is that by the end of the next decade, the same will be true for apartment communities.
Prometheus, the largest privately owned multifamily developer in the San Francisco Bay Area, states that its “mission has always been to revolutionize the apartment industry.” It is doing so by creating The Ultimate Neighbor Experience,™ which includes 100% smoke-free communities, flexible leasing terms, fee-free amenities, loaner tools, fitness center towel service, seasonal year-round events, and more. In addition, the Promethean Outreach and Community Help program (“Our Front POrCH”) encourages residents and employees to volunteer at mission-driven non-profits in their surrounding communities.
And Prometheus is bucking the trend of referring to renters as “residents”, and embracing new terminology, calling renters “neighbors”, which better reflects the community-centered design trend impacting Multifamily now and into the next decade. Currently 48 of 50, 96% of the 2017 Top 50 NMHC Managers still call their renters “residents”. It will be interesting to see whether that trend continues to dominate in the coming years, or whether more operators will follow Prometheus’ lead.
Real-Time Property Operations Is More than Just a Buzz Phrase
Quality assurance is the ultimate customer-obsessed strategy. Optimize your property operations with HappyCo mobile inspections, remote monitoring and real-time reporting.
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