Where are we on the road to apartment digital transformation?

5 minutes read

Last time, we discussed the state of digital transformation in office real estate. In that article, we talked about tech adoption in the commercial real estate world, and also how COVID-19 impacted the field. Our conclusion was clear: we’re at a turning point for offices, which are going from tech-optional, with digital tool deployments here and there, to tech-mandatory, with digital tools deployed at scale.

The same is broadly true for the apartment business. Apartments are indeed transitioning from tech-optional to something beyond that. But there are other elements to consider as well. Let’s discuss them.

One of the driving factors behind the need for offices to evolve is the reality that in many circumstances, remote work can present a viable alternative for individual professionals or even entire teams to operate outside of their offices. Digital nomads, of course, mean that some apartment dwellers are leaving for more flexible accommodations, but the multifamily world doesn’t appear to be facing the same type of remote risk as offices do.

Thus, apartments will need to adapt due to the changes taking shape in the office world. Layout and design don’t scream “digital transformation,” but the fact that more people than ever are working from home means that apartments will need to adapt in response. According to a survey by RENTCafé, an apartment-focused part of the Yardi family of products, 35 percent of apartment renters that work from home say they want an extra bedroom, ostensibly to function as an office. Architects take note: digital transformation indeed.

Beyond that kind of ripple effect, the multifamily business is facing plenty of its own digital disruption as well. While it is difficult to determine exactly how much tech has been implemented at apartment buildings to date, a 2020 study by Xfinity Communities provides some insight. They found that the largest categories of smart tech adoption are lighting, with 56 percent of respondents saying it has been fully implemented, safety and security, at 55 percent, and energy systems at 50 percent. While this survey only included 200 property business respondents, those numbers seem accurate, at least for newer construction.

For older projects, there is probably less adoption. This is one area where redevelopment specialists can stand out. Perhaps it makes sense financially to integrate smart tech rather than spending money on upgraded interior finishes.

Looking to the future, this kind of tech, like smart lighting, HVAC systems, and access control, is likely to be further deployed until properties that lack it are the exception rather than the norm. Since many of these technologies save money as opposed to being cost centers, there may be no clear relationship between price per square foot and smart tech adoption. After all, owners of affordable or lower income housing want to save money just as much as developers of luxury stock.

FLOW enables energy consumption monitoring in residential buildings
FLOW enables energy consumption monitoring in residential buildings

As in the office world, the early bird may get the worm when it comes to apartment digital transformation. However, there may be more opportunity for specialization within the apartment business than the office one. Some apartments might be able to succeed with especially strong amenities and perks. Others, particularly older, urban buildings with little opportunity to stand out through space-intensive amenities like pools and workout facilities, might be able to cast themselves as providers of frictionless living, where everything from access to HVAC controls to lighting is connected to the same smartphone app.

The apartment business has a giant middle market, and it’s here where we may see the most deviation from norms as we proceed through the 2020s. But one thing is certain: the apartment digital transformation is only just underway.

08. September 2021
5 minutes read


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