Well before the residents of multifamily properties were asked to shelter in place, they sought to shelter in comfort. Simply put, tenants want nice things. They want the best amenities. They want to coddle themselves. They particularly want technology that makes their lives easier, and they are willing to pay for it.
The coronavirus pandemic, and the economic upheaval that resulted from it, has called into question whether the latter will remain the case. But the initial shock to the multifamily space was not as dramatic as first feared. A National Multifamily Housing Council study of 11 million apartments found that 84 percent of the residents had paid their April rent by April 12. That was understandably down from a year earlier, when 90 percent had paid by that date, but not as dire as might have been expected.
So for now, at least, multifamily property owners are holding the fort. It will be a challenge to ensure cleanliness in their buildings and maintain social distancing among residents. But there is the hope that governmental measures like stimulus packages and loans will soften the economic blow that closed businesses and led to layoffs and furloughs. There is the hope that apartment dwellers will stay right where they are, as was the case a year ago. The nationwide occupancy rate surged to 96.2 percent in July 2019, its highest since 2000, and stood at 95.8 percent by year’s end. In Chicago it was 94.9 percent for Class A properties, and 94.8 for Class B properties.
There is plenty of uncertainty ahead, to be sure. But in one way, at least, the amenity wars anticipated the pandemic by making allowances for those who work remotely. Specifically, buildings have increasingly included common areas and meeting rooms replete with high-speed internet and other accommodations for telecommuters. That’s not at all surprising, considering 43 percent of the respondents to a Gallup study said they worked remotely at least some of the time in 2017, up from 34 percent in 2012. Now, with the spread of COVID-19, more and more people have not only chosen to work at home, they have been required to.
As in other areas of life, this is a new normal in the multifamily space. Back in a simpler time—like, say, January—the challenge was a familiar one for those who owned or invested in such properties: how do you keep ahead of the amenity curve (especially the tech aspect of that), and thus attract and retain renters?
A 2017 study concluded that 86 percent of Millennials would shell out for gadgets, which makes sense, considering the tech-savvy of that age group. But the same study showed that 65 percent of Baby Boomers were also willing to do so. A more recent survey indicated that 57 percent of renters would be willing to part with as much as $20 more per month if it meant their apartments would be equipped with such things as smart locks and thermostats, as well as security cameras.
Randy Fifield, chair of Chicago’s Fifield Cos., argued in a Multifamily Executive piece that renters are actually getting plenty of bang for the buck when it comes to amenities. She pointed out that if a building has a gym, residents no longer have to worry about a monthly gym membership, and if the building is in an urban center, they can use ride-share services and thus save on the costs associated with owning and insuring their own vehicles.
There are other benefits associated with the most-desired (and most basic) tech—smart locks and thermostats. Smart locks provide “sidewalk-to-sofa” safety, i.e., the ability for a resident to negotiate his or her way through a building’s main entrance, elevator and unit door while using a single electronic credential.
Speaking of versatility, managers have discovered that smart locks, when used in combination with security cameras, can also serve as a method to monitor the use of amenities like exercise rooms. They can reveal unsanctioned subletting and be used to assess staff performance. They can even lead to savings on insurance costs. The latter in particular is not to be taken lightly, as smart locks are not cheap; they run between $200 and $500 per door. But those costs can be offset, not only with those insurance savings but with the aforementioned rent bump.
In short, there doesn’t seem to be much downside to adding more gadgetry to a multifamily property. And the giants of the tech world have taken note. Google, Amazon and to a degree Facebook are in “an all-out war” to “integrate themselves more in the lives of tenants” according to Roelof Opperman, principal at Fifth Wall Ventures.
That figures to continue. Maybe not immediately, given the disruption resulting from the pandemic, but certainly at some point, somewhere down the line. Again, people always want to shelter in comfort. They always want the best for themselves. And multifamily owners have always been eager to oblige.
About the author
Michael Zaransky is the founder and managing principal of MZ Capital Partners, which has been recognized by INC Magazine as one of the fastest-growing private companies in America by placement on the magazine’s Top 500 list. Michael, a licensed Illinois real estate broker since 1979, also has a wide range of banking and financial experience. Michael is a member of the Young Presidents’ Organization (YPO-Gold), the National Apartment Association, the National Multifamily Housing Council, and the Urban Land Institute.