IoT and smart automation are often portrayed as having high costs of entry that are only accessible to upper-income households or individuals. This is largely a result of home automation technologies only being marketed to homeowners, as opposed to renters, and to date, installing disparate devices that don’t communicate with each other has required buying even more devices, increasing already high costs for adoption. These challenges have permeated the smart apartment market, where developers and property managers think of class A urban high-rises as the only place where they can implement smart technologies. Class B and C assets, however, are often seeing the biggest benefits.
Sixty percent of the rental population consists of low- to moderate-income residents. And the majority of multifamily housing stock is class B and C. By not tapping this market, property management companies are missing the majority of their audience. Additionally, these residents are apt to benefit most from smart apartment integration, since they’re less likely to make the investment into owning smart technologies, especially in a rental unit.
Mid-level income residents have time and budget constraints, and smart apartment technologies provide conveniences and savings that benefit them greatly. These benefits can include anything from turning off lights remotely to playing automated stories designed to conserve energy. Smart apartment technology is asset agnostic and for a value-add strategy, or a straight retrofit, residents are willing to pay more rent for the convenience, control and savings. Our partners are achieving rent premiums for their smart apartments as low as $25 and as high as $200 depending on the market and many of them are able to retain more residents because of the “stickiness” of the smart lifestyle experience. According to Jim Dobbie with Hunt Investment Group, “We are seeing $40 pop in our value-add assets that feature IOTAS in our Beaverton, Ore., property.”
Regardless of income or asset class, apartment dwellers expect this type of technology, but they don’t want to pay to set up the infrastructure. After all, it’s an apartment. They want to bring their own devices and have things work without any effort. And once residents experience the digital lifestyle, they don’t want to leave it. For a relatively small investment (less than $1,000), again, for B or C class assets, this is an incredible opportunity to bring home automation to a class that otherwise might find it inaccessible.
Property managers of luxury apartments will always see increased value with smart technologies. Residents are coming to expect it and are ready to spend a premium on these services. However, the class B and C properties shouldn’t ignore the smart apartment revolution. They’ll see the biggest impact on revenues and will be setting themselves apart from competitors who automatically write off the smart apartment potential.
At the end of the day, education is key to understanding apartment home automation. Smart apartments are about the infrastructure and the digital ecosystem that enables apartments to function, learn and anticipate what residents want and need, not expensive devices. What you want versus what you need versus what’s feasible are vastly different across income classes. For instance, class B or C renters may not need a flashy thermostat, but they’ll certainly see the benefit in a smart-enabled heating and cooling system that allows them to save on their monthly energy bills — even if it means a slightly higher monthly rent.
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