Several months ago I started to write a post about the extraordinary changes to leasing processes that we had seen over the previous 12 months. The post, which was to be called “12 months that shook multifamily leasing” went on hold as COVID-19 took over our industry discourse. Few would have predicted the breakneck acceleration of automated leasing that has taken place in the first half of 2020. It has caused us at D2 to discuss extensively and to speculate on what this all means for the future of leasing. I will share some of our thoughts in this post.
First, the research. Which tells us that this isn’t a new thing
We know that forward-thinking operators were already on the path towards many of the changes that we see today from research that we conducted at the end of 2019. We interviewed 20 COOs and CIOs for our annual 20 for ‘20 white paper, to provide an outlook on multifamily operations and technology for the years ahead.
The full details are available in the white paper, and the main points are summarized below:
- When we asked: “Did any technologies play a bigger part in your 2019 than you expected?”, half identified projects that had, with Access Control and Smart Home technology among the most frequent examples. Several leaders described the need for “curb-to-couch” access control as a foundational requirement to several other capabilities, including self-guided tours
- Per-door IT spending had increased year-over-year for yet another year (the same was true in 2019). Several interviewees described a greater desire at their companies to identify sources of ROI and exploit them through technology. Some were bullish about the cost-saving potential of AI-driven leasing, self-show, and maintenance planning. Others saw smart building technologies to support rent premiums
- When asked: “What will be different about 2020?” 75% of respondents cited either operating efficiencies or the evolving technology environment. This included companies expecting to become leaner, based on the technology that was delivered in 2019 or that is currently being implemented. AI-driven leasing, in particular, was seen by several as a game-changer that could break the traditional 1:100 ratio of property staffing to units thus improving the economics of property management forever
Overall, we found the change in attitudes towards automation and the technologies that enable it to be remarkable in the context of our research 12 months earlier (for the 2019 edition). At the time we wrote of our surprise at the relative lack of focus on enablers like AI leasing, self-show, and smart building technology. A year later half of our CIOs cited some combination of those technologies as their main highlights of 2019.
To put that another way, looking forward to 2019 leasing automation was not a priority. Looking back at what happened in 2019 leasing automation projects turned out to be the biggest highlights of the year. The speed of acceptance and adoption surprised the industry in 2019.
What a difference six months makes
We finished our commentary on automated leasing with the following prediction:
“While AI leasing, smart home and self-guided tours all have work to do before they are truly embedded into multifamily operations, we predict only acceleration in 2020. A year ago, we saw push-back and lack of awareness slowing adoption down. At the time of writing it is no exaggeration to say (bumps in the road notwithstanding) that the industry is on a path towards fully-automated leasing.”
Of course the acceleration that we have experienced is quite different from what we predicted. It is not simply leasing that has changed, but now the manner in which we communicate has changed. Today it is normal for prospects to tour properties virtually, often using the leasing agent’s phone with communication via social media. We have changed the way that we communicate with one another - who doesn’t have at least one Zoom meeting (and usually more) each day, for example?
A new industry has been made of forecasting what “the new normal” will be like. Some industry mandarins are predicting the end of the office, the fall of the city, and other wild speculations on where this change will lead us. But change seldom happens that way.
In his recent book, “Digital Transformation,” Tom Siebel writes eloquently about the nature of disruptive technological change, and the existential risk that the combination of cloud computing and AI represent to established businesses. But he explains how the pace of change is not incessant. In fact, he “borrows” from biology the theory of punctuated equilibrium: the observation that evolutionary change tends to come in large, infrequent jumps, in between which things are relatively steady for many generations.
Recessions force change on economies, forcing creative destruction as companies reinvent themselves, their processes and products as they fight for survival in contracting markets. Necessity is the mother of invention, new ideas emerge, and the good ones come to redefine markets as conditions improve. For leasing, the last 18 months feels like one of those infrequent, large jumps in technology and process innovation, with a pandemic and economic uncertainty pushing the pedal to the metal.
Leasing is changing fast, it’s changing permanently and it’s changing for the better. If you don’t have a plan for automating each step, you need to get one (give us a call if you want to talk!) While the environment is challenging, this is a fascinating time to be in the multifamily industry, and we can’t wait to start researching the next 20 for ‘20 report at the end of this year. I imagine there will be plenty to talk about!