The Technology Tipping Point: The Future of Multifamily Housing

In November 2018, we interviewed 20 COOs and CIOs to get a sense of the “state of the state” in multifamily housing operations, and a glimpse into where it will go in the next couple of years. As we prepare to release a white paper, 20 for 20: Where multi-family housing operations is heading by 2020, based on this research, I’d like to share a set of the five high-level findings that we recently previewed with 15 executives at NMHC’s Annual Meeting (if you want to register to receive a free copy of the full white paper, click here). 

Before we get into those specifics, I should note that the entire experience has led us to the over-arching conclusion that multifamily is at a technology tipping point, the like of which we have not seen for 15 years. In the late 90s/early 00s, the industry experienced an onslaught of game-changing technologies: automated credit screening, pricing and revenue management (PRM), web-based Property Management Systems (PMS), and resident/prospect portals.

The ensuing 10+ years saw, at best, minor advancements in process through technology; but that is clearly changing. While not yet certain exactly how they will play out, technologies such as artificial intelligence (AI) and machine learning, smart home devices and short-term rental (STR) marketplaces will clearly have a major impact in how we do business—a much bigger impact than new technology since the early ‘00s.

Now on to “the big 5” observations:

1. “One big project”: fully half of those interviewed had a technology project in 2018 that basically dominated resources to the exclusion of any other major project; and 70% of those were either a transition to a new PMS or a major upgrade to their existing PMS.

D2DS POV: These infrastructure investments only pay off if followed by significant projects that build on top of that infrastructure.

2. Short-term priorities and tech hype not yet aligned. Our interviews were conducted at or shortly after NMHC’s OpTech conference. The big topics at that conference included the aforementioned AI, Smart Home and STR technologies. Yet none of the COOs or CIOs interviewed listed any of those as a “top three” priority for 2019. That doesn’t mean they have no interest or activity (intentional double negative), but it does mean we’re still a bit early in the hype cycle for all three.

D2DS POV: We believe there is first-mover advantage in AI and STR as you learn/mature sooner than others and can maintain that cultural advantage for years. Conversely, smart home tech may have a first mover disadvantage if you “end up with Betamax in a VHS world”

3. Everyone said that recruiting and retaining quality talent was increasingly difficult this past year, and all stated they expect it to be equally difficult (or harder) in 2019. Most are focusing on culture (creating a sense of a belonging to something with a greater purpose), policies (e.g. loosening tatoo/piercing standards to attract a wider talent pool) and investing in career development and training as key strategies for dealing with this challenge. On the development side, the clear #1 priority is investing in sales (leasing) performance improvement. That doesn’t surprise us as a 10-year bull run in multifamily performance doesn’t exactly leave metaphorical sales muscles at their peak level. For executives peering into a future rife with possible slowdowns, it seems wise to improve those capabilities in preparation for potential clouds ahead.

D2DS POV: We believe heavily in the sales performance improvement priority which is why we developed the configurable off-the-shelf program, InSite Sales.

4. BI adoption. Several interviewees mentioned BI projects as a key area of focus though few were completely satisfied with their results to date. We noticed
a. The adoption cycle for BI has been very different than the other technology we mentioned earlier. Those were clearly led by owner-operators and followed a path where early innovators spent years getting just a handful of customers before hitting a tipping point of rapid adoption. In contrast BI a) is following a slow, steady pace of adoption with no rapid increase and b) seems to be equally led by fee managers as by owner-operators. The motivation for fee managers is the need to meeting their clients’ expectations for quantity, quality, pace and customization of data and reporting.
b. Candidly, most BI projects are not set up for success. They tend to be IT led and/or report centric rather than business-led and focused on dashboarding and predictive analytics.

D2DS POV: We highly recommend our white paper on leading an analytically driven company.

5. PRM turns 18. This month is the 18^th anniversary of the very first property that went live on LRO (for any trivia buffs, it was Hunters Run in Austin, Texas). In asking what executives thought was missing in PRM, CIOs told us they haven’t been involved in PRM for years and COOs struggled to articulate any driving needs.

D2DS POV: We are concerned that executives have become complacent about PRM. Other industries (e.g. hospitality) view PRM as a Sisyphean task and never stop working on refining models and processes. At a minimum, we see opportunity in better lease-up pricing, unit amenity evaluation, renovation return analysis and ongoing development of PRM associates.

If any of this caught your attention, be sure to register to receive your copy of the full white paper. And give us a call—we’d love to talk more about this with you, and your teams!