Original article by Travis Barrington, February 13, 2018
With home ownership rates falling to the lowest level in decades, Americans are increasingly turning to multifamily living and demanding cutting-edge amenities and convenience. Savvy investors and building owners are capitalizing on these trends with innovative back office processes, community features and technology. To discuss these trends and educate multifamily investors, owners and managers, Propmodo LIVE held an educational seminar in downtown Los Angeles last week.
At the seminar, Fifth Wall Ventures’ head of multifamily investment Roelof Opperman sat down with Daniel Ceniceros, the founder and president of Connect Media, to chat about transformational shifts happening in the multifamily industry and what the future might look like, particularly in Southern California. “I think we are at a tipping point for real estate, partially because of market factors,” said Opperman. “Everyone is maxed out on rent. The rent to income ratio in LA is 50% and that is not sustainable.”
So what’s a landlord to do when tenants are already squeezed? According to Opperman, technology might be part of the solution. “The best way to maintain value is to boost revenue with things like short term rental or by getting a piece of additional amenities or to increase operating efficiencies,” explained Opperman.
In the short term rental space, Airbnb started by targeting the travel and leisure business but now that growth has stunted. “Now it’s all about the business traveler,” said Opperman. “There are a number of companies coming out that are like management companies for Airbnb. Airbnb has a supply problem. They need to start legitimizing the platform in order for them to be more appealing to multifamily.”
Fifth Wall Ventures has been able to offer early stage real estate tech companies an unprecedented scale of distribution across all the major asset classes of real estate, including multifamily. They are able to do this because their LPs include major multifamily stakeholders like CBRE, Equity Residential, Hines, Lennar, Macerich, and Prologis. These companies are looking to Fifth Wall to uncover opportunities to integrate new technology into their business and portfolios.
According to Opperman, a lot of real estate people, when they get approached with a new technology, often wonder why they don’t just build it themselves. He cited hotel booking website Roomkey as an example of that. Created by a consortium of hotel chains, Roomkey was built to compete for bookings with Travelocity and Expedia. “Currently Travelocity and Expedia are $105 billion in market cap,” Opperman explained. “They do 95% of the online booking and no one has ever heard of Roomkey. They thought that they could do it themselves and lost. The key, as the economy grows and gets more complicated, is focus.”
A central part of Propmodo’s event was a series of educational presentations by several startups angling to help owners and tenants modernize the multifamily living experience. Everett Lynn, the founder of Amenify, spoke about how residents and their brand loyalties have evolved, but the multifamily industry is struggling to keep up. “Owners need to form stronger relationships with residents by leveraging technology, and using data to serve today’s experience-driven consumers,” said Lynn.
Mitch Karren, Chief Product Officer of Smartrent, a home automation platform for the multifamily industry, spoke about fast-changing smart home technology. “We are just beginning to technically address the huge opportunity of the Internet of Things and smart home technology for multifamily,” explained Karren. “One of the biggest challenges facing owners is deciding between different technology solutions and finding ways to help future-proof their investment.”
Speaking about new energy technology, Dover Janis, Co-founder of San Diego-based Grid Technologies, wondered out loud, “When did landlords start letting utility companies take profit away from them?” Janis’s company is an emerging energy startup focused on creating passive income for real estate investors by installing solar power generation and selling the energy to tenants, bypassing the big electric utility.
Marcela Sapone, Co-founder and CEO of Hello Alfred, a tech-driven home management platform, spoke about how technology is redefining the definition of luxury living. According to Sapone, technology has fundamentally changed the way we live but our homes are lagging behind. She said that amenities are still being built for past generations. “How can we bridge the gap between the friction-free experiences people want and how we design homes for new urban living,” asked Sapone. “People want to pay for experiences, not things.”
Capping-off the event, Propmodo co-founder Franco Faraudo moderated a panel featuring real estate experts from a variety of disciplines who spoke about how collaboration and technology are helping increase multifamily housing quality and opportunities.
Otis Odell, an Associate Principal at design firm Harley Ellis Deveraux, said there is a lot of opportunity to improve the quality of existing housing stock: “We are going to see more low income housing, including what is known as permanent supportive housing. There are a lot of 30 year old, family owned apartment buildings that just now are starting to get redeveloped.”
Convenience continues to be one of the most important factors driving urban growth, according to Dana Brody, a Senior Vice President for JLL’s Capital Markets team. “Most people who want to live in urban centers, want to be able to walk to the transit and don’t necessarily want to own a car, so they are very specific about where they want to live,” she said.
A lack of collaboration between developers and local governments, is getting in the way. Mark Vallianatos, Director of LAPlus, a think tank supporting housing development, said: “The most interesting thing about multifamily in LA is that it is illegal in most places. 2018 is the 100th year of single family zoning but we only now have a bill in the state legislature, SB827, that would essentially re-legalize multifamily within a half mile of transit. To me that will let us try things at a different scale now.”
All of the speakers seemed to agree that for governments and developers to work together to improve multifamily housing, data standards and sharing need to exist. Ian Cameron, Chief Innovation Officer for OSCRE, said “The focus that we have at OSCRE is to have a core data set for everyone in the real estate industry to be able to share. It takes a community built on collaboration to do something like this.”
Urban construction is expected to continue to outpace that of the suburbs as it has for the past decade. Consequently, there will be clear winners and losers in the multifamily space so it’s important that owners differentiate their properties to be competitive.
Unique amenities and better processes will distinguish your building and attract more renters. Intelligent systems like AI and machine learning, which are already transforming the office and retail industries, are now making their way into multifamily. Real estate professionals who are able to act on these opportunities will be the winners.
As Fifth Wall’s Roelof Opperman, stated: “People in multifamily are seeing the disruption that happened to retail real estate and are looking to get ahead.”
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