The Pandemic’s Proptech Push

They say necessity is the mother of invention. Turns out, it’s the foster parent of rapid technology adoption, too.

That certainly was the case for proptech in the institutional apartment space over the past year, when the COVID-19 pandemic drastically accelerated the adoption of technology at apartment communities to automate, or make remote, functions that were once handled face to face.

“Prior to COVID-19, everyone was already considering smart thermostats, touchless door locks, virtual tours, and paperless payments and leasing,” says Demi Sterling-Kinney, executive vice president of operations at Austin, Texas-based Aspen Heights, a student housing and multifamily developer that counts 11,849 beds and 1,217 apartment units in its portfolio. “But they were just novel. When the pandemic hit, they immediately became invaluable, because they allowed people to operate 100% remotely.”

At Chicago-based Waterton Residential, an operator of 24,086 units, former executive vice president Lela Cirjakovic saw tech adoption that once was happening in fits and starts take off overnight.

“Pre-pandemic, even if we had a wildly successful pilot, it was challenging to achieve portfoliowide adoption,” Cirjakovic says. “But during the pandemic, if the need and value proposition were clear, people embraced the technology.”

For Greg Bates, president and CEO at Boston-based GID, an operator of 37,000 units via its Windsor Communities brand, the rise of proptech happened when the pandemic distilled what seemed like infinite choices into just one: to stay in business.

“COVID supercharged technology adoption because there were no other options,” Bates says. “There’s no going back.”

Proptech in a Post-COVID-19 Apartment World

Now, operators say virtual and self-guided tours enabled by electronic locks and automated access, online applications, screening and leasing apps, and even bots that eliminate the drudgery of answering the same question multiple times a day are here to stay.

In some corners of the multifamily firmament, the future of proptech is already here, with fully automated communities that allow for a completely touchless experience that encompasses virtual tours online; self tours on-site; an online application, screening, and leasing process; and, finally, contactless move-ins.

Take Kanso, the new touch-free brand of apartment living from Arlington, Virginia-based REIT AvalonBay Communities, which runs 86,025 units. At Kanso Twinbrook, a 238-unit property in Rockville, Maryland, that opened last fall, there are no full-time staff members on-site.

Instead, customer service is supported virtually through AvalonBay’s call center, and maintenance support is scheduled a few times a week, with emergency response available on demand. Access is electronic, and the entire leasing and move-in process has been automated, so residents don’t need to interact with a person to gain access to their new home.

“Staff touches are taken out of the equation,” says Peter Zabierek, CEO and portfolio manager at Philadelphia-based Sugi Capital Management, an AvalonBay investor. “If you want to apply for an apartment, you do it yourself online. You run your own credit, run your own ID check, scan your own ID, and sign your lease online. From start to finish, you don’t interact with anyone.”

On AvalonBay’s fourth quarter 2020 earnings conference call, CEO Timothy Naughton told investors that his firm’s leveraging of proptech, along with that of the broader multifamily industry, got a critical boost during COVID-19.

“Our investment in digital capabilities—AI, machine learning, and things of that sort—has only accelerated as we’ve moved through the pandemic,” Naughton said. “If you think about what’s been happening with virtual tours and self-guided tours and smart access … there’s more conviction in making those investments and the ROI associated with them.” He added that the firm expects to continue to invest in such capabilities in the next couple years, to “see those payoffs come through.”

Multifamily pros now say virtual online tours, self-guided property tours, online leasing, and chat bots will remain as integral tools in the industry long after a majority of Americans have shots in their arms.

“Proptech is no longer just a renter preference, it has become the expectation,” says Yetta Tropper, head of multifamily asset management at New York–based PGIM Real Estate, which operates 54,000 units in the U.S. and has implemented virtual and self-guided tours enabled by smart locks as well as online screening, fraud detection, and leasing. “It’s evolving so quickly, it’s important to embrace these changes and stay at the forefront.”

Proptech Tours on Tap

Virtual and self-guided tours are two clear standouts in the proptech race, even for smaller operators. Take Kenmore Development, an operator of just over 1,000 units outside Buffalo, New York, where president Scott Hunt says the firm has been able to integrate virtual tours quickly into its
property management system, complete with drone shots of the surrounding community.

“VR tours like Matterport offer rental prospects the most ideal way to view an apartment without actually physically visiting the site, and drone tours give them a sense of the neighborhood,” Hunt says. “We integrated it with Yardi’s RentCafe to allow prospects to fully apply online, and, if they’re approved, we move them into [our Yardi platform] with the click of a button.”

But observers say while tours have gotten the spotlight, they also have had a supporting cast behind the scenes that has helped usher in even greater adoption of other applications during the pandemic.

“Everyone is talking about tours, which are certainly huge,” says Rachel Davidson, executive vice president at Austin, Texas-based RPM, which counts 84,000 units in its portfolio. “But online payment solutions, smart home technology, and the complete virtual leasing and move-in experience beyond the tour have became critically important over the past year.”

There’s a Bot for That

Another big adoption gainer during the pandemic? Bots, those little chat bubbles that pop up in the corner of your screen when you land on a website and offer help out of the blue.

A novelty in the multifamily space before the pandemic—one that caused the most handwringing in the industry over losing the human touch with prospects since the advent of revenue management for rent setting in the 2000s—bots have become the turn-to tool to quickly funnel qualified leads further down the sales channel. And they do it without the burnout-inducing routine of associates answering the same queries about parking, pets, and payments over and over again.

“We use bots to answer the simple questions,” says Cirjakovic. “It’s a crucial tool that helps us focus our on-site teams on other, critical work.”

There are two main flavors of bots running inside the apartment world, path-based ones that follow a script down the funnel, and machine-learning bots that actually take on information from previous interactions and grow wiser from them.

Bots also have become the gateway, in some regard, for enabling proptech adoption throughout the leasing and occupancy life cycle, an aspect of this simple, front-line proptech that elicits passion among those who have adopted it.

“I think bots are the most exciting thing that will play out over 2021,” says Mike Brewer, chief operating officer at the Atlanta-based RADCO Cos., an operator of 3,000 units. He points to rental platform Zumper’s recent introduction of PowerLeads AI, which analyzes prospects’ behaviors to identify high-intent renters, according to the firm.

“Imagine bolting this together with your lead nurturing bot technology, a self-guided touring technology, and a smart-home solution that cares for the consumer from conception to your resident alumni program,” Brewer gushes. “A would-be resident will never have to talk to a human if they choose not to. You can include me in that group.”

Internal Benefits

The acceleration of proptech adoption hasn’t just happened with resident-facing interactions, either. Internally, multifamily firms have leveraged the technology to gain efficiencies through remote, internal meetings, scheduling and assigning tasks, and getting greater visibility into the business.

“Proptech helps a work-from-home staff have better communication,” says Zain Jaffer, CEO of San Francisco–based real estate and proptech investment firm Zain Ventures, which has a stake in approximately 5,000 units. “Workflow management tools allow owners and operators to better communicate across teams, assign tasks, share visibility, and operate with full transparency.”

Merrcy Moore, executive portfolio manager at Folsom, California-based FPI Management, which runs 130,000 units in 17 states, says she leverages her Leonardo247 operations platform to get an overview among her staff of who’s doing what quickly, without leaving her desk.

“From the corporate side, I can log into the main Leonardo247 software program and easily see what is going on,” Moore says. “I can find out if my team is doing what they should be in about 10 minutes with just a few simple reports.”

Proptech also has helped staff members multitask during the pandemic, while building a sense of community and esprit de corps among associates, and even helping them stay in shape.

“We offered employees a Peloton subscription in return for a commitment of three hours per week,” says Sterling-Kinney at student housing operator Aspen Heights. “Three hourlong team meetings take place in a group class setting where everyone can enjoy each other’s company, while improving their health. By leveraging the flexibility of working from home and coupling it with technology, our culture has thrived.”

Proptech’s Inherent Challenges

Not all is digital rainbows and virtual butterflies when it comes to rolling out proptech in the multifamily sector, an industry that has been historically averse to tech adoption in general. For example, with the multitude of proptech solutions being offered in the industry right now, the sheer volume and variety of tools—and teaching staff members how to use them—can create new hurdles to overcome.

“With so many new technology solutions out there, and many of them being highly specialized in one function, it is now necessary to think about how you utilize best-in-class solutions while not overwhelming your associates and residents with so many different technologies and apps,” says RPM’s Davidson. “If they don’t integrate well, you end up having associates and residents logging into several different platforms to manage the different functions.”

And while proptech definitely saves time, it also takes time to figure out which apps are right for you.

“To be on the cutting edge of technology, owners need to spend considerable time on proptech research, training, and implementation and spend dollars for unproven results,” says Elie Rieder, founder and CEO of Suffern, New York–based Castle Lanterra Properties, which operates 7,500 units. “Currently, for many owners, this is an additional headache with no right answers. There will come a time when dedicated staff can run the technology well, but that does not make sense for most properties right now.”

There’s also the fact that no matter how good an app is, there still isn’t a virtual way to replace an associate’s instincts about what’s happening in the room on an actual, physical tour.

“Virtual tours encourage site-unseen rentals,” says Kenmore’s Hunt. “Occasionally, a new renter expresses concerns that what the virtual tour showed and what they actually received are different.”

Others say the advantages proptech has offered during the pandemic also have a distinct downside by taking in-person human interaction off the table.

“We can have all the automated and hands-free systems we want, but we are in the people business, and, at the end of the day, we can’t lose that,” says FPI’s Moore. “Our business cannot function without people, and any new system that comes along should be designed to complement that instead of replacing it.”

Spending Money to Save Money

Then, of course, there’s the cost.

Smaller operators may be able to implement aspects of proptech for a nominal price. At Kenmore, with just over 1,000 units, Hunt says the price was “relatively incidental. For our company, we spent around $5,000 to integrate the proptech improvements.”

But for others with larger portfolios, costs can escalate quickly, and measuring the returns in hard dollars isn’t always apparent.

“A VR tour can cost $25,000 to create, but whether or not the prospect would have leased without the technology is much harder to predict,” says Sterling-Kinney. Then, there’s the fact that all of this has been happening during a global economic crisis, brought on by the pandemic.

“I think owners are having the largest challenge investing in the middle of a recession,” says Jaffer. “Proptech solutions can be costly and need to be well-integrated. With diminished cash flows, and maybe more vacancies, owners find themselves in between a rock and a hard place. They can make the necessary investments and destroy their capital reserves, or they can keep the capital safe but risk losing all relevance in the post-COVID market.”

Even though that’s a tough choice, Jaffer says for him, it’s also a clear one to continue investing in proptech. “But that doesn’t mean it doesn’t hurt.”

While the accelerated adoption of proptech during the pandemic hasn’t come without its growing pains, operators who are on the cutting edge of leveraging it have come to a consistent conclusion in its use: Now that it’s here, there’s no going back.