When you talk to developers about the exciting possibilities that the Internet of Things (IoT) offers to multifamily properties, the conversation often follows a familiar path. "Smart building technology is a natural fit for our new build projects, but it's harder in retrofits."
It is, of course, easier to plan to install physical technology in a property before it has walls, doors, and residents. However, the bias towards new-builds is increasingly looking like the wrong way to think about this transformational technology. As operators experience improved customer experience and operational benefits, the decision to retrofit the technology into existing properties is becoming a bigger priority.
Many developers consider this decision in the same way that they consider other unit amenities. Upgrading amenities is normal, for example, to increase rents so that over time, the property can fulfill the financial objectives that justified the projects in the first place. But that means developers have a lot of different choices of which amenities should consume their time and capital.
Upgrades to public areas, kitchens, furnishings, and decor can all make the property more desirable to the target demographic. But there are some ways in which amenities like smart access behave differently from other amenities.
One important difference between smart building technology and other amenities is the nature and magnitude of the potential return on investment. There are numerous and compelling reasons why smart building technology is a better use of capital than most other amenity types.
As we have explained in previous posts, smart access control can impact both the cost and the revenue sides of the ledger. Technology-enabled living experiences are hugely appealing to residents, and they tend to support higher rents.
They also tend to result in higher average review scores, which, when coupled with a smart technology-enabled property tour, makes the community more competitive in attracting residents. The combination of more rent plus more leases usually justifies the cost of implementation.
We could argue that all amenities are meant to drive revenue and should be able to pay for themselves, but where smart building technology varies sharply from other amenities is in the improvements it delivers to operations.
When a property stops distributing, managing, and collecting physical keys, it puts hours back into the site team's day. The same is not true of other amenities: When a developer installs a dishwasher in a unit, for example, residents appreciate it, but it doesn't change how the community runs its business.
When we think about this range of benefits, we can see how retrofitting smart technologies can lead to a better financial outcome than simply upgrading appliances or common areas. Additionally, many of the companies that are becoming more ambitious in their retrofitting projects are doing so because of the speed to benefits relative to other capital projects.
Consider other types of renovation, like those involving remodeling units. It usually takes months to choose paints, appliances, finishes, and schedule the project. It might be necessary to wait for an apartment to turn over before renovations can begin.
Smart access technology, by contrast, can be installed in a matter of days and with minimal inconvenience to residents. And once the locks are installed, everybody at the property can start using them, along with the controlling technology, right away. Because the technology is available as soon as the installation is complete, the operator wastes no time capturing the benefits that justified the expense.
Depending on the operator's policy, rent increases or amenity charges could be applied on renewal or in some cases, right away. Operations become immediately keyless, adding efficiency. Other renovation projects may take significantly longer to deliver financial rewards.
Finally, once retrofitting is complete, the building has an IoT platform to which it can add more capabilities. It is normal to start by rolling out smart access, and once installed, operators can consider other related technologies such as leak detectors, thermostats, and additional energy and utility features. As ESG scores become an increasing feature of the multifamily landscape, retrofitting these controls into buildings will become a growing priority.
Overall, it is critical to think about the context of the individual building when considering a retrofit project. All properties are unique, and we have seen many cases among our growing customer base where implementing smart access control is an easy decision based on financial and business drivers.
A good and frequent example is where a company already using smart access acquires a property that still uses keys. The acquiring company knows how to deliver an immediate and transformational improvement in this case. Companies that already use smart access in other portfolio assets seldom want to take the step backwards into having to operate with keys again.
Another frequent example is where a property's direct competitors are implementing smart access control. Today, that situation is suboptimal. Tomorrow, it will be outright damaging to your business to be competing with properties using smart access if you don't have it yourself.
In every case, the important thing to understand is how—specifically—IoT technology can change an individual property, given its individual characteristics and situation, as we will explore in the next blog in this series.
Learn more about retrofitting with Latch.
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