Intuition has long been a key to success in the multifamily industry. Measuring the values of properties — both for purchasing units and figuring out the optimal rental price — requires a keen understanding of location, local economic opportunities, access to restaurants, transit, quality of local schools, and other factors that can be intangible and hard to quantify. Intuition is especially vital to estimating how long a given resident is likely to stay in a unit long term because changing conditions and desires have a major influence on whether they plan to move when their leases end. Instinct and expertise will always have a valuable place in the multifamily residential business, but now artificial intelligence (AI) is giving property owners and leasing professionals data-driven insights to predict turnover with pinpoint accuracy.

Technological advancements have constantly shaped the multifamily market. The industry underwent an information revolution in 2010 as online credit checks and virtual property tours fundamentally changed the leasing process. But no innovation stands to disrupt the industry like AI because its incredible predictive potential can revolutionize the ability to anticipate changes in leasing effectiveness and retention rates. In conjunction with experience and instinct, the analytics produced by AI will lead to actionable insights that change best practices across the industry.

AI Demystified

AI is an extremely exciting technology, but it is often misunderstood. While it is truly hitting its stride as a generative system today, it has actually been a useful tool in multifamily for almost 25 years. Big data and analytics have dominated headlines for the better part of a decade, but this powerful approach goes back as far as the early 1990s. Companies have always rushed to leverage the incredible potential of all the applications of AI, and today's generative and machine learning systems are no different. The multifamily industry stands to benefit from making AI part of its DNA.

The most advanced generative AI systems can defeat a top chess master and create useful basic texts and interesting images. They do this not by having original thoughts and creations but by aggregating countless examples of essays, artworks, or chess matches and then predicting the most likely steps to take. This is why the term AI is often paired with ML — machine learning. While the promise of artificial intelligence might be the ability to mimic human cognition, the reality is that in its current incarnation, it aggregates massive amounts of data based on previous situations to create extremely accurate predictions that help business leaders make important decisions. This is extremely important in the multifamily industry because there are literally hundreds of millions of points of data that already exist that AI tools can use to guide property teams' decisions.

Big Data, Big Difference

Analytics is the process of examining and interpreting vast amounts of data to draw key insights from patterns of events and behavior. These insights can then drive intelligent decision making, displaying a level of adaptability and flexibility that only those multifamily professionals with the keenest instincts could previously anticipate. AI is a key driver of the growth of analytics, with big data predicted to be worth $400 billion by 2030. The sooner that multifamily businesses adopt AI-powered analytics, the sooner they can benefit from the agility and rapid adaptability these insights can provide.

The right approach to AI can help multifamily companies differentiate themselves by building unique experiences that resonate with target residents, evaluating their needs and preferences based on qualitative factors. Understanding resident desires and overall satisfaction with potential factors in a living space makes it easy to predict their likelihood of renewing a lease and maintaining resident loyalty.

This ability to set ideal and transparent prices also optimizes leasing agents' and other professionals' limited time, freeing them up to focus on community engagement and customer service to create multifamily communities where people naturally want to live for many years. Limits on the time, bandwidth, and resources of multifamily teams can make it difficult to assess each resident's situation using intuition and personal expertise alone. AI can integrate qualitative and quantitative insights to create data-driven recommendations that help teams scale their processes and optimize occupancy rates to outperform competing brands.

The Rush to Adapt

As in the hotel and e-commerce industries, multifamily leaders are racing to implement AI solutions to improve performance and reduce costs. Residents are also taking advantage of a data-rich environment to demand clarity in pricing structures and get the best value for their money. Across the board, standards for evaluating and providing transparent and competitive prices have become much higher thanks to AI. Incumbent practices like static rate increases are simply outdated, and intuition alone is not sufficient to determine costs.

Adopting an ambitious and forward-thinking attitude toward AI can ensure that multifamily businesses properly benefit from machine learning and build predictive models that attract and retain the best residents. Intuition is the backbone of a sound lease-up and retention process, but even the most experienced and savvy property company can benefit from powerful tools that strip the guesswork out of the pricing process. By integrating human knowledge and expertise with AI technology, multifamily companies get the benefits of both emerging innovation and hard-won expertise.