The rise of smart home technology (aka Internet of Things) poses an interesting challenge for the multifamily industry. While the concept is still in its nascent stage it’s generating massive buzz and starting take hold. Individual homeowners, of course, can kit out their abodes with whatever connected devices they choose – want to run your washing machine from your smartphone? Go to Best Buy or Amazon and it’s all yours. 

Multifamily is trickier, however, because if owners want to provide residents with the newest gadgets, it will cost the owners, perhaps heavily. Installing the appliances, devices, systems, etc. is one cost source. Maintaining them is another. In this second cost lies significant uncertainty. At a recent conference we heard one multifamily owner describe the situation by saying, “You become tech support if maintenance can’t fix it, then what?”

One interpretation is that despite emerging demand, there is hesitance to supply because it would disrupt the existing model, which would wreak havoc on returns in the short-term. 

Nevertheless, it does not seem so crazy to think that in the future maybe real estate will become less about dirt and concrete than data and clouds. Maybe providing better service and the amenities consumers want will actually lead to better returns. Maybe there will have to be a re-education of investors. Maybe tech support will replace maintenance as a line item. Maybe good tech support will be a key feature in the customer-decision process. 

Maybe instead of punting technology adoption to maintain current yield demand, the multifamily industry should take this as a massive opportunity to go for it and start preparing for returns for the next generation. The adoption and integration of technology into real estate is charging ahead at breakneck pace and figuring it out is going to be messy and painful, for sure. But for those who do, the rewards could be significant. 

Not so long ago International Business Machines was a company that made large mainframe computers. Just a generation later, IBM realized computer hardware manufacturing was a race to the bottom so it pivoted and became a service-based consulting firm. While its revenue and return models have undoubtedly changed, the company remains successful and is a reference in global business. 

This view might be a bit extreme but our aim is to think about how far the smart home trend could go in multifamily. We’d love to hear your thoughts about how you are thinking about and/or preparing for these new devices and technologies.