11 Multifamily Industry Trends to Look Out for in 2018 Feb 08, 2018 It’s official, the new year has arrived. With a new year comes many other new items: resolutions, goals, and trends. In honor of the new year, we sat down with a few customers to get their predictions on multifamily industry trends in 2018. What are the dominating topics surfacing in multifamily? Which technology advancements will impact 2018 the most? Where is the owner/operator relationship going? What role does data access play in the coming year? Our multifamily experts weighed in on these questions and more. We spoke with: ● Al Pace, President & CEO, Pacific Urban Residential ● Carrie Briggs, VP of Marketing and Revenue Management, FPI Management ● Bob Murray, Senior Director of Asset Management, TruAmerica Multifamily ● Joe Coleman, COO, Mosser ● Brandy Daniel, VP of Business Intelligence Systems, BH Management We noticed a few common themes, namely that most of the trends centered around data and technology, organizational relationships and culture, and the overall real estate market. Without further delay, here are the top eleven trends our experts highlighted for 2018: Data and Technology Trends 1. TECHNOLOGY AS A COMPETITIVE DIFFERENTIATOR “On the owner side, being data-driven has become hyper-critical. Cap rates have compressed, sourcing deals is more difficult, and everyone is moving toward managing properties analytically. On the third-party management side, you have to maintain a competitive edge to earn the business and to maintain margins that are profitable. If you can replace overhead and substitute with technology, you’re going to do that wherever you can. Technology really allows you to see shortfall on the human capital side.” – Joe Coleman, Mosser While the market has been on an upswing, obtaining new investments and generating high returns for existing investors is always a crucial need. To support these investments, impress their clients, and attract new ones, third-party managers need to distinguish themselves. Recently, adding technology as a competitive benefit is one of the ways managers are differentiating themselves from other operators. “We use over a dozen management companies across the country; Business Intelligence and analytics have become a key way to drive our understanding of what’s going on at our communities and in our markets. By using this technology, we are also able to see local and national trends without having to do time consuming analyses.” – Bob Murray, TruAmerica 2. ENHANCED MARKETING TECHNOLOGY “For over 20 years, we have looked for a tool to measure performance and show the improvements to value, that our team works so diligently to provide. Excel and other manual solutions were our only options. Now, with Business Intelligence, we have the technology to give us portfolio wide and site level data that includes performance metrics, allowing us to provide real-time solutions.” – Carrie Briggs, FPI The importance of leads, or prospective tenants, is certainly not new. However in the past, it was difficult to effectively measure and track lead acquisition, nurturing, and conversion. With enhanced CRM technology, management groups can have greater awareness of all touchpoints in the prospective resident lifecycle. Essentially, advancing marketing technology is giving teams like FPI the lifecycle data they need to make personal, human connections with their prospective residents. “CRM systems are showing us the number of touchpoints it takes to convert a prospective resident to a valued resident at one of our communities. Lead management has always been essential in showing our prospective residents that they matter. However, new technology now allows us to track our efforts, and efficiently guide our prospective residents on their journey to find their new homes. Moving is one of the most stressful events of a person’s life, and these tools help relay our compassion, dedication, and care for them.” – Carrie Briggs, FPI 3. ARTIFICIAL INTELLIGENCE “I see technology advancements being so much about artificial intelligence and voice recognition, like what Google and Amazon are doing with Google Home and Alexa. I think that’s going to be more and more a part of our everyday life and what our customers are looking for in features that will work their way into our housing units.” – Bob Murray, TruAmerica In both the business and consumer world, artificial intelligence (AI) and voice recognition have already taken off. However, they haven’t significantly impacted the multifamily industry to date, but our experts believe that might not be the case for much longer. “I would like to start seeing it [Google Home or Amazon Echo] on our properties. We are looking into ways to get these devices into our common areas and units. There would have to be an easy way to control how it could be used in a cost-effective manner so that it did not need constant programing. Features that interest us are the basics on music, lighting, security, telephone and television but also interacting with our management teams on work orders and community events.” – Bob Murray, TruAmerica 4. BUSINESS INTELLIGENCE “Business Intelligence is one of the most exciting, necessary and revolutionary tools that I’ve been a part of in many years.” – Carrie Briggs, FPI Given that Rentlytics’ flagship product is our Business Intelligence solution, this is a trend we’ve seen emerge and continue to grow in recent years. We’ve seen multifamily organizations like FPI Management, Mosser, Pacific Urban Residential, BH Management, TruAmerica, and our other customers jump on board this technology to significantly transform their businesses. “I can’t even put a number on how many reports I would print a month. I’d drop them into Excel, sort them in different ways, slice and dice data, and that still gave me only a fraction of the story that I needed to see. Now we have Rentlytics Business Intelligence, where we pull up our dashboards and the only thing it doesn’t have is a cup of coffee waiting for us.” – Carrie Briggs, FPI While Briggs and others have noted the time savings aspect of a Business Intelligence solution being key, having access to this previously siloed data has even larger effects. “It tells us closing ratios, advertising source effectiveness, which properties are ahead of NOI year-to-date, how the property is comparing historically and so much more! Operationally, the things that matter most to us, aside from taking care of our residents, are taking care of this asset that’s been entrusted to us and maximizing the value to the highest potential that we can. Business Intelligence allows us to do this.” – Carrie Briggs, FPI 5. THE IMPORTANCE OF REAL-TIME DATA “We want data very quickly so that we can adapt and either improve the resident experience or the investor returns. We just can’t get enough data.” – Bob Murray, TruAmerica Historically, multifamily organizations had to wait until month’s end to have the financial and operational data they needed to make decisions, but that was already too late to have an impact on the prior month. With stale data, you can only hope to stop issues from repeating or worsening, but it’s very difficult to prevent them or seek out opportunities to immediately impact NOI. That’s why many multifamily leaders, like our experts, recognize the growing importance of having access to real-time portfolio data. “Big Data has grown in demand for the last decade. Having real-time data is extremely important at TruAmerica. We are working on improving our platform for reporting by using products like Rentlytics and other services.” – Bob Murray, TruAmerica Organizational Relationships and Culture Trends 6. THE OWNER/OPERATOR RELATIONSHIP AS A PARTNERSHIP “Our clients also, have become more sophisticated because of technology advances. It’s this thirst for knowledge and understanding of how to maximize the value, which FPI has really taken a hold of. We feel it’s our responsibility and honor, to help guide our valued clients in that education process.” – Carrie Briggs, FPI A theme we first explored at our 2017 User Group Session was the changing owner/operator relationship. As technology has advanced and influenced multifamily organizations, both owners and third-party fee managers have new opportunities to grow their companies, and have strengthened their partnerships to do so. “Aligning owner and operator visions is imperative for successful performance. There is added value when the partnership is extended into the Business Intelligence department. Stronger confidence is built through transparency via easily consumable, relevant data. This immediate access to data by owners and operators results in clearer directives, stronger performance and a more consistent revenue outcome. The real-time data we have at our fingertips, allows for a more data-driven conversation with owners and operators and lends the opportunity to create strategies and achievable goals based on accurate market conditions as opposed to perception.” – Brandy Daniel, BH “When we roll out a new initiative, such as Business Intelligence, we want to make sure our clients are trained, not just our staff. I feel there’s a responsibility of a management company to make sure their owners are always their partners on this journey.” – Carrie Briggs, FPI 7. THE NEW, DATA-DRIVEN MULTIFAMILY ORGANIZATION “The only way to embrace data or technology is to create a culture around it.” – Joe Coleman, Mosser As mentioned in the data and technology trends section, data access and Business Intelligence are making it easier for multifamily owners and managers to do their jobs. However, our experts noted that simply having the tools is not enough to ensure technology adoption; you need organization-wide support. “It’s fine to have a top-down approach of the technology management, but at the end of the day, you need organizational buy-in for a successful rollout.” – Joe Coleman, Mosser But how do you elicit that kind of support for your team? We recently released an ebook with a section specifically focused on getting organizational buy-in on new technology. Our experts also provided compelling answers from their own experiences. “Data empowers people to really perfect their craft, whereas in the past it may have been scary for the end user because it didn’t have the ease of use. The Rentlytics dashboards have consolidated information in a meaningful way creating buy-in across an organization and empowering teams to make real-time decisions based on analytics.” – Joe Coleman, Mosser 8. ACTIVE ASSET MANAGEMENT “Historically, institutional owners have not had access to the granular operating data that allows them to make informed decisions. Generally, that information was both sourced and provided by the operator. The operator provided them with their assessment of property and portfolio performance. As data becomes more graphically friendly and transparent, expect owners to become more involved in impactful decision making.” – Al Pace, Pacific Urban Residential What is active asset management? Essentially, it’s defined as investors who utilize third party management companies, but are strategically involved in the operations of their portfolio. While external property managers continue to handle the day-to-day details of leasing, resident management, and property maintenance, active asset managers step in to help property managers better leverage resources to maximize portfolio returns. “Our organization is very hands on. We use over a dozen management companies and they definitely agree; I think this approach gives us a competitive edge in the investment world we work in. When we communicate with our investment partners, they know we are continually looking for the best practices and making adjustments as necessary. We give them better returns because of it.” – Bob Murray, TruAmerica Our experts noted that this seems to be a trend that’s gaining traction, partially because technology has increased data access across organizations, making it possible for owners to be more active in property operations and finances. “The more transparent that information becomes and more readily available it becomes for investors, the more actively they can get involved in both the operations and the strategy of the assets. They can determine when you need to put the foot on the accelerator and when you should begin to tap the brakes.” – Al Pace, Pacific Urban Residential “All organizations want to have active asset managers but it’s about the people and the execution to make that happen.” – Bob Murray, TruAmerica 9. TECHNOLOGY-FUELED CAREER GROWTH “From a career growth perspective, it used to be ok to report or make changes 30 days after any event has happened. That is not ok now. Property managers are being asked to do more thinking than in the past and to make adjustments to performance quickly.” – Joe Coleman, Mosser In years past, many real estate professionals didn’t choose their career track, but stumbled into it and then stuck with it. Today, there are more career growth options and defined paths for real estate, so people are purposefully selecting property management as a career and then getting a formal education for it. For this more educated workforce, using top technology to perform better is a natural choice. Because the real estate workforce is becoming more educated, multifamily organizations are expecting more from their employees. In order to stand out from their peers and grow their careers, real estate professionals need to perform at a high level. So what trend is taking shape? Using technology to achieve those results and move up the corporate ladder. “What enables you to make career growth changes is to hold yourself accountable to numbers and results. Technology makes that easier.” – Joe Coleman, Mosser Market Trends 10. THE EMERGING SHORT-TERM RENTAL MARKET “There is an interesting, emerging dialogue taking place. Residents are beginning to talk about whether their rental lease provides an actual equity interest in their rented apartment home. Some are arguing that their apartment lease provides them certain equity rights to do whatever they want to do with their apartment home, inclusive of unlimited subletting without owner approval, etc. Owners on the other hand have appropriate concerns relative to community security and whether or not somebody should be arbitraging their unit in the form of short-term rentals. Irrespective of the merits of the argument, it is pretty clear that hyper short-term rentals will become an increasing part of the market.” – Al Pace, Pacific Urban Residential Short-term rentals, supported by platforms like Airbnb, are not new this year. In fact, in May 2017, we had a blog post highlighting that there could be a growing number of multifamily owners willing to partner with organizations like Airbnb, to let long-term tenants rent out their units. We referenced a September 2016 NMHC survey which stated that 33% of survey participants said they would be open to a partnership program with short-term rental sites such as Airbnb. We had anticipated that number increasing and we’re not alone. “Short term rentals, especially though online marketplaces, are currently a hot topic in property management. Trailblazers are looking for the best way to line up management needs and resident expectations. While this appears at surface level to be an avenue to untapped revenue, the additional wear and tear, unchecked residents and transiency are all concerns for management. Despite these concerns today, we will likely see this new market find its place in the normal course of property management business over the next few years.” – Brandy Daniel, BH “I think you’re going to see the emergence and acceptance of ultra short-term leases of a few days as de facto what apartment communities in urban markets are going to offer. It’s entirely possible we are going to have apartment communities in urban markets where a portion is going to look and feel more transient, more hotel-like, while you will have conventional long-term leases in the balance of the apartment community. By segregating the product type by consumer need, owners can then begin to effectively address security and management concerns vis a vis controlled floor access, knowing who is in the building, et cetera. We have seen this in the for sale residences/hotel concepts for years. I suspect it will come to the multifamily space as well.” – Al Pace, Pacific Urban Residential 11. VALUE-ADD FOCUS “There’s always been some kind of value-add investing and repositioning of assets. That’s always been a part of the industry but it’s become more and more prevalent in recent years. I think the development of apartments is going to slow, the cost and money is increasing, there’s been a lot of pressure on wage growth in a lot of markets, especially coastal markets that demand upkeep of aging product. There will be more and more focus on repositioning mid-tier assets, B-quality assets, suburban garden style that are ten to thirty years old.” – Bob Murray, TruAmerica Building new apartment buildings is more time- and resource-intensive than improving existing ones. While renovation is not a new way to increase property value, if development slows as predicted by Murray, focusing on making existing assets more valuable is likely to be an emerging trend. He also noted that as rents and home values increase, people seek out more affordable renting options, but still expect certain amenities to be provided. This is where updating existing assets comes in. “Building new apartment product is becoming more expensive so I think we’re going to see less and less apartment development. I believe 2018 will still be a good year but we are moving toward the end of the development cycle. There’s going to be a lot of demand for more affordable housing that has amenities that are current with the times and match the lifestyles of our customers. This is where you see remodeled and expanded gyms, dog parks, community spaces in clubhouses with WiFi and hang out spaces like local coffee shops.” – Bob Murray, TruAmerica CONCLUSIONS While our experts highlight different predictions on trends for the coming year, many of their thoughts trail back to one central theme: data access and advancing technology is propelling the multifamily industry forward. As a leading multifamily data analytics company, this is something Rentlytics has seen taking shape over the past few years, so it came as no shock to us. What is surprising is that while this trend has been growing in recent times, it seems to only be growing year over year, with no signs of slowing down. But don’t take our word for it, take Pace’s word for it. And Coleman’s. And Briggs’. And Murray’s. And Daniel’s. While we’re all a part of different organizations, we’re seeing very similar trends. Data is key. 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