Technology is ubiquitous and impacting all environments, especially buildings. One unique market for smart spaces solutions is that of smart apartments and MDUs. Smart apartments feature smart amenities for residents, community management solutions and building automation solutions. These solutions are growing in popularity among MDU property managers and owners in the U.S. and Europe. In Europe, this is noted by investments in property management software, such as Plentific, which raised $100M in funding from Brookfield Asset Management, Highland Europe and Target Global, among others. Also, recently a property technology (proptech) firm based in London, Lavanda, was funded $7.25M.
Internationally recognized market research firm, Parks Associates, reveals that 57 percent of MDU managers report having a lighting control system in their largest property; 26 percent have an energy management/monitoring system, and 13 percent have a smart home device or IoT platform/hub. Additionally, 44 percent of properties with energy management systems incorporate internet-connected devices such as smart thermostats and smart lighting into the system for remote monitoring and control.
The use cases and deployments targeting the smart apartment space have many similarities to solutions targeting the hospitality space. However, there are unique factors in the MDU market that introduce additional complexities and challenges.
Dual Perspectives: Residents and Property Managers
Many smart home solution vendors perceive MDUs as a potentially lucrative channel for new business, while traditional MDU technology vendors are making investments to rapidly expand their service offerings, including through acquisitions and IPOs. This market does have unique challenges: in smart apartments, unlike in other verticals, solutions providers are serving two different clients—the property manager and the residents. The wants and needs of these groups may differ, as do the solutions that best serve them.
Property managers and owners who have installed smart home solutions report significant benefits from these solutions. The top benefits include increased rental revenues, improvements in operating efficiencies, and an increased ability to attract and retain residents. The research firm reports that more than a third of MDU residents are willing to pay an additional 15 percent per month in rent for smart amenities. At present, MDU owners and managers are less likely to note lower property insurance costs as a benefit, but this will likely increase as the market develops and matures. According to The Wall Street Journal, insurance premiums for apartment communities in the U.S. rose by 33 percent in 2020 alone. Smart home platform providers can partner with more insurance companies to offer lower insurance premiums to property managers on the basis of the lower safety risks associated with smart home device implementation. This too will drive higher return on smart home device investments for property managers and drive higher adoption rates for device and platform vendors.
The Importance of Reliable, High-Speed Broadband
While the majority of MDU residents acquire broadband service for their units directly through providers via a retail service model, a growing number of properties offer managed high-speed internet access (HSIA) as an amenity. However, given recent FCC rulings on resident choice in MDU environments, MDUs are no longer able to enter into exclusive or graduated revenue-sharing agreements with ISPs and are no longer able to participate in sale-and-leaseback agreements. Vendors working to deploy IoT solutions into MDUs must be prepared to support a mix of deployment models, including multiple internet-service providers or even tenant-owned devices. MDU residents making use of property-provided devices are keenly interested in use cases related to safety and security, as well as energy management. Parks Associates finds that 43 percent of U.S. MDU residents report using smart home devices, including a mix of property-provided devices, and devices the resident purchased at retail. Consumers prefer to monitor and control their devices through a single user interface, and top solutions will support a BYOD approach.
As data security and privacy continue to be an important concern for smart home users, both apps and voice controls pose different pros and cons of use. Manufacturers desiring higher adoption are well-advised to focus on privacy-focused policies, capabilities and product design, particularly for camera-equipped devices. Further, 60 percent of property managers report that they can monitor the data from smart home devices installed in individual units, and 38 percent also report that they can adjust any device at any time. Platform vendors providing smart home devices typically restrict these capabilities for property management companies in order to prevent invasion of resident privacy and rights.
MDU residents are more likely than consumers living in single-family homes to own smart home products, with residential owners of units in condominiums or townhomes particularly likely to use smart home technologies. More than 42 percent of MDU unit owners report that their property pre-installed at least one smart home device. However most renters, by contrast, have fewer BYOD and self-install options. MDU residents looking for a more complete smart home experience must select a unit with devices pre-installed, but just over 10 percent of renters living in MDUs report that they are currently living in a unit with a pre-installed, property-provided smart home device.
MDU residents report that pre-installation of smart home devices is an important factor when selecting their new apartment. More than half of MDU renters are willing to pay extra for an apartment with smart capabilities and amenities, which would also include a system that allows them to add their own devices without limitations or needing approval. Given the tech-positive tendencies of MDU households, there is considerable room for smart spaces solutions to grow in the MDU rental market.