According to a May survey by Yardi Matrix, rent growth in the multifamily market has reached pre-pandemic levels. Rent prices rose 2.5% year over year in May 2021, with all major markets nationwide showing recovery. As workers in finance return to the office, many seek luxury apartments in major cities like New York. On the other hand, many tech workers continue a remote or hybrid arrangement, leading to slower growth in Seattle and San Francisco.
Competition remains fierce on both coasts and in the middle of the country for luxury apartments. The Yardi Matrix report showed growth in all top 30 metro areas. The CBRE 2021 Real Estate Market Outlook report shows that demand for multifamily housing will continue to rise in 2021, but may not hit pre-pandemic peaks.
With new construction now resumed, owners of Class A assets will find themselves competing with brand-new properties as well as existing construction. Landlords who set their multifamily units up with the best amenities, including smart home automation and security systems, will be in a position to capitalize on rising rents and a hot multifamily market.
Tenants Seek Smart Home Amenities
More than 75% of tenants said they would be willing to pay more for an apartment with smart home amenities, including security cameras, smart locks and smart thermostats. Of those surveyed by Entrato, 57% said they would pay up to $20 more per month for these amenities. Another study revealed that millennial renters were willing to pay up to 20% more for a unit with smart home technology.
Smart Locks Top the List
Of the smart home amenities renters seek, smart locks and security systems topped the list. A study by a lock manufacturer found that 55% of millennials would pay more for an apartment with smart locks or a keyless entry system.
But keyless entry does more than just make tenants happy and lead to higher rents. It can save landlords time and money while adding security to a unit. You won’t need to change locks when a tenant leaves; all you have to do is reprogram the entry code. And when you’re showing a vacant unit, you can provide a one-time code to the realtor or property manager.
High Turnover Rates Affect Profitability
A study by ResidentRated discovered that the average U.S. renter in a multifamily apartment stays for 27.5 months, or just over two years. These numbers vary based on the region, however. Renters in the northeast tend to stay an average of 32.9 months, while those in the south stay an average of just 24.3 months.
Landlords and property managers know that reducing tenant turnover is a key to maintaining profitability and improving your capitalization rate, or CAP%, the net income divided by the purchase price. Vacancies can drive down the CAP%, as can tenant turnover, as landlords typically improve a space, including everything from paint and new flooring to a thorough, professional cleaning when a tenant leaves.
Why Tenants Leave
The ResidentRated survey also uncovered the reasons tenants leave. In addition to rent increases or moves due to job changes, tenants left due to poor maintenance, unresponsive staff, noise, safety concerns and poor heating or cooling in their unit.
Smart home automation, including smart home thermostats, add comfort and convenience that will attract and retain tenants. Smart home systems make it easy for tenants to regulate heating and cooling and even set their preferences to automatically adjust the temperature based on the time of day through a mobile app.
Provide Amenities to Encourage Tenants to Stay
Landlords across the country struggle with turnover rates from 30% to 35% under the best circumstances. But you can reduce those rates with the right amenities, including highly sought-after smart home tech.
Approximately 40% of apartment turnover could be eliminated by addressing tenants’ concerns; security systems and automated outdoor lighting systems can help reduce safety concerns, while smart thermostats can address heating and cooling issues. An apartment with smart home features is, in general, a well-maintained space that will attract and retain high-quality tenants. Especially with rising rents across the country, the right amenities will encourage renters to stay where they are rather than paying more for a space that may not provide the same amenities they have grown to love.
Attract Better Tenants with Smart Home Tech
Tenants who are willing to pay more for a space with the technology they want are likely to be happier in the long term. Smart home systems make multifamily apartments safer, more secure and easier for landlords to manage.
A report from the Consumer Technology Association showed that 83 million households owned at least one smart home product in 2019. Those numbers have only increased throughout the pandemic with more people staying home and embracing technology. The time will come when smart home technology will no longer be a perk but an expected necessity in Class A multifamily rentals. Stay ahead of the multifamily industry by outfitting your properties with smart home automation systems now to take advantage of rising rents and a hot multifamily market.
Dawn Allcot is a full-time freelance writer and content strategist specializing in commercial real estate and smart home technology. Her vast list of writing credits includes Crestron, the Home Technology Association and LoopNET.
MultihousingNews.com – National Multifamily Report – May 2021
ResidentRated.com – Average U.S. Renter Stays in a Building 27.5 Months
PRNewswire.com – Study: Apartment Renters Prefer Smart Home Amenities Over Pools
ResidentRated.com – Aside from Rent Increases or Life Changes, Why Do Renters Move?
PRNewswire.com – United States Smart Home Market Analysis and Forecasts 2020 – 2026