When residents pull up to AVE Florham Park, a 256-unit luxury mid-rise property in Morris County, N.J., the door to the parking garage automatically opens for them, without the need to press a button or search for an access fob.
“You’re not fumbling in your purse to find the garage remote,” says Lea Anne Welsh, COO of Philadelphia-based Korman Communities, an operator of 4,700 units in five U.S. markets as well as London. Instead, AVE Florham Park’s garage is programmed to read each resident’s E-ZPass RFID transponder, the electronic toll system used up and down the East Coast, to identify them and give them access to their building, without the need to carry another device or card. “You just pull right up, the garage door opens, and you get into your home a lot easier.”
Inside AVE Florham Park’s select premium units, those same residents can enjoy automated Lutron lighting, window shades, and temperature controls as well as smart locks on their doors to create a seamless entrance and transition when they return home. “People want security, energy efficiency, and convenience,” says Welsh. “That’s what they’ll pay for.”
In fact, Korman collects an extra $150 in monthly rent for those premium units. The firm’s focus on smart tech amenities, and the premiums residents will pay for them, illustrates how operators can profit from select offerings as they try to keep up in the tech arms race that is the hallmark of today’s apartment environment. Operators who have figured out what residents will pay for say you need to provide a basic level of technology just to get in the game and that any premium amenities should be captured in a unit’s rent rather than pricing out each item individually.
“We don’t actually say you’re paying $150 extra for this,” says Welsh. “We just say this is a premium, two-bedroom apartment overlooking the park, and this is the rent. Because that’s where returns come from: rent.”
Quick Payback
Mike Pestronk, CEO of Philadelphia-based Post Brothers, which operates 3,700 units, recommends a similar approach. “We don’t go after a nickel-and-dime strategy,” he says. “We just provide it as part of the base rent.”
At The Atlantic, a 268-unit community in Philadelphia’s Center City, that rent—ranging from $2,095 for a studio to $7,725 for a three-bedroom—includes tech goodies like an iPad installed on the wall of each unit to manage lighting, the Atmos Home automated environmental control system, and Lutron-powered window coverings. While all of that is built into the rent, Pestronk estimates the technology package, which costs $3,000 to install, helps him command an extra $200 to $300 per month, for a 10- to 15-month payback.
“Usually, when you put in a capital investment, you’re looking for at least a 10% return,” Pestronk says. “But the returns on putting in this technology are certainly better than that.”
The Importance of Open Access
While mounting an iPad in each unit gives Pestronk a physical selling point for the system, he says it’s just as important to make sure all the tech provided can also be controlled from residents’ own devices.
“What people really want are things that work with what they already have,” says Pestronk, who notes that his residents can connect to the baby monitor cameras in his properties’ playrooms through their phones as well. “Everybody has either an iPhone or an Android so they want the tech in their apartments and buildings to be nonproprietary so it integrates with what they already own and is easy to use.”
Not Just a Luxury Approach
It’s not just at the luxury end of the market where operators can charge extra for tech. According to Lucas Haldeman, CEO of Scottsdale, Ariz.–based SmartRent, which helps operators automate apartments, smart home tech has a wide-ranging appeal for residents.
“In every market and every class of product, we have seen the ability to charge more money for smart apartments,” Haldeman says. “We are seeing owners push rents $25 to $40 per month for a base system of smart locks, thermostats, and leak sensors, and $100 to $300 for more robust offerings like lights, shades, and voice control.”
Options, Options, Options
Giving people a choice of tech is also critical at today’s properties. Operators increasingly stress the importance of not locking in a building’s residents to a single internet provider or doing “bulk” deals that force residents onto a given platform, even if service providers try to sweeten the pot up front by installing infrastructure at a property.
“Residents have come to expect a choice of which technology service providers they can use,” says Salil Sheth, senior vice president, residential operations at Jersey City, N.J.–based Roseland Residential Trust, which operates 7,262 units and focuses on providing smart door locks and thermostats as well as USB charging outlets in its units. “We are pivoting away from bulk deals on technology services in order to offer more variety. Today, the technology changes so rapidly, the bulk deals can result in obsolete technology in multiple buildings.”
Sheth stresses that while residents may be willing to pay an amenity fee for over-the-top tech, increasingly it’s just an expectation in today’s buildings. “It’s implied today that a premium building will offer great connectivity at high speeds,” Sheth says. “In our markets, that’s just the expectation and not something that residents would be willing to pay extra for, as they’re already paying premium market rents.”
In other words, when it comes to providing technology that residents will pay for, increased rents are where the returns are.
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