Arize, a smart apartment technology company that partners with multifamily properties to offer smart ecosystem services for residents, takes a deep dive into the multifamily industry. It researches on what drives growth in the sector and how property managers and owners cope with the competition against surging rates.
“During a recession-like economy, people move down from luxury apartments or downsize from homes to apartments and with home prices still at an all-time high, it’s pricing out many home buyers, which is, in turn, creating new renters,” says Sylvia Crawford, the senior director of marketing strategy and planning at the company.
According to its website, Arize offers residents services like its Smart Hub, a remote apartment access, leak detection and resident mobile application. In March, it also launched IoT devices, including the Arize Smart Thermostat, Smoke Listener and upgrades to its existing products.
FinLedger spoke with Kyle Finney, the business development manager at Arize about amenities as a service in smart apartments, smart devices offering risk mitigation and driving NOI and what these mean for the multifamily industry today.
Finney says with the Gen Z demographic entering the rental market, smart technology is on the rise. IoT surrounds us, especially when we speak to turn on the television or want to listen to music. More tenants are willing to pay over $50 extra a month to avail services in smart apartments, and more people need parking reservations in cities for just a night of hosting.
Q: Could you tell us a little bit about the concept behind Arize’s inception?
A: Arize is really the kind of brainchild of some of our sister companies that have been in the smart home space for many years. Arize itself is an owner-centric company that partners with property owners and operators to identify and deliver turnkey solutions that meet their everyday needs and challenges.
Within that our mission is really to provide the best automated experience through custom turnkey solutions that immediately enhance our client’s property value and also help to streamline operations, without forcing them to pay for devices they don’t need. And a lot of times we do see when we’re working with clients that already have a smart system in place, they either have a bunch of devices that they didn’t really want to begin with, or they don’t really need and they’re paying for.
To successfully deliver on our mission, property owners can self-select and build product bundles that work together in a cohesive ecosystem that helps respond to different scenarios and community living situations.
Q: What are some of the recent multifamily housing trends you have observed in a post pandemic setting?
A: 91% of renters believe that home intelligence is a necessity at this point. Especially coming out of the pandemic, a lot of people working from home and whatnot. But the apartment landscape has really experienced numerous changes over the past couple of years. That includes increased IoT spending.
Globally it’s in the billions and the adoption of the amenity as a service model, that model has really become popular in the smart apartment landscape.
That comes down to having devices and products that function as-a-service. So things like having a smart thermostat in-unit to help control the temperature in the home allows property managers to really generate ancillary income, while also adding an additional level of convenience to their residence.
Q: How is the current economy impacting the multifamily rental space industry?
A: Both renters and owners are aware that rental rates are just increasing at an astronomical rate. It’s important to understand where that comes from with the fed rate hikes and whatnot, cost of capital for owners is becoming much higher than it has been.
There’s not only that, but you have rising construction costs, which has been a trend for many years, and labor shortages. You have to pay more to retain people or hire people to do the same job that they’re paying less for in the past. All those factor in and so when an owner is thinking, “My NOI is going to be X per month, based on what I’m charging for rent,” and they have to set their rents accordingly.
So oftentimes, when you’re seeing these higher rental rates, there’s always a reason behind it. In terms of smart apartment tech, we’re seeing it’s no longer such a novelty, it’s now becoming just a cost of doing business.
70% of property owners and managers believe that smart tech devices are profitable to invest in. We like to show that not only are smart home devices wanted and the demand is not always not only being created by residents, but they’re able to see ROI by implementing it.
Q: How are amenities as a service changing the rental industry?
A: In terms of amenity as a service, a lot of times it ties in with owners wanting to maximize their profits. Over half the property owners that have been surveyed would agree that maximizing profits is their top concern.
Proptech allows managers and owners to maintain productivity with less employees, which obviously has a positive impact on payroll expenses. So you see many large and small community owners leveraging amenities as a service to boost NOI.
It might be they’re rolling various amenities into one amenity fee that they show as a line item on their lease, or maybe they break it out in charges for smart apartment tech as a separate line item. But either way, they’re charging modest fees for the added convenience of a system that it can offer to the residents.
It’s bringing them a new stream of revenue. They put out a study that said that residents will pay an average of $38 a month for smart apartment tech in their apartments. But overall, residents are willing to pay upwards of $53 extra a month, depending on the number of devices that are actually in that home.
As far as class types, using this amenity, as-a-service model, and implementing smart technology within that doesn’t have to be for just brand new buildings. I’ve worked with a lot of property owners and managers who have older properties, properties that are already built. So when it comes to doing retrofits, you don’t really have to wait for a heavy rehab in order to implement these kinds of devices. That’s because they’re plug-and-play.
Q: What other smart amenities are on the rise?
A: It depends on the community where it’s located. For example, communities that are in a downtown metropolitan area, where a lot of the buildings are more vertical, as opposed to horizontal, there’s not as much parking. If you look in Southern California, that ratio of parking spaces to resident cars, are a lot of times very lopsided.
Being able to offer a parking reservation app, so if you have a guest coming over for a couple hours or maybe a couple of days, you’re able to reserve that space to ensure that they have parking.
The owner or manager might charge an upfront fee to use that, or they might charge X amount of dollars to reserve a space for five hours, or a couple of days. Some others I’ve seen are offering solar or managed Wi-Fi.
Q: What is the role of smart devices in the industry today?
A: A lot of the demand is driven by renters to have them. When you start looking at the Gen Z population, they’re getting into the rental industry more and more. In-unit smart tech devices, and the value for owners of being able to increase the rent on these communities, everyone’s kind of leaning into smart tech to satisfy those needs.
Arize provides a simple and smart, innovative solution to a lot of common multifamily problems. It seamlessly forms connections that enrich people’s lives.
Q: Based on your observations, could you elaborate on some of the proptech tools that are untapped, but have the potential to become indispensable in the future?
A: I just mentioned parking apps. As a lot of bigger cities are either redeveloping or running out of land in places like Phoenix, Austin, Denver, San Diego, Los Angeles. I think reserved parking is going to be a bigger deal.
With all the immigration happening to a lot of metropolitan areas like Phoenix, Denver and Austin that are filling up these apartments as occupancy rises. It’s just a constant battle. I’ve talked to friends that invite us over, we go to park and we don’t have anywhere to park.
When the time comes to renew that lease that can be a deterrent, like I’d like to host people, but it’s impossible for anybody to find parking when they come here.
Different sensors from a risk mitigation standpoint, and this is just a personal opinion. But I talk to a lot of property managers who might be spending $20 to $30 thousand a year on water damage in units. That’s something that’s put on the budget and allocated year over year over year.
If you can implement a system for $10,000, that’s going to help you mitigate those. So you can find that leak when it first happens, take care of it and not have to hire a restoration company to come in and break down drywall and put in fans.
At the end of the day, would you rather spend 10 grand up front, or maybe even 15, than have to go through not only the higher expense of paying for contractors, but also the headache of displacing tenants and having construction done on your property.
Q: How does IoT and AI fit into the multifamily landscape?
A: When it comes to IoT, there are a lot of IoT devices and ecosystems that people may not be aware of, are IoT. If you become accustomed to walking into your home or your apartment and saying, “Alexa, turn the lights on” or being able to change the channel on your TV just by speaking, a lot of those kinds of IoT devices have really accelerated the demand for smart tech.
It’s here and multifamily residents want it, so smart tech is no longer a luxury amenity, it’s the cost of doing business. And we see this as evidence where more and more developers are factoring this technology into construction plans for their multifamily communities throughout the nation.
Arize’s smart tech ecosystem is here to help attract and retain residents to those communities. I think that it’s a win-win for both the residents and the owners and operators. And, that goes for senior citizen communities all the way down to the Gen Z demographic getting into the marketplace. It’s a differentiator against competitors.
Q: What are some of the upcoming plans for Arize that we should keep a lookout for?
A: Iterating on current devices and then as far as new devices, we’re constantly doing market research and looking into what’s going to be that next thing.
And maybe we want to be ahead of the market in some of those. But if anybody’s wanting to learn more about Arize, we will be at Optech in November. We’ll have a good setup. I suggest coming to say hello, if anybody will be there, but also just heading to the website, submitting a contact form or following Arize on LinkedIn or reaching out to me.
In other recent proptech news, Halstatt Real Estate Partners, a women-owned real estate private equity firm, announced capital commitment to Stillwell Jerome, a project launched by multifamily property management and investment firm Coastal Ridge Real Estate. PURE Property Management also announced its 50th acquisition since its launch in October 2020, including 20 completed transactions within the first half of 2022.