Smart Home’s New Frontier: Apartments
By: Merritt Hummer
Tags: Real Estate Tech, Venture Capital, Real Estate, IoT, Smart Home

Announcing Our Investment In SmartRent

In just under a decade, smart homes have gone from experimental to mainstream. In 2009, Nest had not yet launched its signature smart thermostat, but by 2018, half of U.S. consumers reported owning at least one smart device in their home. For its part, Nest had sold over 11 million thermostats by that point, reaching roughly one in 10 U.S. households.

With the smart home movement well underway, the benefits of such devices are well known to consumers — you can turn off air conditioning, answer your door, and watch your baby sleep from the comfort of your office. Designed with the modern homeowner in mind, the earliest generation of smart devices were well-marketed consumer brands. Consumers responded enthusiastically, propelling brands like Ring and SimpliSafe to billion dollar valuations.

Yet the smart home industry has long ignored a massive segment of the market: apartment dwellers. Over 70 million Americans reside in apartments, the vast majority of whom rent rather than own their units. (See table below for a breakdown of American households by property type.) The distinction is important because the property owner, not the renter, typically decides whether to install smart devices. And until very recently, multifamily property owners had shown little desire to do so. That is starting to change.

Today, we are thrilled to announce that we are leading a $32 million investment in SmartRent alongside RET Ventures, a fund backed by several premier multifamily owners. Launched last year in Phoenix, SmartRent quickly identified a gap in the market: a smart home automation platform built to serve the unique needs of the multifamily industry.

SmartRent sells a wide range of smart devices and integrates them with proprietary software designed for both property managers and tenants. Founder and CEO Lucas Haldeman spent years in the real estate industry prior to founding SmartRent, most recently as CTO of Colony Starwood Homes (NYSE: SFR) where he designed Colony’s smart home strategy.

SmartRent’s remarkable traction is a testament to the latent demand for smart home technology by multifamily owners.

Why now?

A confluence of factors has led to multifamily property owners’ recent interest in smart home technology. Consumer expectations play a role; smartphone wielding millennials expect their appliances to be as connected as they are. In fact, surveyed millennials expressed a willingness to pay a 20 percent premium for apartments equipped with smart home devices. The incremental rental income is appealing to multifamily property owners.

But smart apartments are about more than delighting the tenant.

For multifamily owners, the real value is the operational efficiency achieved through the devices.

Take the smart lock. Temporary passcodes enable prospective tenants to take self-guided tours. When a tenant moves out, the lock is simply reset with a few clicks rather than replaced. “Losing keys” will soon be an anachronism. Thermostats help reduce maintenance costs, too. Property managers can monitor temperature in vacant units and avoid overpaying for utilities. Smart sensors detect water leaks in real time and automatically generate maintenance orders. And so on.

Today, property management is characterized by manual, repeatable tasks and checklists. In the future, property management will revolve around elevating the tenant experience. Just as the washing machine and dishwasher increased productivity at home a century ago, so too will smart devices today. By freeing property managers’ time, their effort will be channeled toward transforming and amenitizing the tenant experience. Tenants will benefit from more attentive property managers and enhanced connectedness to their neighbors. Smart devices will lead to a smorgasbord of applications that we can’t even anticipate today.

We are excited to partner with SmartRent as they embark on a new chapter for the smart home industry.