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Kay Properties & Investments, LLC - Building

How Technology is Changing the Landlord Tenant Relationship

There is always a push and a pull between landlords and tenants. The relationship is usually viewed as a zero-sum, any gains made by one side come at the expense of the other. Both sides have varying amounts of power depending on legal obligations and market forces and often use it to their advantage. In places like California and New York, renters have a number of rights protecting their domicile but a constraint on the supply of housing often puts them in a poor negotiating position. If we look more closely though, the relationship is actually a lot more complex than what it seems.

There are plenty of examples how both owner and tenants can mutually benefit. One is the implementation of smart devices. Security cameras can keep tenants safe and protect an owner from liability or property loss. Smart thermostats can help a renter save on their utility bills and enable landlords to control their energy spend for common areas. Smart locks can enable safe package deliveries and eliminate the hassle and expense of rekeying.

Besides these operational gains, landlords are also likely to see increased demand from smart device implementation. It seems that the perceived value of these kinds of amenities are starting to allow for a price premium, especially in younger demographics, as seen in this C&W research. Landlords are able to increase their top line revenue and their operating margins by installing smart devices.

Smart devices need to be used by both the person living with them and the organization that installs and maintains them. For this to happen a collaborative relationship needs to be cultivated rather than an adversarial one. Both the landlord and the tenant need to be able to use the information that the devices collect while keeping the more private pieces of information siloed between the two users.
ZegoOne of the ways to do this is to use a digital amenity platform like Zego. The service gives renters a useful mobile app that they can use to control the devices in their individual apartment while giving owners and managers a dashboard to streamline unit turnover, maintenance and creates other operational efficiencies. Rather than waiting for a unit to become vacant before installing the devices and building in a price increase, many of their clients have engaged in joint marketing efforts with Zego and made the platform an option available to current renters for an additional monthly fee. These fees allow for a substantial NOI increase and are being onboarded by 80-90% of the tenants in their portfolio of properties.

Further proving Zego’s proof of concept is the fact that their latest round of investments was raised from many of their larger clients. One of those investors includes Scott Everett, CEO of S2 Capital, an owner of 10,000+ apartment units throughout Texas and Florida. He had this to say about his recent investment in the company, “Zego’s value proposition is very compelling: Zego increases our net operating income and reduces our operating expenses, all while providing our residents a better experience.”

That last part jumped out at me. He recognizes that the improved experience that the service provides is an important factor. The commercial property industry is finally starting to realize that buildings can be brands. They are more than the sum of their amenities and have value above their square footage and zip code. By creating a better customer experience from creating a collaborative relationship they can build brand equity, which can ultimately increase their value.

Collaborative platforms like Zego are just the beginning. AirBnB is in the midst of partnering with Veritas properties throughout San Francisco to allow renters to use the house-sharing service under the oversight of the property managers. If these types of programs catch on it might change the way we think about how landlords and renters interact. It also might be just the catalyst that is needed to help buildings reach their destiny, as unique brands rather than just stacks of brick and mortar.

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