Smart access technology can improve multifamily property performance in numerous different ways. Revenue (as we explained earlier in this blog series) is an obvious example as the convenience of keyless entry is a critical enabler to the tech-driven living experiences that renters increasingly demand. On that basis, it makes sense that renters would pay more to live in buildings offering smart access control.
Rent increases, however, are not the end of the story of how smart building technologies can impact performance: far from it. In this post, we will begin to understand these technologies' potential impact on the cost side of the ledger, and more broadly, upon the efficiency of multifamily operations.
Before we go too much further, we should consider the nature of costs in multifamily operations. Like most businesses, multifamily properties incur a mix of variable and fixed costs. Variable costs move up or down according to sales volumes, while fixed costs are those that stay the same, irrespective of what you sell.
In multifamily operations, this distinction is critical, as the highest cost items (e.g., salaries, property tax) are fixed costs. To understand why this is important, consider a function like leasing. Companies can usually dial up or down marketing expenses based on how many units they need to fill. On the other hand, leasing agents are full-time equivalents (FTEs) who have to be paid irrespective of how much selling activity we need them to do.
It is important to understand which type of cost is affected by the technology. More efficient use of a variable cost item usually translates directly into dollars saved, which is simple to understand. "Banking" the benefits of more efficient use of fixed cost items is a little more complicated, as we illustrate in the examples below.
One obvious cost-saving for companies moving from keyed entry to smart access is the cost of keys. This is a classic example of a variable cost: the more times a property leases a unit, the more times the operator must pay to replace its locks. Below is a simple example of the annual keying costs for a typical, 300-unit multifamily property with a 50% average turnover.
While relatively small compared to the other financial benefits of smart access technology, keying costs are far from negligible, with almost $7,000 per year wasted on replacing keys.
There are various ways to think about operating efficiencies. In the example below, we use the typical staffing model for a 300-unit multifamily property, with three FTEs overseeing property management and leasing and three covering maintenance.
The six team members are full-time associates, which means that the community must pay their salaries, regardless of how efficiently they work. But that is not to say that the considerable time saved by getting rid of keys does not improve property performance. As the example below shows, by removing the time that teams currently waste handling building and unit access (typically an hour a day for each team member, based on our experience), the implementation of smart access puts hours back into the site team's day.
The community in this example wastes a lot of time and money handling keys. While the operator can't take the roughly 30 hours per week or $45,000 per year to the bank, they should seek a better return on that time and money.
Fifteen additional hours of property management time spent following up on leads or conducting proactive renewal calls would surely improve revenue performance. Fifteen additional hours of maintenance tickets each week could improve service, enable more proactive maintenance work and, in some cases, reduce the direct cost of having to hire external maintenance labor during peak periods.
As we have discussed throughout this series and in our recent whitepaper, the gains that accrue from smart access are unusually broad compared with other technologies. They range from rent increases to improved customer experience to the kinds of efficiency gain described above. But for some properties in some portfolio types, greater financial benefits are often available, as the technology can enable more radical change to the property staffing model.
The potential impact of smart access upon staffing models has important implications for operational efficiency and employee engagement: a subject to which we will return in the next post in this series.
Smart building technology delivers a wide range of financial benefits for multifamily owners and operators. From cost efficiencies to improved customer experience, a strategic investment in the right technology solution can positively impact both the cost and revenue sides of the ledger.
There are several different ways to estimate how smart communities achieve ROI. Learn more about the four most popular approaches in our easy-to-read guides.
Explore how effectively highlighting your community's smart home technology can help attract prospective renters.
A strategic investment in smart access technology helps save your site team's time and empowers them to focus on more value-adding activities.