Today, every multifamily company is inching closer to being a technology company. Multifamily owners and operators have no choice but to adopt, manage and sometimes create new technologies simply to be competitive.
While the industry’s growing reliance on technology, even prior to the pandemic, stoked demand for more information on the state of technology in multifamily, research and benchmarking resources were largely nonexistent until the advent of the NMHC/One11 Advisors Apartment Industry Technology Benchmarking Report.
Released at NMHC OPTECH 2020 this past November, the survey included responses from 46 companies representing more than 1.3 million apartment units on a number of technology-related issues, including tech team staffing, reporting structure, in-house/outsourced functions and more. Here are a few of the biggest takeaways.
Size Matters in IT Leadership
The biggest takeaway from the survey was that the size of the apartment operator often influences their approach to technology. The study segmented its data into four main company types: Smaller operators with 100 to 10,000 apartment homes; medium operators with 10,000 to 25,000 homes; large operators with 25,000 to 60,000 homes; and the largest operators with more than 60,000 homes.
Each segment’s approach to IT starts with who leads the IT department. According to the survey, nearly half of smaller companies (46 percent) don’t even have an in-house head of IT, while 43 percent of medium-sized companies have a chief information officer. Nearly three quarters (72 percent) of the largest companies have a CIO.
“In the smaller companies, people have to wear a lot of hats,” said Cindy Fisher, CEO of Kettler, during the release of the survey results. “It’s an economic factor more than anything else. In the smaller companies, you’re often hiring people who are going to be able to cross over.”
While smaller companies don’t necessarily have a head of IT, they do have in-house IT teams. Those teams often report to the CEO (34 percent) or the CFO (33 percent). Medium and large apartment companies often have their IT teams reporting to the CFO (45 percent), while the head of IT at the largest apartment companies more often than not reports to the COO (57 percent).
“You’re seeing that COO role come into play because technology and process can’t be separated,” Fisher said. “With a lot of what we’re building, you have to have the right process, the right training, the right linkage into your activities. Not all CFOs want to get that deep into your front-end process. Looking at the smaller to the larger, it’s like watching the evolution of what’s happening in our industry.”
Multifamily Firms Outsource
Regardless of who leads the technology function at an organization, outsourcing of technology remains prominent in the multifamily industry. According to industry leaders, this is most likely a result of not having the in-house expertise and a desire to focus on core competencies that don’t include becoming a technology company.
“We’re not necessarily a technology company,” said Margette Hepfner, COO of residential management at Lincoln Property Co., during the same OPTECH discussion. “We’re a consumer company. We’re development. We’re operating assets. But we need technology, and we need the technology that we utilize to be spot on and not just be good. It needs to be good at all of the things that we do.”
The survey found that a large percentage of apartment companies outsourced at least some of their IT functions. About 86 percent of the largest companies, 71 percent of large companies, 89 percent of medium companies and 74 percent of smaller companies said they outsource.
“Outsourcing does give us the ability to be nimble on things that are our core competencies,” Fisher said. “Not on the things that we can outsource, like infrastructure and other pieces that quite frankly are not part of a multifamily development, investment, owner model.”
Tech Steering Committees Grow
Among the activities that should be outsourced is cybersecurity, according to Shawn Mahoney, senior vice president, CIO & chief technology officer at GID. Mahoney believes it’s important to outsource cybersecurity because it’s difficult to keep up with how quickly the discipline evolves.
While only 19 percent of companies outsource security monitoring, according to the survey, SaaS providers, such as property management systems, assume much of the security burden. But that doesn’t mean operators are completely free from security responsibilities.
“Multifamily operators have a huge amount of information on residents and prospects, and they have what they call a full information suite, which is very valuable,” Mahoney said. “There are two risks. They’re both real and they need to be planned for, but one is much more probable. And it’s really about money. Thieves are rational. They’re lazy, and they just want to get your money with the minimum amount of effort. The easiest way to do that is to send you a phishing email and ask you for money. They do it all the time. The second one is reputational risk.”
Reputational risk occurs when resident and prospect information, which multifamily operators have a lot of, is compromised. Mahoney calculated that an operator with a 10,000-unit portfolio with a 15 percent closing rate, a 50 percent renewal rate and a seven-year document retention policy has more information than the population of a medium-sized city.
READ ALSO: Tackling Challenges in Smart Tech’s New Era
Deciding whether to outsource cybersecurity or any technology-related activities, however, often isn’t simply up to someone in IT or in operations, for that matter. Many operators today have assembled innovation and technology steering committees, but there is a big discrepancy in the usage of these committees, depending on the size of the company.
According to the survey, 57 percent of the largest companies and 59 percent of the large companies have a steering committee. Just 14 percent of small companies and 22 percent of medium-sized companies have them. This is understandable, according to Hepfner, as some companies might feel overwhelmed by the number of committees they have. But the impact of technology on every area of the business is just too great to ignore.
“If you’re only going to have one committee in your company, I think the technology and innovation steering committee should be it,” said Hepfner. “It’s at the top of the list. It touches 100 percent of all that we do as a business.”
This article includes reporting from Peter Jakel, vice president of strategy for LinnellTaylor Marketing.