Multifamily's 'AI-Driven Revolution' Widening Gap Between Big, Small Landlords

Multifamily owners are among many in the business world trying to leverage artificial intelligence to cut costs and improve efficiency, but implementation of the technology is uneven, with bigger players able to incorporate AI at scale and more effectively than their smaller counterparts. 

The spotty adoption of the technology, and the advantage large firms have in terms of increased labor utilization, better operational efficiencies and better insight around asset acquisition threatens to leave behind those who lack the funding and tech-savvy to adapt. 

“I think the fast will eat the slow, but the slow will die very slowly,” said HappyCo CEO Jindou Lee, whose firm utilizes AI to assist with apartment maintenance. “Real estate adopts tech very slowly, so attrition will stretch out for the slower players.” 

There’s already a gap, according to the latest Property Management Benchmark Report from AppFolio, one of the larger AI-enabled platforms for property management. Forty-seven percent of respondents who manage more than 5,000 units use AI compared to just 28% of respondents who manage fewer than 50 units. 

“Multifamily is on the cusp of an AI-driven revolution,” JLL Senior Vice President Mendowa Martin said. “Those firms who either hesitate to adopt or don't have the resources to adopt might really find themselves unable to meet the evolving demands of both our residents and our investors.”

As the artificial intelligence landscape changes, so does its impact on the multifamily space. A recent survey from the National Apartment Association about AI usage in the industry found significant savings realized via the technology: 10% savings in payroll, a 15% increase in retention rates and a 5% improvement in resident satisfaction.  

But incorporating AI isn’t like flipping a switch. Part of the challenge, especially for smaller firms, operators and landlords without dedicated tech staff, is that AI doesn’t typically work out of the box. It requires not only researching the right solution and potentially training systems but also working out kinks, said Martin.

Many AI adopters in the space have already seen success with chatbots that help with the leasing process. In the coming year, better data analytics will help guide property operations and acquisitions as well as focus on operational efficiency and maintaining better relationships with tenants, which can aid with amenity usage or parking issues. 

JLL, Berkadia — with its AI assistant “Berkie” — and other big brokerages are investing heavily to help with underwriting, acquisition and better understanding properties, said Kevin Donnelly, executive director of the Real Estate Technology Transformation Center.

More apartment owners will adopt additional tools like enhanced predictive maintenance systems that use portfolio and building data to proactively fix issues, according to AI advocates. 

Other tech offers better ways to measure resident satisfaction, virtual tours directed via voice chat and customer service solutions from AI-driven virtual assistants. Factor in revenue management software like RealPage, and those who have made the investment into AI can pull further ahead.

“I see everybody moving beyond the chatbot and actually applying AI in their operations in other ways,” said Jason Wallis, founder and CEO of SurfaceAI, a generative AI platform for apartment owners. “It’s building the agents that actually drive the process with human oversight and human partners, but it's not relying on a human to take the next step.” 

But those advantages only come if owners and operators have the wherewithal to invest in new technology.

“With the majority of the rental housing stock in this country being with mom and pops, we're still dealing with a huge population of rental properties being managed via Excel and QuickBooks,” Donnelly said. “We have to acknowledge as an industry that we can’t have Class-A luxury properties with all the bells and whistles and AI-enabled operations while a very significant chunk of rental housing properties and its residents are completely left behind.”

The full scale of AI adoption and deployment in multifamily remains murky, with no comprehensive data gathering in place.

AppFolio’s Property Management Benchmark Report found 35% of property managers use AI in some capacity, and an NAA survey of nearly 1,000 industry professionals found that while 57% of companies use AI, just 6% of all companies use AI across multiple functions. But 46% plan on rolling out AI across different parts of the operations system within two to five years. 

Many of the big players in the AI software market for multifamily include Yardi Virtuoso, EliseAI and AppFolio, which recently released Realm-X. Some of the larger apartment users of AI technology include BH Management, which has its own proprietary in-house data dashboard; Avenue5 Residential, a third-party manager that uses AI marketing tools; and student housing firm Price Cos., which has been experimenting with deploying robotics in their buildings. 

Eventually, apartment owners will utilize AI for resident sentiment and behavior analysis, according to JLL’s Martin and Dom Beveridge, principal of multifamily consultancy 20for20. That would mean better parsing out how they talk about or discuss certain facets of building operations or how they use amenities, which would inform what developers include in future projects. When pressed for how that data would be collected, Martin referenced the kind of geotagging and tracking already used in retail real estate via firms like Placer.ai.

She also mentioned AI-enhanced security systems as something the industry was working on, which would utilize facial recognition and anomaly detection, would go through footage and look for anomalies.

“As much as we all value our privacy, we also value our safety,” she said. 

“I think it’s going to become the next Ring doorbell, everybody is going to have it,” she added.

In addition, the rollout of agents should also impact multifamily operations. Donnelly sees this technology steering calls from prospective tenants, creating more meaningful dialogue and recommending alternative apartments with an owner’s portfolio if certain desired units aren’t available. HappyCo’s Lee envisions agents automating more of the tenant intake. After a lease is signed, agents could coordinate unit clean-up, maintenance, move-ins and other tasks using AI. Others see audit agents automatically reviewing contracts and spotting errors or oversights. 

Beveridge has spoken to operators, and he estimates that 10% of those already in the AI market are starting to look at investing in training models utilizing their own data. He sees this leading to more opportunities to automate, especially back-office work.

“People will just automate more and more admin staff,” he said. “The definition of what we think of as admin will probably grow as more and more stuff gets sort of sucked into that.”