As multifamily housing continues to shift from high-touch to high-tech, let’s explore the history of high-touch and its ongoing shift to high-tech.
For nearly a century, the secret to generating market rents in multifamily real estate was by offering high-touch amenities. These included 24/7 concierge and on-premises services such as house cleaning and maintenance, often requiring staff and investment. However, thanks to new technologies, owners, developers, and property managers can now merge high-tech with high-touch to provide their residents with a world-class living experience — without the need for a large workforce or capital investment.
From the first luxury apartment of the late 1800s up until the LEED movement of the late 1900s, real estate professionals consistently offered high-touch amenities as a way to differentiate their property and charge higher rent. The LEED movement’s ability, however, to demonstrate to developers, owners, and managers that technology could be used to reduce operating costs set the stage for an even bigger idea: the smart building. Today, buildings across America are being advertised as smart, self-sufficient, and fully responsive to all of their residents’ needs. The coming decade will continue to bring innovations that will make multifamily properties more desirable, efficient, and profitable.
How we got here, what caused this shift, and where we will be 10 years from now are questions this series will explore. The goal is to guide and inform developers, owners, and property managers through this transition, ensuring they are able to attract and retain residents today while remaining competitive tomorrow.
Let’s take a closer look at how it all started.
The history of high-touch in multifamily
New York City, 1870: The first upscale apartment building is constructed. Although multiple-unit tenements were being built in the 1830s, these were not considered upscale because they did not include a private lavatory. Ever since Richard Morris Hunt designed the first luxury building, the multifamily world has been designing and building apartments with an ever-increasing number of amenities in order to differentiate themselves, attract new residents, and, hopefully, charge higher rent. Often, these amenities revolve around the belief that creating a high-touch experience is imperative to charging market rent and generating a high return on investment.
“Apartment amenities that renters want most aren’t flashy. Renters tend to be practical and focus on amenities that ensure their security, help add to day-to-day conveniences, and make their commutes to work easier.” — “The Boring Amenity that Renters Say They Really Want,” Apartment Guide, Oct. 17, 2018.
While high-touch, in the form of superior customer service, continues to remain important — 68% of renters leave because of poor customer service — the way residents engage with high-touch amenities has changed.
Nearly 100 years after Hunt designed the first luxury multifamily development in the U.S., innovative developers began experimenting with new types of energy-efficient building materials. Their developments incorporated items such as energy-efficient appliances, insulating foams, and UV reflective windows — all intended to reduce the energy consumption of a building and in turn lower the operating costs for future owners.
As owners and managers realized the long-term savings associated with energy-efficient buildings, they began demanding this type of construction. Soon, a new standard in development was born, and by 1993, the Leadership in Energy and Environmental Design (LEED) was formalized. The success of LEED demonstrated to the real estate community that innovations in the built world meant better efficiency and lower operating costs. This set the stage for more disruption and, ultimately, the smart building.
The next post in this series will explore how the most popular electronic device in history, the smartphone, paved the way for the smart building.