The Appeal and Value of Multi-Dwelling Units for Smart Home Players

In October 2019, Amazon’s Alexa fund invested in Arizona-based SmartRent. The apartment vendor gained more than financing from Amazon; SmartRent stressed that the investment would lead to the two companies developing software and hardware specifically for multi-family housing environments.

SmartRent, which had already raised US$32 million in a Series B funding round in June 2019, is one of a growing number of vendors in the U.S. market vying to deliver smart home services to Multi-Dwelling Units (MDUs) building owners and residents. Although such vendors service only a small share of the current smart home install base in the United States, there are signs it will continue its rapid growth and, with-it, smart home devices and services will have to adapt.

The last decade saw high-speed broadband providers develop specific strategies and service packages to appeal to MDUs and their residents. Now, smart home providers are increasingly realizing they must do the same. The value is there for service providers and building owners alike. MDUs are the intersection between single-family homes and commercial buildings, as they share characteristics and deliver benefits to both.

Embedding and supporting smart home services in MDUs provides building owners with a way to better manage their properties with centralized control and management of spaces and resources shared throughout the building, delivering greater security and insurance claim prevention. For residents, especially in the rental market, smart services appeal to a growing generation of residents that increasingly look for connected devices and services to simplify daily living. Ideally, systems should provide support for common areas as well as individual apartments.

A typical smart apartment offering bundles a smart lock, smart thermostat, and/or smart lights. The smart apartment platform will deliver a dashboard for building owners and management and a smart app primarily for building residents. As these systems are sold to building owners, popular smart home devices such as voice-control front ends are typically supported but are added as a Bring Your Own Device (BYOD) by residents.

Several players in the bellwether North American smart home market have emerged to deliver and support smart apartments. Alongside SmartRent there is Dwelo, Homebase IOTAS, LittleBird, PointCentral, and others. Meanwhile, existing smart home providers including Alarm.com (PointCentral), Vivint, and Comcast have also dedicated resources to work with building management companies to deliver MDU smart home services.

With a global move toward urbanization and extending the housing stock, MDUs are an increasingly valuable sector of the housing market as well as a sizable market for appropriate consumer offerings. During 2019, more than a third of new residential buildings comprised five units or more. Overall, MDUs in the United States are estimated to account for close to 27% of residences, while in other countries that figure is far higher. Even so, many of the popular smart home devices available today are unsuited to the MDU market, due in part to the longstanding focus of the smart home space. Single Dwelling Units (SDUs) have been the focus for smart home providers and device vendors, due initially to the targeting of high-income households and more recently to the favoring of home security services, especially in the U.S. market. Smart apartment offerings demand different or augmented services, applications, platform support, and devices. For example, while smart locks appeal to both SDUs and MDUs, the latter—especially when intended for building-wide deployment—requires centralized control and monitoring. The same would be true for water leak or Heating, Ventilation, and Air Conditioning (HVAC) monitoring and control. Even smart thermostats would have to support a centralized way to reset devices as residences change residents.

That said, the growing demand to support smart apartments will have a wider impact on smart devices and functionality. Over the past five years we have seen established smart home installer channel players like Crestron, Savant, and Control4 expanding their offerings to include support for more and more off-the-shelf third-party consumer smart home devices. Key to the long-term investment in the MDU market will be a similar flexibility from system providers. The management and ownership of MDUs, as well as the kinds of functionality and control each will want supported, can vary greatly. In addition, and most importantly, they will also have to determine which off-the-shelf consumer smart home devices to support and how well devices that appeal to residents also deliver the functionality, reliability, and longevity necessary to draw MDU management investment.

It is also important to consider that the MDU opportunity is not just restricted to the centralized systems and building-wide installations targeted by smart apartment providers. Individual MDU homes are also adopting smart home services to deliver the same benefits, and smart home devices and service offerings will have to increasingly consider deployment in smaller spaces with greater device density as well as the kinds of HVAC and lighting and plumbing specifics of MDUs. According to the National Multifamily Housing Council (NMHC), MDUs (structures with two or more households) account for the majority of rented accommodation in the United States. Delivering devices that can supporter rental consumers is another aspect that the smart home industry will have to accommodate with, devices that can be deployed and redeployed with ease and without damaging the home’s interior.

Amazon’s investment in SmartRent is a sign that smart home players are ready to start adapting their offerings to better target MDUs.