Smart MDU Players Are Winning Investors and Expanding Their Potential

In November, smart apartment specialist Dwelo was acquired by Level Home. Dwelo had been among a handful of companies that spearheaded the push to offer a smart home platform focused on multifamily properties. In contrast, Level Home didn’t launch its first product, a smart lock, until late 2019 (“Level Home, Walmart, and Making Smart Home Connectivity Invisible,” IN-5672). The trajectory of both companies and their coming together reflects the growing investment and focus on the ability to manage multiple smart homes for a single customer. The push is across the market, encompassing new builds and retrofits, rentals, and homeowner residences.

In what is essentially a vertical business integration, Level Home says that its locks will now be supported across the Dwelo software-as-a-service-based smart property management platform. Dwelo already supports a range of smart locks from Yale, Assa Abloy, dormakaba, and Kwikset. Dwelo has long focused on the retrofit market, and the Level locks now feature a smart lock mechanism designed to be retrofitted and embedded inside the door and not at the handle.

Perhaps more importantly, what Level Home brings to Dwelo—besides its retrofit approach—is the deep pockets of its investors. The newly combined company raised US$100 million investment as a merged entity in a round of investment led by Cox Communications and included previous Level Home investors Walmart and Lennar.

For its part, Dwelo recently partnered with smart home provider and innovator Vivint in a deal that saw Dwelo take over Vivint’s multifamily offering subscribers as the company exited the multifamily business in September 2021. At the end of last year, Vivint’s offering was supporting over 32,000 units while, prior to its deal with Vivint, Dwelo had been focused solely on serving the multifamily industry and had a portfolio of 100 customers and 65,000 units with hundreds of thousands of smart home devices.

Dwelo’s acquisition by Level Home follows rival SmartRent’s own US$2.2 billion merger with a startup firm created by venture capital company Fifth Wall. Starwood Capital Group, Lennar, Invitation Homes, and the Blackstone Group are all investors in the new startup. In 2019 SmartRent had previously received an investment from Amazon’s Alexa Fund. As of June 30, SmartRent had over 200,000 units on its platform.

The smart home market is built on the single-unit homes market. Much of this can be traced back to the intersection of smart homes with home security; most industries similarly focus on single-family homes. This is also a reflection of the greater complexity involved in bringing smart technology into new and existing multifamily properties.

While these offerings can leverage the same smart home devices that are already pushing into single unit homes, at the platform and the customer level the market is more complicated. For example, the customer is typically a building owner or management company rather than the consumer directly. These clients will have to be convinced that investing in smart tech throughout a building not only will improve operational efficiency but also will appeal to individual households enough to typically warrant a monthly fee for smart services. The market has to serve three sets of stakeholders: building owners, staff, and residents. For example, Vivint indicated that the complexity of the business-to-business-to-consumer model is one reason it handed over its operation to Dwelo and is now focusing on its traditional business-to-consumer offerings.

Usually, players like Dwelo offer residents smart home capabilities that include access management, thermostat control, leak detection, lighting control, and voice integration throughout its cloud platform and its end-user mobile app. For property and building managers, these capabilities can include property management software integrations, vacant unit automations, guest access modules, and dedicated support.

Nevertheless, the past half decade or so has seen a broad array of vendors beginning to capitalize on the opportunity for smart homes to deliver value to the Multidwelling Unit (MDU) market. (The market potential has been reviewed in ABI Research’s “The Appeal and Value of Multi-Dwelling Units for Smart Home Players,” IN-5763, from 2020.) Smart home platform players have also reacted to the opportunity—for example, Alarm.com has its PointCentral unit, and Tuya Smart has its dedicated Tuya Apartment offering; in late 2020, home security giant ADT launched its own Multifamily product.

Despite a more complex value chain, the smart apartment market offers significant potential. Smart management for MDUs supports key transitions taking place in the wider real estate market. The U.S. market for one has seen significant shifts that support smart apartment management:

• Growing demand and delivery of new MDU construction, and the ability to install smart home capabilities appeals to buyers and helps to distinguish new apartments from old.
• The housing market has also seen a shift toward build-to-rent developments, and players such as Lennar are tying this to the integration of smart homes.
• Environmental demands are pushing for greater efficiency in managing energy demand within the home, and connectivity in HVAC systems are key to enabling residents, building managers and utilities to do that.
• Increasingly, institutional investors have turned to the residential market to build up property portfolios. These may be across single homes as well as MDUs, but the ability to manage these disparate portfolios in a cost-efficient manner will increasingly fall to multi-home management platforms and capabilities.
• The ability to remotely manage property viewings has become a key feature during the COVID-19 pandemic and has proven to be a valuable way to provide more flexible services to customers. In October, ADT announced a national partnership with Redfin, a technology-powered real estate company, to increase security and to allow for greater convenience in touring and showing homes.

In addition, there are changes within available smart home technology that will further drive the MDU market over the next few years. Most importantly, the planned Matter specification will deliver a standard that should guarantee that all smart home equipment can be connected together into a smart home system and be managed by an array of compliant platform players. This will help ensure that investments into smart device installation in rental homes will be flexible enough to integrate with the services residents want and are already familiar with. It will also expand the potential for competition in the smart MDU space.

Level Home’s combination with Dwelo speaks to the investment and market opportunity for smart MDU management more than it does to the state of the smart lock vertical. This investment and others in the space, highlight the value and potential for the wider market. ABI Research expects to see significant investment and development in this space and is preparing a detailed analysis of the market in a report set for publication in 2022.