The good news is multifamily data has never been more plentiful and accessible.
The not-so-good news? Multifamily data has never been more plentiful and accessible.
This conundrum represents a challenge to developers looking to gain net operating income (NOI) efficiencies. The rewards are tantalizing: McKinsey, for example, concludes pairing artificial intelligence (AI) with a rent intelligence platform can help spike NOI by up to 10% or more. Others, like the three firms that follow, reveal a wide range of operational advantages.
This industry moment represents an inflection point for many: What’s the best way to apply modern rent intelligence techniques to proprietary databases that may go back decades?
Few dispute the power of AI to alter the conversation around rental pricing, property positioning, and operations. Documented use cases are compelling and persuasive. What lessons can you draw from others who have moved aggressively to supercharge margins in these areas? Multifamily firms Middleburg, Origin Investments, and Bonaventure offer their perspective:
Middleburg
“Data alone is noise. Intelligence is what you get when you’ve built the infrastructure to actually interpret and act on it,” advises Mark Franceski, Middleburg chief strategist. The vertically integrated development firm and builder recognizes identifying the signal from the noise is a key institutional priority. “Data availability has outpaced most organizations’ ability to act on it,” Franceski says. “The advantage now belongs to teams that can synthesize what they’re seeing … not just collect it.”
Speed in closing a delta between a pricing issue and occupancy directly translates to NOI. “Yet, no renter wants to be told their rent is increasing ‘because the computer said so,’” says Franceski. “No technology can replace real people making real decisions.”
The power of AI in Franceski’s view is the ability to game out retention scenarios, assess local market supply, and track macroeconomic trends. “We can stress-test like never before. It extends the range of questions we’re able to ask,” he reports.
He likens the situation to baseball. Moneyball changed how baseball performance was evaluated. “Baseball experts discovered old school stats left out a lot of the story,” admits Franceski. “Multifamily is learning lease expiration cycles, customer lifetime revenue, floor plan comparisons, and unit amenities (first floor vs. third floor, proximity to elevator, etc.) offer a much richer picture of where value is created or lost.”
Franceski worries the next three to five years, a time of expected improving industry health, will mask the real need to invest in analytic infrastructure for the next downturn. “A lot of operators are going to look smart, whether they credit rent intelligence or not. That’s concerning. Firms that reinvest in data infrastructure now gain a competitive edge later. That’s our plan. We’ll be even sharper.”
Origin Investments
Origin’s analytics platform is no crystal ball, but it comes close to being one. So much so, it allows the Chicago-based private real estate investment fund company to take aggressive positions in markets many would regard as oversupplied.
Its superpower? Its in-house and proprietary suite of machine learning models known as Multilytics. “We pull in 3 to 4 billion unique data points with Multilytics,” explains Dave Welk, managing director of acquisitions at Origin. “Our industry is bifurcating between those who fully embrace AI, like ourselves, and those that are still investigating its capabilities,” he says.
If Multilytics sounds like advanced technology, it is, integrating data science disciplines like spatial econometrics. Welk has seen how the platform pinpoints diamonds in the rough in markets like Charlotte, North Carolina, where the platform spotted a deal that offered 6% annual growth over five years. “We never would have underwritten that deal without Multilytics,” affirms Welk. “Even at that, we elected to underwrite at closer to 4%. The point is, the platform allows us to move with conviction. It also helps us steer clear of declining markets.”
For all its tech savvy, Origin also keeps one foot firmly planted in old school reporting methods as well. Quarterly reports? You bet. Webinars? “That’s one of the most popular things we do for investors,” reports Welk. “The Q&A portion presents very helpful investor feedback. All you need to do is field questions with honesty and transparency.”
Welk smiles when asked to make a three- to five-year prediction about the state of rent intelligence.
“Who would have predicted the impact of Claude three years ago?” he asks. “What I can say is the speed of analysis will continue to improve. Information is becoming democratized. The big barrier for a new real estate investment manager isn’t technology. It’s capital access at scale.”
Bonaventure
All three multifamily developers agree the speed of data analysis is amazing and upends the script on reporting efficiency.
“But here’s the thing. Grabbing data frequently is fast and easy. But making sure the data confidently reflects what you want can be tricky,” reports Bonaventure’s head of asset management, Barrett Lowell, reflecting on the continuing need for careful vetting.
Bonaventure goes to great lengths to verify data because they know the power a high-functioning rent intelligence platform represents.
“Our data foundation is our AI brain and advantage. It’s super proprietary to us,” the industry veteran explains. “With it, we’re able to control expenses and make rent decisions like never before because we now leverage data like never before.
“Internally, for example, we were able to confidently eliminate a couple of different products from our tech stack that in different times might have taken us a quarter or even a year to study and execute. In just a couple of weeks we brought down a controllable tech expense about 4% to 5%.”
The Bonaventure “brain” also comes with another high-value attribute: It doesn’t forget. It preserves an institutional memory that flashes a red light if a data analysis mistake is about to be repeated. “It’s an efficiency model as much as finding something you never thought about before,” adds Lowell.
The future shines bright for rent intelligence at Bonaventure. “You’re going to see a lot of data analysis functions go in-house,” Lowell predicts. “Yes, we’ll be able to make rent decisions much quicker. Our underwriting will be much sharper. We’ll understand the impact of new supply much faster.
“What won’t change is the need to keep our residents happy. We’re in the housing business.”