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Apartment Owner Survey: Constructing the Right Technology BalanceOwners, managers pinch pennies on services such as software and high-speed lines
Apartment owners and managers are embracing technology that promises to help them attract and retain tenants, such as high-speed wiring for new and existing apartments. But they are moving slowly to test out new online services and are taking a penny-pincher approach when it comes to new property management software. The level of technological savvy among owners and managers varies widely, according to a survey by Apartment Finance Today magazine. The survey found that only the very largest real estate firms are planning to spend large sums of money on technology. Smaller firms, which make up the vast majority of the apartment industry, are still skeptical of new technology, and many of them don’t yet have Web sites or high-speed access. Large percentages indicated they did not use any online real estate services and did not plan to try them. Many firms showed no inclination to spend the money that would be needed to set up their staff with new property management software that takes full advantage of the Internet. Indeed, many firms are making do with off-the-shelf business software and are not even using software designed specifically for property management. Survey characteristicsAbout 140 real estate companies involved in apartments responded to the survey. Before analyzing the results, AFT eliminated responses from firms that had less than $500,000 in annual revenue or did not own or manage any properties. This reduced the number of firms in the sample to 101. Among these 101 firms, the median level of spending on computer hardware had been consistent and was expected to remain steady. Counting only the 53 companies that gave spending estimates for each year, the median level of spending on hardware was expected to be $10,000. Similar consistency was found in spending for software of all kinds. Among the 56 firms that gave spending estimates for three years, the median amount spent on all kinds of software was $4,000 in 1999. The median figure for expected spending in 2000 was $5,000. For 2001, the median was also $5,000. The preceding figures refer to all kinds of software purchases. Spending on property management software is even lower. Among firms that had annual revenue over $500,000 and gave answers for all three years, the median level of spending for property management software was $2,000 in 1999. For the same group, median projected spending was $2,000 for 2000 and only $1,750 for 2001, When firms that managed five or few properties were excluded, the median projected spending for 2001 was $2,500. What property management software is most popular?It was a tie between two software makers. Among firms that managed at least one property, about 16% said they use software from Yardi Systems, Inc., and about 15% said they use applications by RealPage, Inc. Just less than 20% said they do not use any software for management or did not answer. About 8% said they used general business software, such as Microsoft Excel or Quick Books. Other software products accounted for the balance of the responses. When it comes to the Internet, new online real estate services have a problem; only a relative handful of apartment industry employees have regular Internet access. Among all respondents with more than $500,000 in revenue, the median number of employees was 26. However, the median number of employees with Internet access was six. Among the 91 firms where at least one employee has Internet access, about 21% were using dial-up modems, which may be too slow to be practical for online real estate transactions. Thirty-six percent said they had digital subscriber lines (DSL) or other high-speed Internet access. Forty-three percent of the respondents indicated that one or more employees have Internet access but did not indicate what type of Internet connection they used. Only about 54% of the respondents said their firms have Web sites, although the percentage with Web sites increases as revenue rises. Among firms with revenue of $1 million to $5 million, about 50% had Web sites. Among those with revenue over $5 million, 62% have Web sites. New Internet services trying to help apartment owners obtain mortgage loans have yet to win many converts, according to the survey. Of the 70 respondents that have revenue over $500,000 per year and own more than five properties, only 11% say they have used an Internet service to find a loan. Waiting for next generation softwareAccording to a Real Estate Information Technology Survey conducted by KPMG Consulting, LLC, and the National Association of Real Estate Investment Trusts (NAREIT), many real estate technology users are still waiting for a new generation of software to fully take advantage of the Internet. NAREIT’s survey matches the findings of AFT survey, revealing that about half of the respondents have Web sites, but only a small percentage are taking full advantage of the Internet to buy, sell or lease a property; find an equity investment or mortgage loan; or to procure services. The NAREIT survey examined the business priorities of information technology, including applications, organization and expenditures. The results also include predictions for the future. The results of the NAREIT survey indicate the dominance of five property accounting and management applications: AMSI, CTI, J. D. Edwards, MRI and Yardi. While each of these applications is exclusively designed for the real estate industry (with the exception of J.D. Edwards), users indicate a strong need for expanded functionality, particularly in the area of Internet-related capabilities. “The gap between technology needs and the available package solutions suggests that custom solutions may be required to take full advantage of the Internet in the near-term,” said the report. Also, medium and large REITs are more likely to view Information Technology as a strategic function, according to the survey results. Close to 90% of these REITs have a chief information officer or equivalent person dedicated to technology. Increasingly, this officer is likely to report to the CEO. A rise in loan application servicesWhile Internet-related software technologies still have yet to take off, there is a strong interest in loan application services. Among the same subset of respondents, 46% said they had not used such services but planned to try them. Forty-three percent said they don’t use the services and have no plans to do so. The Internet was far more popular for buying and selling properties. Of the 70 respondents that have revenue over $500,000 per year and own more than five properties, 26% regularly use such services, and more than half of them could actually name the service they use. Four respondents named Loop Net, and two named Property First. Biggest success story: online leasingThe biggest success story is online apartment leasing. Of the 67 respondents that have revenue over $500,000 per year and manage more than five properties, 28% regularly use online leasing services. However, only 9% could name the service they use, suggesting a lack of loyalty to any one service provider. Among the service providers named were Apartments.com and homestore.com. Of those 67 respondents, 30% have not used online leasing but plan to try it soon. About 42% said they don’t use the services and have no plan to try them. Another clear winner with apartment owners is the provision of telecom, Internet and television services to tenants. Among owners that have revenue over $500,000 per year and own more than five properties, the percentages who plan to retrofit at least one property to provide those services is as follows:
Among the respondents who planned to retrofit one or more properties, the median number of properties to be retrofit for Internet service was 7.5. For telephone and television service, it was 13. Among firms that identified themselves as developers, these kind of services appear to be a routine part of new project planning. Majorities ranging from 70% to 83% said they plan to install Internet, telephone and television services in some or all of their new projects. |
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