Proptech is the new key to residential success

Institutional investors are increasingly harnessing technology as they become more involved in residential real estate.

Investors have become big players in the residential market. ATTOM Data Solutions reports that in some US cities they now represent nearly 20 percent of the market. Residential is different to other commercial real estate assets, and technology may help bridge the understanding gap.

Sadie Malim, head of special projects at manager Moorfield Group, argues for bridging that gap by leveraging “technology and proven operational models to rationalize otherwise very time-consuming, detailed workstreams… and manage what are fundamentally granular assets.”

This granularity can involve thousands of geographically dispersed individual homes. Data and technology can make sense of that.

Avinav Nigam, co-founder at IMMO, a pan-European tech-enabled residential investment platform, says: “We use technology to sift through…to the top 1-2 percent most suitable properties for investment, looking at factors such as asset liquidity, population growth, employment, pricing variances, transport that accurately predict rental demand and total return.”

The crucial question, according to Michael Steingold, director of private markets at Russell Investments, is what will catalyze broader investment in technology in the residential space. “The clearest economic case for the upfront cost is where there are buyer/tenant preferences which an investor is seeking to cater for from a marketing point of view,” he says. 

Artificial intelligence can play a significant role. Anil Erdem, managing director at BentallGreenOak, has a specific focus on proptech. He says AI “has proved particularly important when marketing our properties, allowing prospective new residents to interact at their convenience 24/7 with an online salesperson who is nearly human.”

Cost savings from residential technologies that improve energy or water efficiency generally benefit the homebuyer or tenant rather than the landlord or developer, so the decision to use such tech has been viewed through return on capital from the demand side. Until recently, energy efficiency technology seemed almost “optional.”

Changing focus on energy

This could change dramatically as legislation comes into force with increasingly stringent regulation of emissions. As Steingold notes: “In that scenario we will have a non-economic driver where installation of sensors and monitoring will become required. Capturing that data will become more valuable over time to comply with regulation.”

The residential sector has a major role to play in the reduction of greenhouse gas (GHG) emissions. A study published in PNAS which examined 93 million homes in the US concluded that residential energy use accounts for roughly 20 percent of GHG emissions.

In Europe, the main regulatory framework for improving the energy performance of residential property is the EU taxonomy. This rules that all buildings must have an EPC from 2030 that has an energy rating above F, and above D by 2033.

“[These are] times when the energy performance of an asset is becoming more and more crucial” 

Benita Schneider,

Some countries have introduced their own more stringent regulations. For example, in France from January 2025, no G-rated residential property can be rented, and from January 2028 no E-rated property. The UK has even more stringent regulations.

The US generally has nothing like these punitive measures, although there are exceptions, such as New York City and some Californian cities. “NYC is introducing energy regulations in 2025, and we have ensured that all of our buildings are compliant ahead of that,” says Melanie Domres, managing director, residential, at BentallGreenOak.

Other help is coming. “The Inflation Reduction Act can fundamentally change these economics,” says Lindsay Luger, co-founder and partner at Energy Impact Partners. “By one estimate, the IRA allocates more than $370 billion to clean energy and energy efficiency solutions for buildings.”

These funds include up to $14,000 in discounts for income-qualified households installing electric appliances – and a 30 percent tax credit for homeowners installing rooftop solar and battery storage solutions. California has mandated that all new homes must include solar panels.

The Russian invasion of Ukraine and the surge in energy prices has also concentrated everyone’s minds. As Benita Schneider, head of real estate asset management, Europe at DWS says, these are “times when the energy performance of an asset is becoming more and more crucial.” 

Energy efficiency: Data, data, data

Energy efficiency is top of everyone’s agenda. Hannah Helmke is one of the founders of right°, which works with Europe’s largest housing company, Vonovia. It offers software and metrics to measure and steer companies’ alignment to the 1.5C goal of the Paris Agreement.

“With residential properties, the biggest challenge is always data. Obtaining high-quality data on emissions from existing buildings can sometimes be an effort,” she says.

Anything that makes that data gathering process simpler is therefore valuable, says DWS’s Schneider: “It is fundamentally important to have timely and accurate utility data.” That is why her firm is putting in smart meters wherever possible across its European portfolio.

Smart meters are an important part of reducing energy consumption, agrees London-headquartered Patron Capital’s chief sustainability officer, Emilio Cereijo. Combined with moving from a single-family housing model to co-living or co-renting, smart meters can “reduce energy consumption from an average of €125 a month per family unit to just €25 a month in co-living space,” he says.

Along with smart meters, other monitoring technology has a part to play. Joe Persechino, head of residential and student accommodation at AXA IM Alts, says his firm is “integrating a number of different types of sensors, such as space sensors which monitor usage in different areas of the buildings which help inform which areas are used the most and the least.”

This data can then be used to implement changes to lighting and heating control and usage. Window sensors are configured with the heating system so that if a window is opened in a room, the heating for that room will automatically turn off to avoid losing heat.

Further, air quality sensors monitor the quality of the air to ensure that sufficient air changes per hour (ACPH) are occurring. This is on top of the ‘standard’ measures such as installing LED lighting with linked motion sensors to reduce consumption and lighting of empty spaces. 

Smart homes

It is not just about energy. A ‘smart home’ can make the occupier’s life easier. At AXA IM Alts’ largest residential asset in London, which is currently undergoing a major refurbishment program, there is a trial for a ‘tech hub’ in each apartment, which will provide a video intercom, heating and lighting controls and energy usage monitoring.

Similarly, DWS is looking at air quality monitoring, and has been rolling out tenant apps that allow a smart interaction of the tenant with the property manager, booking of onsite services, keyless access to the apartment or building and monitoring of their respective energy consumption, among other things.

BentallGreenOak has also introduced a 24-hour live digital maintenance system that allows tenants to report problems and talk with someone to see if the problem can be resolved immediately, and a system for managing deliveries. Rob Maxwell, director at occupier experience platform Locale, notes that “secure access control, automatic number plate recognition (ANPR) technology for controlled parking and density sensors to understand resident capacity are also rising up the agenda, aiding the seamless and hassle-free nature of modern-day developments.”

Another smart home component DWS is looking into is in the senior living sector. Specialized sensors connected with smart software can send an automated notification to relatives or emergency services in the event of an accident.

Given the central role of proptech going forward, it is no surprise that residential investors are developing their own tech nurseries. BentallGreenOak has made strategic commitments to three leading venture capital firms that are specialized in proptech to “identify upcoming disruptive technologies,” according to Erdem, while Vincenzo Tortis, COIMA’s chief information officer, says the Milan-based manager helped launch a property technology accelerator program called HabiSmart “with start-ups focused on transforming real estate through technology.” 

A number of technologies have been developed in the HabiSmart program, such as clean technology start-up Allo’s HOMIE platform, an energy management solution for the smart home, based on a mix of AI and advanced Internet of Things, which analyzes data and combines with other behavioral and environmental inputs to assist with energy awareness. Ekore and TwinUp also each have cloud-based software for creating digital twins of buildings, while Sensegreen develops solutions for the digital transformation of real estate by providing optimization models based on machine learning.

Residential real estate owners, operators and investors are increasingly aware of the power of technology to optimize performance and returns. And they are finding new, innovative ways to implement it.