Exploring Proptech in a High-Interest Rate Environment

How proptech can further bolster multifamily’s resiliency as an industry during any forthcoming recession.


Main Takeaway: The multifamily housing sector has historically been resilient during economic downturns. With the advent of many proptech solutions, the industry has found new ways to buoy itself through recessions and maintain revenues, stability, and tenants.

Story: It has been said that property technology is the multifamily industry’s secret weapon. We agree. Proptech can dramatically help with tenant retention, reducing OPEX, increasing NOIs, and reducing manual employee work, to name a few. 

Rising interest rates and a dramatic slowdown in homes on the resale market have pushed more and more would-be buyers into the rental market. This has attracted ongoing attention from investors in proptech and multifamily as a potential hedge to the current economic headwinds.

Source: Redfin

Against this backdrop, renting may be the only option for many. To attract prospective renters, multifamily owners and operators seek opportunities to attract and retain tenants with technology, amenities, and perks.

Valley Bank released its second annual Present and Future of Proptech report, which reports on industry trends and the impact of trends such as rising rates, remote work, and economic uncertainty. Stuart Cook, CIO at Valley Bank, comments on the current proptech market trends:

“Despite rising interest rates and volatile economic factors, proptech remained a strong investment category in 2022…The shift towards sustainably built new structures and retrofitting existing assets is either in progress or being planned for extensively by owners and investors. Investors are likely to remain active given broader dynamics and longer-term horizons at play in regard to real estate.”

Indeed, finding ways to retrofit or augment older multifamily assets using technology products will be an ongoing trend throughout the remainder of the year and into 2024 as owners and operators seek to reduce costs and maximize NOIs. Two of the key sectors to look out for, according to Valley Bank, include:

  • 🔐 Security and Access: Smart access devices enable multifamily owners to create connected, secure, and intelligent living spaces. Smart locks, thermostats, lighting systems, and appliances enhance security, energy efficiency, and convenience for residents. These solutions attract tenants and help owners optimize resource consumption and reduce operational costs.
  • Smart Energy Management: Smart energy management systems help multifamily owners monitor and control energy consumption within their properties. Through the use of IoT-enabled devices, such as smart meters and energy monitoring systems, owners can identify areas of high energy usage, implement energy-saving measures, and reduce utility costs.

Overall, the proptech industry is growing not only in terms of size but adoption as well.

Source: Grand View Research

Given the economic imperative to fight against rising debt costs and downward cap rate pressure, multifamily owners and operators who weren’t already exploring proptech solutions will have a new imperative to do so.

In sum, rising rates, although a headwind for multifamily debt costs, also provide an opportunity as the pool of prospective renters grows who can’t afford or find a home for purchase. Further, adopting proptech will help owners and operators optimize NOIs and reduce OPEX, ultimately putting upward pressure on their asset values. 

Expert Take on Rates and Proptech

“Tech adoption in the real estate industry will continue to happen at a rapid pace, but will prioritize fully built-out solutions…There will be less growth amongst companies that are nice-to-haves and don’t directly affect NOI. We will still see growth in adoption of technology, but they need to solve meaningful problems that impact the bottom line and help solve regulatory challenges.” MIPIM Year End Report

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