This week, I’m diving into the details behind Avalon Bay’s “self-serve” apartment experiment, Kanso. Before we get started, send this to a friend who might find it interesting.
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Kanso – An Apartment Experiment without People
There is a big “missing middle” in the new construction of multifamily assets. Developers typically build luxury assets or take advantage of LIHTC programs because they pencil. As such, there historically hasn’t been new construction that targets middle-class renters … until now.
Avalon Bay is experimenting with a new construction multifamily program targeted at middle-income earners. The strategy involves dramatically reducing property expenses through unconventional operating practices. Avalon Bay calls this product line Kanso and opened their first building, Kanso Twinbrook, in Rockville, Maryland at the end of 2020.
This “self-serve” property has no on-site staff, no elevators, and very few amenities. The building uses Works With Latch and Google Nest systems, which solve utility management and accessibility requirements. An Avalon Bay call center handles all resident requests, and maintenance support is pre-scheduled weekly at regular intervals.
The leasing process is also fully automated, with a first-floor model unit that can be viewed without leasing staff.
Cornell’s real estate school recently interviewed Kate Hollinger, Avalon Bay’s SVP of Strategic Initiatives about Kanso. I’ve summarized interesting points from the interview below.
- Kanso was in R&D for 5 years.
- The two main places where they could apply technology to cut costs were staffing and utilities.
- The main drivers of utility costs come from common spaces, elevators, pools, and gyms — these were all eliminated in Kanso Twinbrook.
- Latch allowed for the elimination of on-site staff. Prospect tenants receive a temporary, one-time access code to tour the model unit.
- Kanso’s target market is “young careerists” … people ages 23 to 29 who are early in their career and can’t afford a $3k one-bedroom.
- Kate avoided details when asked a question about how the property is performing … according to Kate, it is performing as expected … but Avalon Bay does not plan to scale the Kanso project.