Apartment owners and operators are strategizing to attract more renters as homeownership costs rise and consumer behavior shifts.
According to a recent Deloitte report, one such emerging strategy is “Living-as-a-Service” (LaaS).
Under the model, apartment owners and operators go beyond just leasing units with a few amenities to operating a subscription-driven, service-oriented platform built around convenience and lifestyle flexibility.
“Similar to other ‘as-a-service’ products, the subscription model is less about cost bundling and more about the ease of consumption, enablement of short-term mobility to address tenant lifestyle changes and long-term predictability of services,” Deloitte Consulting LLP principal and report co-author Jody Hill told Connect CRE.
Deloitte’s report noted that a subscription-style approach could help renters adapt their living arrangements as their needs evolve, while appealing to consumers seeking flexibility and convenience rather than homeownership commitments.
For owners and operators, a LaaS model could generate additional revenue streams while boosting retention.
The Forces Driving LaaS
Software-as-a-Service pioneered the model that eliminated the need for software installation on network systems. Through the platform, consumers subscribe to use specific services, rather than owning the products.
In multifamily housing, Living-as-a-Service offers subscription-based living arrangements that can provide everything from furniture packages and flexible leases to dog-walking, fitness classes and concierge-style services.
According to Deloitte, several demographic and economic trends are driving interest in the model. The report anticipates that the number of U.S. renter households could climb by 21.7% by 2035, reaching 56.3 million from today’s 46.2 million.
Meanwhile, renters are remaining in apartments longer, with lease renewals now accounting for roughly 57% of leasing activity.
The renter population is also shifting:
- The percentage of renters age 65 and older increased 30% between 2013 and 2023.
- The number of high-net-worth renter households tripled between 2019 and 2023.
- More households are delaying or eschewing homeownership due to affordability challenges and lifestyle preferences.
Hill said the LaaS platform could help owner-operators improve resident retention, as renters are already staying in place longer.
“Other subscription-based businesses strategize on customer retention, as the cost of netting a new customer tends to be much higher,” he said.
“Given that the data suggests that the average consumer will rent longer than they did just six years ago, it makes sense to have renter retention as a key target performance metric for commercial real estate companies.”
What Living-as-a-Service Looks Like
Hill outlined several renter profiles that could benefit from the model.
For younger long-term renters, LaaS offerings could shift to address major life changes such as marriage, children or career moves. A tenant might begin with a basic lease and later add services, upgrade to a larger unit or transfer to another unit within the same owner’s multifamily portfolio.
“In this case, a subscription-based model for this consumer could initially provide a fixed-term lease with basic amenities,” Hill said. “It could also provide the ability to add other features or even move to other properties with larger units and more amenities when their lifestyles change.”
Older renters approaching retirement could benefit from predictable subscription payments, flexible living arrangements and lifestyle-oriented services that support downsizing or increased travel.
Meanwhile, remote workers and nomadic renters could use the platform to relocate more easily between units in different cities within the same multifamily portfolio.
Advantages for Owners and Renters
Hill said LaaS could create benefits on both sides of the leasing equation.
For renters, the model offers flexibility, convenience and fewer administrative burdens related to lifestyle services. Rather than managing multiple providers separately, tenants could access services through a handy subscription platform.
For apartment owners and operators, the main benefit is stronger retention. Deloitte also said that additional service revenue, combined with reduced turnover and vacancy costs, could generate higher profit margins.
Potential Downsides
Hill acknowledged that LaaS remains an emerging concept that Deloitte has been evaluating with commercial real estate clients over the past year.
“We’ll identify lessons learned as we work through commercial models,” he said.
One potential challenge is ensuring that renters understand the long-term value of a subscription structure. Those who leave the platform too quickly might not reap the full benefits of the bundled services.
Transparency will also be critical. Hill said that owners and operators require controls to ensure renters subscribe only to the services they need. In addition, owner-operators would need to rethink traditional operational metrics and performance benchmarks to accommodate a subscription-driven business model.
The move to LaaS would also require significant upfront planning, technology infrastructure and coordination with service partners.
Still, Deloitte believes early adopters could gain an advantage due to increased rental demand.
“For those that start preparing early on the technical, analytical, and partnering requirements, it’s an opportunity to establish new in-demand business channels for an expanding rental marketplace,” the report stated.
Will It Work?
According to Deloitte and Hill, yes.
The report said that even a modest adoption of bundled services across large multifamily portfolios could generate new revenue streams while improving tenant satisfaction and retention.
Hill added that LaaS adoption is likely to increase over the next decade as consumer expectations continue moving toward convenience, mobility and subscription-based services.
“Commercial real estate companies that embrace different ways of growing their return on assets will be well-positioned for the future, just as software companies pivoted to delivering their products in an ‘as-a-service’ model over the past decade,” he said.
This article first appeared on ApartmentBuildings.com.
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