David Madrid is Vice President of Innovation and Ventures at AvalonBay Communities, a $2.8 billion multifamily real estate investment trust that owns nearly 300 apartment buildings and more than 90,000 apartment homes across 12 states and the District of Columbia. Madrid is an architect turned investor and is now responsible for building and launching new strategic business lines.
We connected with him earlier this month for a wide-ranging interview that touched on collaborating with an investing in startups; smart home technologies; AI use cases; and his advice for other innovators.
• • •
For those who don’t know the company, give us 30 seconds on AvalonBay.
We’re the largest public multifamily real estate investment trust, or REIT. We’ve been in business for over 30 years, and own and operate more than 90,000 apartment homes across the country. We’re publicly traded on the New York Stock Exchange, and I’m glad to be talking to InnoLead, because innovation is core to our long-term strategy.
You’re VP Innovation and Ventures. What does that mean at a REIT?
My role focuses on driving innovation and strategic investments to enhance value across our platform, which includes five key responsibilities.
The first is aligning innovation with business strategy, which means ensuring our innovation initiatives support our broader business goals: Enhance residents’ day-to-day experience, drive operational efficiency, and increase asset value.
The second is identifying new revenue streams, which includes exploring opportunities to increase net operating income through new products, services, or business models, such as furnished housing and prefab accessory dwelling units.
The third: managing investments. That includesoverseeing strategic investments and partnerships in corporate sustainability and property tech VC funds, aligning them with our long-term growth objectives.
The fourth involves driving technology adoption, which means collaborating with other departments to implement innovative solutions like smart home systems and IoT solutions to improve property management and resident satisfaction
The last is monitoring industry trends and staying informed about emerging real estate technologies and market dynamics to anticipate future needs and maintain our competitive edge.
Overall, my role is to implement forward-thinking strategies that enhance property performance, resident experience, and sustainable growth.
Tell us about how you align that innovation and investment strategy with the overall business strategy. Who’s involved?
Cross-functional collaboration with various departments and stakeholders is key. I partner with internal teams and external partners to identify technologies, programs, products, services, and investment opportunities that enhance our property portfolio, operational efficiencies, and ultimately, create a better way to live for our residents.
But who do you report to, and who’s actually helping set the strategy and measuring progress?
I report to our EVP of Human Capital and Administration. This centralized team enhances organizational synergy and strategic alignment, ensuring that innovation initiatives receive the necessary support to achieve the company’s broader goals. This alignment is crucial for driving new products and programs that increase NOI [net operating income].
Give us an example of a recent investment that has significantly impacted your operations?
We made an early investment in Elise AI, a machine learning technology designed to simplify the leasing process through conversational artificial intelligence. Initially focused on AI prospect management, Elise AI improved our leasing operations by engaging incoming prospects and maintaining seamless communication through automated follow-ups and reminders. This transformation optimized our leasing workflows and significantly enhanced interactions with prospects.
Since then, Elise AI has evolved into a comprehensive suite of products, including Housing’s All-in-One AI Assistant & CRM.
What are the top technological innovations you’re exploring to enhance tenant experience?
Over the last few years, there have been many new point solutions for residents, including smart access apps (like Latch), maintenance request solutions (like Sightplan), and payment portals. These provide critical services, but we want to be cognizant of app fatigue and ensure residents know what app to use, when, and for what.
We want to be cognizant of app fatigue and ensure residents know what app to use, when, and for what.
We are excited to continue testing technology innovations that streamline this process by creating one central, personalized experience for our residents.
Are you leveraging data analytics to improve property management and operational efficiency?
Yes. Data analytics is a core component of our platform. It helps us make data-driven decisions to improve property management and operational efficiency. For example, our integrated funnel optimizes apartment utilization, reducing vacancy loss, and providing deeper insights into prospects. This drives improvements in our Net Promoter Score, which we use to measure and gauge customer loyalty, satisfaction, and enthusiasm, all while aligning with our broader strategy of enhancing the resident experience and optimizing property performance. Beyond business intelligence, our use of data science also sets us apart in the industry.
Additionally, we have a robust customer insights function that allows us to stay in touch with prospects and residents through surveys. These regular touchpoints ensure we have a pulse on their wants, needs, and expectations for the community they call home.
Is AI, machine learning, or GenAI something you’ve either invested in, or deployed across the portfolio? Can you give us an example?
We leverage AI in multiple ways to enhance our projects and drive business growth. We see it as a key tool for improving productivity and achieving our vision for the future of operations, which is to deliver seamless, personalized experiences made easy, for both our customer and our associates.
A few of our primary AI use cases include enhancing the resident experience, predicting maintenance needs, automating routine tasks, and optimizing resource use…
With all digital initiatives and applications, we deploy a robust build vs. buy calculation to make sure we’re making the right decision as it relates to efficacy and efficiency. We often debate whether to buy or build, and in my view, buying often makes sense because those companies specialize in perfecting their models. However, if no product in the market meets a specific need, building in-house is the better option. For example, we built a digital mobile renewal app in-house because no existing solution met our needs. This app allows residents to receive and renew their apartment leases on their phones, streamlining the process and improving conversion rates.
As early adopters of the technology, we made investments in AI several years ago, both directly and indirectly through VC managers. We’ve seen the significant potential AI has to improve our operations by introducing new efficiencies and capabilities, positioning us for long-term success in a digital world.
A few of our primary AI use cases include enhancing the resident experience, predicting maintenance needs, automating routine tasks, and optimizing resource use, which leads to fewer issues and lower costs. AI-powered support via chat, email, text, and voice offers instant assistance to prospects and residents alike. This boosts satisfaction by providing real-time answers and access that align with their unique schedules, helping us meet the customer when and how they want to be met.
What about “smart home” technology? Have you deployed it, and how do you see it evolving?
It’s integral to our portfolio, as it helps reduce friction and inconveniences for residents. By integrating devices such as smart locks, thermostats, security systems, and energy management solutions, we create more comfortable, convenient, and secure living environments.
These technologies help attract and retain residents who are seeking modern, tech-savvy apartments. Additionally, smart home technology enables more effective property management, reduces energy consumption, and lowers operational costs through automation and real-time monitoring.
Looking forward, we anticipate further advancements in AI and IoT, allowing for greater integration and automation. We plan to leverage these developments to enhance our platform, improve operations, and advance sustainability initiatives within our properties. Our proactive approach ensures we meet current demand and anticipate future trends, maintaining our competitive edge.
What challenges do you face when trying to implement new technologies across such a large portfolio?
Given our portfolio size and fully integrated approach, we can realize numerous benefits that others may not be able to achieve. However, implementing new technologies across a large organization presents challenges as well.
First, there’s integration complexity. Integrating new products/technologies with existing systems and processes requires thoughtful planning and pilot programs to validate products and implement phased rollouts effectively.
Second is basic resource allocation and budget: Investment in capital expenditure, training, and maintenance is necessary. Aligning these investments with strategic priorities and ROI expectations is key.
Overcoming resistance to change, educating stakeholders, and demonstrating tangible benefits require ongoing conversations and effort…
I’d say fostering a culture of innovation can be a challenge, as I’m sure many of your members have experienced. Overcoming resistance to change, educating stakeholders, and demonstrating tangible benefits require ongoing conversations and effort but are critical in ensuring buy-in and collaboration throughout the implementation process.
Any lessons you’ve learned about host to foster a culture of innovation you could share with our members?
Innovation is a core component embedded in our organization and one of our seven cultural norms, captured in “We Innovate.” Fostering a culture of innovation requires a strategic and comprehensive approach, encouraging risk-taking, promoting open communication, and nurturing diverse and inclusive teams. These elements challenge conventional thinking and recognize problems as the seeds of innovation, generating new ideas, offering better solutions, and embracing change at all levels.
Do you collaborate with tech startups to drive innovation? How?
Absolutely; we engage startups in several ways.
First, we do pilot programs and proofs of concept. That entails testing startup solutions in real-world environments within our properties to assess feasibility, functionality, and potential impact.
Second, we do strategic partnerships and make investments. We consider startups with strong potential for strategic partnerships or investments that either solve our needs or where we can help shape their product roadmap.
We also have a collaborative innovation culture, where ideas flow freely between our internal teams and startup partners through regular communication, workshops, and brainstorming sessions.
This mutually beneficial approach leverages startups’ agility and creativity and our specialized expertise in the real estate industry to drive meaningful innovation.
Are there any technologies or capabilities you’ve seen recently that are particularly exciting or intriguing?
One of our three strategic pillars is 24×7 proactive automated communication and support for our customers, which include prospects, applicants, and residents. We have seen a rise in AI features that talk and respond to customers like humans would and have been very encouraged by our customers’ positive reaction to Sidney, AvalonBay’s own AI assistant.
Any lessons, learnings, or recommendations you can make to other innovation executives?
Sure. First, make sure you align innovation with business goals, and make sure all initiatives directly support the overall business strategy. That includes allocation of resources to contribute to strategic objectives.
Second, aim for cross-department collaboration. Emphasizing collaboration among different departments will enable you to leverage diverse expertise and perspectives and get ahead of potential pain points.
Third, focus on scalable solutions. Prioritize innovations that can scale effectively across various locations and adapt to different business needs for the long term.
Third, stay engaged with emerging technologies. Make sure you’re investing, experimenting, reading, listening, and perhaps even sitting on the boards of emerging technology companies. This will help you understand how to potentially embrace these technologies to stay ahead of the game.
