Multifamily owners focused on improving net operating income (NOI) may be overlooking a critical amenity that can help.
A version of this story was originally published on GlobeSt.com.
Amid a market plagued by economic uncertainty, high interest rates and weak investment performance, multifamily owners may be seeking opportunities to drive gains in net operating income (NOI). Fiber internet is one opportunity to do just that.
So argues Dan O’Connell, VP of consumer sales at Quantum Fiber, who says that multifamily owners contracting bulk services for their community are finding a valuable amenity with stabilized costs and limited capital investment. It’s a big win for multifamily owners looking to further optimize their NOI in a challenging market.
Benefitting Both Sides of NOI
Multifamily owners can drive NOI in two ways: through revenue growth and through operational efficiencies. Fiber internet can drive net operating gains at both fronts.
On the revenue side, fiber helps to attract and retain residents and drive rent growth. According to the National Multifamily Housing Council 2022 Renter Preferences Survey Report, over three quarters of multifamily renters are willing to pay a premium in rent if high-speed internet is included and available through the property. “The market recognizes and values the inclusion of a fiber-based internet service as an amenity for which they are willing to pay,” says O’Connell. “That drives revenue growth and contributes to NOI gains. The simple way to do that is to bring a fiber infrastructure into the community through a bulk agreement with an ISP for the service delivery to all residents in the community.”
In addition, multifamily owners have the option of monetizing fiber internet as an additional service. Residents could have access to lower cost internet service than they would get independently, and owners can create a new income stream. It’s a win-win.
On the cost reduction side, fiber internet from a tier-one and reputable provider typically has stabilized and consistent costs over the term of the contract. There are no annual step increases included, so the cost of the internet service will not change for the life of the contract, sometimes with securing up to a 10-year contract. That is valuable stability in a market where operational expenses routinely increase substantially year-over-year. Plus, a fiber infrastructure can provide utility savings; fiber uses less energy than cooper. Its long lifespan reduces the need for costly upgrading or replacement.
“With a bulk agreement with Quantum Fiber, you can build a proforma that’s very straightforward, very consistent and very predictable,” says O’Connell.
Gaining Amenities Without Capital Costs
Unlike many amenities that help drive value in a multifamily property, fiber internet has no installation cost for the property owner or developer, only an agreement for the service. With no investment required by anyone at the property level, the amenity provides substantial upside for owners of both new and existing properties.
Developers of new communities need to deliver a highly competitive and future-proofed choice for residents. Fiber internet checks those boxes for developers. It also opens a door for existing apartment-style properties to evolve alongside new development and dodge obsolescence.
“It’s a tremendous opportunity for an aging property to become more competitive quickly,” says Quantum Fiber’s O’Connell.
Today, multifamily owners are looking for every opportunity to drive revenue. Progressive technology amenities like fiber internet should be on the list of initiatives to unlock hidden value at the property level.
Check out these related articles:
- Home developers and HOA’s are bulking up on NOI growth.
- Bulking up on NOI growth. The residential rental market.
- Residential fiber is now table stakes for boosting NOI (Part 1)
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