During my acting days in New York City, I lived in some, um, interestingapartments. At least half, unbeknownst to me, were illegal spaces. My favorite was a sublet of a sublet, where I had a bed, a shelf, and a suitcase in the hallway of a railroad-style apartment in Hell’s Kitchen. At night, the 100-year-old mortar from the brick wall my bed was smashed up against often crumbled onto my bed (and face) as I slept. Luckily, I found a picture of it (point-and-shoot Kodak circa 1997).
I was so busy doing that thing called city living that I was rarely there. I slept there. That’s about it. However, I couldn’t help but fantasize about what living the high life in a midtown condo equipped with a doorman would be like. I not only lived in a hallway, but I was forced to use a post office box to get mail and packages – which was several blocks away.
This summer, Amazon launched The Hub, pitching landlords the concept of installing digital lockers on their properties that allow tenant packages to be securely delivered, freeing up valuable mailroom floor space and employee time managing all those packages. Amazon penciled deals with huge apartment owners like AvalonBay Communities, Equity Residential, Greystar, and Bozzuto Group, which represent more than 850,000 units nationwide.
If you’ve been to some higher-end complexes in cities like Los Angeles and New York, you’ve probably seen these lockers. They are impressive. Mailrooms never looked so cool. The smallest locker is 6 feet by 6 feet, and landlords pay at least $10,000. The Hub is slightly different from Amazon Lockers, which are marketed exclusively for Amazon delivery. Amazon Hub, on the other hand, allows delivery from multiple vendors including FedEx.
Regardless, both locker programs require landlords or property owners to pay anywhere from $10,000 to $20,000, depending on the locker size. From the looks of Amazon’s application, landlords of apartment buildings appear to need on-site management (for now) in order to use the service. Landlords will also need at least six feet of linear space in a well-lit area that is ADA compliant (there goes 100% of the places I lived in). The lockers must be plugged into a standard 110v circuit, but no internet is required—the lockers use cellular modems.
So, if you’re an apartment owner who has at least $10,000 and space to spare, here’s the application link. It’s interesting that Amazon isn’t paying you, the landlord, for access to your real estate. Instead, you’re paying Amazon for the privilege of offering an amenity to your tenants. Well played, Amazon, well played.
Unlike lockers in apartment complexes, those in an HOA can be unmanned pending the same requirements. For investors with other business locations (or maybe perhaps you have a vending machine business as a side hustle) lockers could be a money maker. But, wait until you read the rest, because it might not end up being the best bang for your buck, thanks to another interesting Amazon invention.
Amenities Increase Rents and Value
Apartment and condo complexes that can afford the lockers come at a premium. Tenants and owners pay for those lockers in higher rents or HOA fees. The landlords I was paying in NYC would certainly scoff at the idea of spending $10,000 for a locker. These buildings were smaller, and their century-old lobbies and foyers would never fit these massive lockers. They certainly weren’t ADA compliant.
Here’s a picture of an illegal basement apartment I lived in (alas, I didn’t know it was illegal when I signed).
The inside of the apartment was actually nice. The hallway just looked straight-up like it was from a horror film. We didn’t know the entire building’s phone system resided in our unit! Anyway, this is the hallway where the post office would have had to drop our packages inside the building. Needless to day, we didn’t get deliveries.
Amazon’s Brilliant Move into Real Estate
Last year, Amazon was getting some seriously bad PR because it was not making same-day deliveries in lower-income and minority neighborhoods. At the time, Amazon said it was working to offer service in all areas of the 27 metros in which it offered same-day service. It explained it was focused mainly on areas with a higher concentration of its Prime members. Unfortunately, that excluded many neighborhoods that were predominantly poor.
Amazon is tight-lipped about its total subscribers, but some research firms now peg Prime subscriptions at 90 million in the U.S. There are 125.8 million U.S. households, so roughly 70% of U.S. households have an Amazon Prime membership.
It’s no wonder major commercial brick-and-mortar stores continue to close their doors as more consumers go increasingly online. And, it’s why Amazon’s next move into real estate is even more important than some realize, and why real estate investors should pay attention.
Amazon Key Changes the Apartment and Condo Game
If you’re unfamiliar with Amazon Key, it’s a lock-camera-application system Amazon just announced in October (Amazon Home Kit currently starts at $250). In theory, it completely solves the delivery issue mentioned above and makes the locker somewhat unattractive to landlords for the cost.
Amazon Key involves a digital lock on the door, a camera placed inside the unit, an internet connect, and a delivery person. You are connected to the system via the Amazon app. It works in tandem to offer a seamless, secure, and hopefully wonderful delivery experience.
Here’s how it works. You place an order via the Amazon application (with or without Alexa). You get a time window, and when your package is being delivered, you are notified and can see the transaction taking place (before, during, and after). You don’t have to be home to grant Amazon access to your home or apartment.
It won’t just be Amazon you’ll be granting the access to in short order. Think of the number of things you can do and the companies already well-positioned to leverage the partnership (rentals via Airbnb, task delivery via TaskRabbit, food via UberEats, dog walkers via Rover, repair people via Yelp, etc.). And think of all the valuable data Amazon will learn with those partnerships. #Winning and #frightening at the same time.
There was a ton of clickbait hype in the media around the Amazon Key launch alleging Amazon was sending strangers into our homes. While that’s partly true, users will jump at the opportunity because currently, they have never had another option. Not just for same-day delivery, but for delivery at all! And, sites like Airbnb have proven that access with the right security measures can be a beautiful thing for all.
If you live or invest in urban markets, you know that if a building does not have a doorperson accepting packages, you’re forced to use a P.O. Box or have packages delivered to work (if it’s allowed). Perhaps Amazon is willing to deliver to your doorstep or inside a foyer, but there’s increased risk that packages will be stolen. Expect that risk to disappear as Amazon slowly unwinds being willing to deliver without Amazon Key in place. Stolen packages cost money! The burden is shifting to the consumer or the landlord, who will be forced to install Amazon Key or face severir FOMO (fear of missing out). You know all your friends are going to do it.
In the series of articles to follow, I’m going to lay out why Amazon Key is onto something special. This technology could completely upset the current apartment and condo markets. Real estate investors should be paying close attention, if not actively considering strategies to make better buying decisions and upgrades to rentals sooner than later.