The world belongs to Millennials, and we need to take heed, because they will be the driving force in the commercial real estate market.
There are over 73 million Millennials (ages 23 to 38) and they will overtake the Baby Boomers, in population, in 2019. Why is this important? By 2020, Millennials will have a collective spending power of $1.4 trillion (Source: Fool.com). So, the life style and interests of Millennials should be of extreme interest to any investor. This generation of consumers is already influencing the next phase and direction of the real estate market.
The trend is more demand for multi-family properties, mixed use facilities, and eco-friendly properties. Today’s real estate investor needs to identify and get out ahead of the growing trends that are being driven by Millennials.
Millennials are choosing to live in apartments and are not buying homes the way that their parents had in the past. There are a number of reasons for this. Many Millennials are marrying later in life, so there is simply not a need for home ownership. But for most, the reason they don’t own a home is strictly economic.
Saddled with unyielding student loans, lower paying jobs, and the inability of parents to front a down payment, Millennials find that home ownership is impossible.
It is also a matter of simply liking the apartment lifestyle better. They can get more for their buck. The same way one chooses to lease a more expensive car than they could purchase, Millennials are finding apartments that better, nicer, or simply closer to work or places of entertainment. They do not need to worry about upkeep or maintenance, so their free time is their own and can be spent on what they are most passionate about.
Once they start the apartment lifestyle, it usually takes a major life change (marriage, babies, etc.) for them to start looking for a house. The apartment lifestyle can be costly, making it difficult to secure a down payment for a house. Half of all millennials who rent an apartment are considered rent-burdened (30 percent of paycheck goes to rent) and unable to save enough for a down payment on a house (CNBC).
Millennials place an extremely high value on ease and convenience. They don’t want to drive to five different stores to get their shopping done on a weekend. They prefer a walkable, mixed-use complex that has a live-work-play lifestyle. This is the generation that has made home delivery of food (that isn’t pizza) a thing. They have made retail spots a destination place rather than someplace just to shop.
Besides saving gas and time, mixed-use complexes provide them with a central place to shop, eat, and hang with their friends. It provides a sense of community that attracts the texting generation.
While mixed-use facilities started to get traction in the mid-2000’s, Millennials are making mixed-use properties in high demand.
Eco/Tech Friendly Facilities
Millennials have gained social awareness through their extensive use of social media platforms. They are all about both the environment and how technology can make their lives better.
Millennials want living spaces that incorporate technology and the way that they live. They want to know that their life style and where they live do not have a huge carbon footprint.
Multi-family mixed-use apartment complexes are the perfect combination where developers can meet the desire and needs of the millennial generation.
While no one can predict the future, it doesn’t take reading tea leaves to see that the directions and choices being shown by millennials will soon become the norm. Right behind the Millennials is an even larger group called Generation Z (born mid 1990’s to early 2000’s). This group makes up 25% of the US population making them even larger than Baby Boomers or Millennials.
This is also the generation that has only known smartphones, computers, smart appliances, etc. The same economic and social issues that drive Millennials will be even more amplified with Generation Z.
This is the time to get ahead of the curve and start investing in multi-family mixed-used properties. If you would like to learn how, ask one of our trainers at Commercial Academy.