Millennials shape how we use the internet, how we collaborate at work, and how we respond to many social issues. In short, they are movers and shakers—with a strong emphasis on movers. Millennials relocate for employment and love to explore new opportunities. They enjoy their freedom and live somewhat gingerly as a result. Much more likely to rent an apartment (due to financial limitations) than purchase a home, millennials think less about the size of their living spaces than the functionality and cost. They prefer open layouts to small rooms, and are keen on specific amenities that fit their work and professional lifestyles. Millennial preferences have significantly impacted the multifamily property market and, in turn, investors of apartment buildings.
Millennials Flock to Urban Areas,
The country’s metropolitan areas are attracting millennials looking for a better work/life balance and the convenience of mass transit options available in cities and directly outside them. The urbanization of secondary cities is also happening, due in large part to millennials who are priced out of downtown areas. Reports indicate that 64 percent of millennials rent and 75 percent work in cities or large towns. This, coupled with the fact that the millennial generation is poised to surpass Baby Boomers as the nation’s largest living adult generation, bodes well for people investing in apartment buildings
Texas investors, for example, should keep a keen eye on Dallas, Houston, and Austin, which are millennial magnets. Dallas is strong when it comes to job growth and job opportunities, and millennials have reacted to the influx. Millennials living in Dallas earn an average of $69,000 per year; the U.S. average is $67,900. The city had the highest job growth rate out of the 12 largest metropolitan areas in the year leading up to November 2017, and it’s home to over 10,000 company headquarters—the largest concentration of HQs in the country. Nearly 8 percent of all financial sector jobs in the Southwest region are in Dallas.
Austin, well known for its music, film, arts, and tech events, such as South by Southwest, is a haven for millennials, who value experiences more than possessions. The addition of 30,000 net new jobs in the year leading up to December 2017 made Austin the sixth fastest-growing major metro area. The city’s unemployment rate then was 2.7 percent, compared to 3.1 percent in Dallas. Just one year ago, Austin’s unemployment rate was 3.2 percent.
The Houston metro area is also growing due in large part to millennials. This year, Houston should add around 69,000 jobs, providing for a 2 percent annual growth rate, which has been the average each year for over the past 25 years. Fourteen of the top 25 largest Houston-region employers are located in the city. Plus, over 140 high-growth tech startups that draw millennials call the region home.
Is Suburbia Next for Millennials?
Naturally, some millennials are trading in their metro commuter cards for SUVs and heading to the suburbs. Young professionals between the ages of 25 and 29 are about 25 percent more likely to relocate from the city to the suburbs than move within the city; older millennials are 50 percent more likely to relocate from the city to the suburbs. In late 2017, Dallas, for example, saw a 2.2 percent population decline in the city and a 5.8 percent increase of millennials in its suburbs.
Millennials will Impact the Way You Invest in Apartment Buildings
Investors looking to reposition multifamily apartment buildings to appeal more to millennials should consider focusing largely on layout design and functionality upgrades. In some areas, including Houston, developers have been tailoring their designs to meet millennial wants and needs over the past few years. Developers in the Houston metro area have been targeting millennials by creating “one-of-a-kind and context-specific” properties. Many developers are differentiating their designs by working with historic buildings, reusing and adapting older materials, and incorporating modern design features in both indoor and outdoor spaces.
Space consideration could be made with respect to communal amenities, too. Millennials are extremely health conscious and enjoy outdoor activities. Therefore, rather than filling your wellness center with stationary bicycles and free weights, consider a bike-rental area and making room for yoga and other fitness classes. If you have a tennis court in need of an expensive major repair, consider redesigning it as an outdoor fitness area. Millennials like to workout on their own terms, so an open space would allow them to engage in their own fitness program rather than be limited by the equipment you provide.
Millennials will impact the decisions multifamily property investors make now and in the foreseeable future. Their design tastes, career needs, and their focus on health and well-being should all be factored into your real estate investment strategy.
At CWS Capital Partners, we are a fully integrated multifamily real estate investment management firm that offers everything from due diligence and risk management to transaction support and property management. We own multifamily investment properties in each city mentioned above, as well as in other major markets across the country. We specialize in assisting our clients with 1031 exchanges, acquisitions, repositioning, and development, and employ a team of experts who can help you hone your investment strategy. For more articles like this one, check out our investment strategy blog posts.
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