An interesting report published by the White House last fall showed the monumental impact that millennials – those born between 1980 and 2004 – who are entering the workforce in droves can have on the economy.
Millennials make up one-third of the US population and, as they begin their professional careers, significantly influence how we do business.
The millennial mindset has been shaped by a lifetime of access. This is the first generation that doesn’t remember a time before the Internet, and they rely on technology in every aspect of their lives.
The White House report also tells us that millennials value community, family, and creativity in their work. They tend to marry later than previous generations and are less likely to be homeowners. When a third of the population shares a distinctive set of preferences, there are implications for all types of business, and commercial real estate is certainly no exception.
Married to the Startup Culture
Open offices and collaborative spaces are favored by millennials and the startup culture, which value flexibility and interaction. Millennials prefer more flexible spaces and, given drastic advances in technology, are easily able to work wirelessly. Increasingly, space is being redesigned to meet their expectations.
Another priority for new commercial spaces is green design. Natural light, sustainable materials, and energy efficiency are increasingly considered requirements for new developments. Millennials tend to favor cooperation and sustainability, and a healthier workplace is important, as is using resources responsibly.
Rental Conveniences Drive Millennial Business
According to a Harvard report on rental housing in the US, two-thirds of Americans ages 25-39 currently rent, due in part to increasing student loan debt and a tough job market.
A recent Forbes piece, “Why Millennials Love Renting,” outlines other factors that persuade millennials to rent instead of purchase:
- Love of Amenities: Gyms and business centers are just a few of the “free” perks found in many apartment buildings are a big draw for millennials.
- Love of Community: Common areas—libraries, coffee bars, and rec rooms—for socializing are added space for apartment dwellers, plus, renting in the city center means living closer to culture and nightlife.
- Love of Flexibility: Millennials appreciate the freedom of leasing compared to the long-term commitment of buying. Renting lets millennials keep their options open, allowing them to more easily switch jobs or locations.
- Love of Convenience: There’s a lot of work that goes into maintaining your own home. With renting, there’s no need to worry about repairs, upgrades, or yard work.
Washington, DC is a magnet for millennials, as more than a third of the district’s residents fall into this age bracket.
And recent multifamily statistics back up the claim that multifamily growth in this area is being driven by millennials and their love of rental conveniences. In fact, in Q2 of 2014, DC saw record-setting year-over-year Class A absorption, for which industry experts attribute a resurgent economy and a desire to live in newer buildings with access to high quality finishes and amenities. Just behind is Utah, followed by Alaska, North Dakota and Texas.
All Things Tech
The Brookings Institute estimates that by 2025, millennials will constitute 75 percent of the workforce. Their fondness for technology and willingness to adopt new applications to solve old problems will drive innovation and utilization.
The level of comfort millennials feel with new technology has made them quick to embrace electronic solutions for contract management, document sharing, listing management, and even renting and purchasing.
In the coming years we can expect to see even more participation in online transactions, especially those involving crowdfunding, which allow smaller investors to take part in CRE investments.
These are just a few of the CRE trends that are being directly affected by the millennial mindset. We look forward to seeing even more shifts and disruptions driven by this dominant demographic in the coming years.
Image Source: Building Design + Construction