The millennial generation has had an increasing impact on our workforce and economy, and studies are just now uncovering the extensive effects of this generation on the commercial real estate industry.
The millennials are aged 18-34 years old and are 80 million strong. They spend about $600 million a year presently and are expected to spend more than $1 trillion annually by 2020. Based on these numbers, this is definitely a group every business should be paying attention to.
Here are the top four effects this generation will have concerning the commercial real estate landscape.
- Retail: As you might expect, this generation is very tech savvy. They have never known anything but a high-tech world, and they have embraced smart phones and tablets into the fabric of their everyday lives. Millennials still prefer to shop in a store versus online, but they use their tech savviness to come armed with research on prices, features and deals. This generation is extremely cost-conscious, and they seek out coupons, deals and sales. This has lead to an increasing trend toward discount retailers as millennial shoppers have gravitated away from high-end, luxury retail.
- Multifamily: The millennial generation is renting longer, and homeownership is not as important to them. Previous generations viewed homeownership as a way to build stability, wealth and equity. The millennials saw many of their parents finances ruined because of homeownership, and they now proceed with caution. They are also getting married and having children later, and this tends to delay the move to purchase a home. New apartment complexes catering to the millennial crowd offer units that are smaller but in communities that are rich in amenities and high-tech features.
- Office Space: Millennials don’t like to be tied to a desk, and they prefer when the lines between work and play are blurred. For the millennial employee, work isn’t a place — it’s an activity that can happen in nontraditional places like coffee shops or the outdoors, and there are no set hours when work takes place. These factors, among others, have changed the way office spaces are used and how much space is required. In the last decade, the average amount of office space per person has shrunk, and this trend is expected to continue. Co-work spaces are also growing in appeal. These spaces generally have no walls, and they appeal to the entrepreneurial startups that many millennials are engaged in. According to John Fleming of Trimark Properties, who is planning a co-work building in Gainesville’s Innovation Square, “They want to be around other people that are passionate about the businesses that they are starting. They don’t want to work alone at home or in an isolated eight-by-eight, white-walled cubicle.”
- Sustainability: The environment and sustainability are more important to millennials than any other generational cohort in history. They seek out products, dwellings, companies, automobiles and cities that align with their belief systems for sustainability. The desire to live their lives in a sustainable fashion impacts many decisions relating to commercial real estate. It affects, for example, decisions on how far a millennial might be willing to commute to work. They want public transportation options, and many prefer biking to work. Urban areas are making a huge comeback thanks in part to demand by millennials and new, mixed-use urban communities have appeal as well.