As the country's largest generational population, millennials are a major force driving real estate trends. Their influence on today's multifamily rental market spans unit size, design, amenities, technologies incorporated and much more. This generation is anticipated to reach 70 million by 2024, so millennials can be expected to continue having a strong influence on the national real estate market for years to come.
Renters account for about 40% of the approximately 118 million U.S. households. The ratio is significantly higher among millennials under the age of 30. The recession and housing crisis of 2008 led to predictions that millennials would become averse to housing investment risk, and would postpone, or even permanently avoid it. Their freer lifestyle choices were also anticipated to have them delaying commitment to homeownership.
These factors, along with staggering student debt and escalated total cost of living across the U.S., have led to increased rental rates and the low number of millennial homeowners. According to the Urban Institute, only 37% of millennials were homeowners in 2015, which is 8% lower than Baby Boomers and Generation X homeowners by that same age range of 25-34.
Rents reportedly consume around 29% of the U.S. national median income, and the ratio exceeds 30% in more than a dozen major cities. With high rent and other costs of living, many Millennials are finding homeownership out of reach. Add the exorbitant student debt burden they can expect to carry for decades, and the picture becomes one of a U.S. American generation that is less able than their predecessors to build personal wealth and financial security for retirement on a foundation of homeownership.
Multifamily Market Trends from Millennial Shift
Many young people are aspiring to homeownership, however about 64% are renters, the majority of whom report that they do so due to their financial position. The vast majority (75%) of millennials work and live in urban environments, which are especially appealing to younger millennials whose priorities include having their work, recreation, social activities and housing all in close proximity.
As millennials are approaching their later 20s, many gravitate away from living and working in urban centers and look to settle in the suburbs, to raise their families and work. Their priorities change from those of young singles, to focus on finding better school districts for their children and more affordable multifamily residential square footage. In response to this shifting millennial trend, some employers are relocating office operations to suburban areas.
Features and Amenities Attractive to Millennials
Millennials look for luxury apartment features and ultra-modern common area amenities, yet at discounted pricing. Some attractive features to millennials include:
- Internet and technologies
- Fitness facilities, yoga studios
- E-commerce delivery accommodations
- Security features
- Outdoor recreational features
- Barbecue grill areas
- Washer and dryers in units
- Recycling services
- Dog parks and pet bathing facilities
- Online payment and maintenance ordering
- Smart controls
- Concierge services
- Electric car charging stations
How Millennials Can Change the Multifamily Rental Market
This generation of renters value higher-end apartments that provide luxury features and amenities that a single-family starter home typically does not offer. Generally speaking, what millennial multifamily property residents want includes:
Constant Connectivity — Millennials want the best available connection, and they want to be seamlessly and continuously connected for work, shopping, recreation and socializing. Multifamily property developments should accommodate Wi-Fi needs, online shopping deliveries, and an online property management digital communications interface for residents.
More Bedrooms — Born between 1981-1996, millennials are now 23-38 years old. So, as many grow their families, they need more living space. Gallup Analytics reports that just above half of millennials at around age 34 are married, a striking 83% have children by that age. But, according to Axiometrics data, over the past 17 years, under 40% of new apartment development has been in two-bedroom units.
Community Setting — They want a community lifestyle, as provided by common area options for work, recreation and daily living activities, and by programs to provide them with info on social and community events, etc..
Going Forward for Multifamily Developers
In 2018, student loan debt was $1.5 trillion, and young adults (age 24 and under) held average savings of -1.8%, per Forbes data. So, single-family home ownership does not appear likely to work in the budget for a vast percentage of young graduates any time soon.
Therefore, generally speaking, millennials can be expected to be a driving force across the multifamily rental market, with these young renters selecting the best available options for their lifestyles and budgets. The best performing properties that serve this market segment will be those that emphasize the particular features, amenities and pricing needs of this demographic.