To fully understand the impact millennial migration trends are presently having on companies’ site selection decisions, it is valuable to compare what we know about site selection decisions of the past to what we know now about the millennial generation. Can we assume that millennials have the same preferences as their Gen X and Boomer counterparts? Or is what we hear in the news true? That is, millennials are disloyal employees who desire the convenience of a personal and professional life in a walkable downtown. Then, based on the current research on millennial preferences, what can we say about the future of site selection decisions?
First, we must understand what is really going on with the millennial workforce of today. For our purposes, we will use the U.S. Census Bureau estimate of millennials consisting of adults born between 1982 and 2000. Despite the common perception of millennials as strict urbanites, according to CBRE Research’s “Millennials Myths and Realities” report, a staggering 58 percent of millennials are willing to work in the suburbs or outskirts of a large town, while 55 percent are willing to work in a medium-sized town. Additionally, 28 percent are even willing to work in rural locations. Furthermore, 21 percent of millennials are willing to travel further from their homes for a better office environment.
Though the CBRE “Millennials Myths and Realities” survey results may be surprising, are they reflected in practice? The ostensibly shocking answer is yes. One reason why millennials are moving to these traditionally suburban markets is housing affordability and quality of life. The high cost of housing is encouraging and sometimes forcing millennials to remain at home longer than ever before. These homes, typically, are in suburban markets. Even when moving out of the family home, millennials may be seeking locations where wages adjusted for the cost of living are equal to unadjusted median earnings. In sum, they are looking for markets where they can both live and work. Millennials seem to be far more practical on the decision to balance the cost of living, quality of life, and office environment than previously assumed.
Keeping Costs Down
How is this willingness of millennials to live in suburban markets going to benefit U.S. businesses? If companies can work on a business strategy that allows them to retain millennial labor in these markets, they will also benefit from reduced labor costs. For example, according to CBRE’s 2017 “Scoring Tech Talent” report, companies will pay around $113,000 for a tech worker in the industry-leading market of Seattle, compared to lower-cost markets like Madison, Wisc., where they may pay an equally skilled tech worker closer to $78,000. Over the first five years of an employee’s career, this equates to around $175,000 of savings per employee for a company. Combine these savings with lower real estate costs, and it’s clear there are significant costs savings associated with operating a business in a suburban market. With this example, it’s easy to see that suburban markets outside of large downtown metros can reduce labor costs significantly.
We cannot simply assume that millennials are flocking to downtowns in masses.
How are these findings on millennial migration trends and company overhead costs lining up with today’s site selection decisions? Although it may seem that companies are quickly fleeing their previous suburban campuses to join the masses in the city, this is not necessarily true in practice. According to CBRE’s Global Occupier Survey 2017, talent attraction is still a primary driving force in workplace strategy with 86 percent of U.S. respondents noting that they are adapting their workplace standards with a goal of employee satisfaction.
These results reflect well what our Location Strategy and Economic Incentives groups find in practice. Many of our clients are asking where they can find talent outside of major cities, while still maintaining the workforce they need and the business necessities salient to their operations. Whether it is a call center moving from a relatively expensive top-tier market into a secondary, cheaper market while maintaining a skilled labor force, or a back-office facility that needs to expand operations into a new market with less expensive real estate costs than the downtown headquarters, clients are seeking low-cost alternatives that still allow them to maintain the requisite workforce.
What can we take from this information? We cannot simply assume that millennials are flocking to downtowns in masses. As millennials age, suburbs and mid-sized towns will likely be their preference just like their Gen X and Boomer counterparts. Going forward, site selection analysis will become increasingly critical due to the need to balance practical business needs and costs with labor availability and retention. It is no longer as simple as saying the downtown move is the easy option to recruit millennial talent and maintain a loyal workforce. Now, it seems, a suburban shift may be the smart, long-term, and practical move.