Minding The Millennials in Real Estate Decisions
Employers trying to attract the technologically savvy millennials need to understand their living and working preferences.
However, I will spare you another discussion about what kind of real estate millennials want. The fact that millennials prefer dense, walkable, mixed-use, centrally located, transit-oriented environments is no longer in question. Instead, I’d like to focus your attention on a potentially more fascinating question — why?
But I know what you're thinking: “You’re just a kid. Why should I listen to what you have to say?” Well, first of all, millennials now make up the largest generation, outpacing boomers by 15 million. Additionally, we are the best-educated and most technologically savvy generation that there has ever been. We value community in a way that our parents' generation did not, which manifests itself in where we choose to live and how we would prefer to work. Understanding our motivations and responding to them should make our employers, our customers, our neighbors, the developers of our communities, and our parents a lot better off.
The Great Recession hit us disproportionally hard and has shaped our subsequent behaviors. In 2012, 36 percent of millennials lived with their parents. The percentage of us who were married decreased from 30 percent in 2007 to 25 percent in 2012. The unemployment rate for individuals between the ages of 16 and 24 was 15.5 percent in 2013 and 14.4 percent in 2014, while the over-25 cohort enjoyed an unemployment rate of 5.4 percent.
Rising costs, stagnant wages, longer hours, and greater responsibility are the reality of the modern professional — and pains acutely felt by millennials. According to the NY Federal Reserve Board, student loan debt per person for the under-30 cohort increased from $13,000 to $21,000 during a period when all other forms of debt decreased. While higher education leads to better and more fulfilling employment opportunities, the associated costs are forcing millennials to delay their entry into the housing market and creating a headwind for the broader economy today, and impinging on our ability to save for retirement. We have lower rates of homeownership and fewer defined benefit pension plans, which will threaten to impoverish a larger portion of our cohort. Rising costs, stagnant wages, longer hours, and greater responsibility are the reality of the modern professional — and pains acutely felt by millennials. According to an EY Global Generations Research study, 80 percent of millennials live in households with two full-time incomes, whereas 73 percent of generation X and 47 percent of boomers do the same. In fact, 25 percent of boomers have a spouse who works part time or not at all. According to Karyn Twaronite of EY, “When there’s frustration about work-life balance in the workplace, and you think your boss doesn’t get it, that very likely could be true.”
Multiple surveys show millennials as the most dissatisfied segment of the labor force and have identified flexibility in when and how they work as their primary concern. We will take pay cuts and forgo promotions to maintain work-life balance. In case you read that as an invitation to cut our wages, we’ve also cited lack of flexibility as one of the primary reasons that we have quit jobs. Astonishingly, 40 percent of millennials responded that lack of paid parental-leave policies would make them consider moving to another country.
For example, The Washington Post profiled Ryan Shaw (23/no kids) in an article discussing our generation’s desire for work-life balance. Ryan identified work-life balance as “necessary for success.” While he liked his job, he did not enjoy paying high LA rents, which prevented him from paying down his massive student loan debt. He negotiated with his manager to work remotely and promptly moved back to his parents’ home in Florida. To quote Ryan, “I want to take care of my health and have deep relationships with people I care most about. And not just people who happen to be in the same building with me every day.”
Embracing Technology/Different Work Habits
Millennials are the first generation to be born and raised in the digital age and see mobile computing as a way to organize and simplify our lives. SAS and the Bank Administration Institute published a report that concludes that financial services institutions must innovate to appeal to this generation or face the prospect of being pipped at the post by disruptive technologies in much the same way traditional taxicabs were blindsided by Uber and Lyft. Younger workers who grew up immersed in technology see it as a way to work productively from anywhere whereas older managers see empty cubicles as lost productivity. As Reagan babies, millennials have lived their entire professional lives in the wake of the broken covenant between employer and employee. The economic revolution that so empowered and enriched our parents has impaired our well-being in myriad ways. A lack of job security defines the labor market that we inhabit; therefore, it is natural for us to value agglomerative economies that allow us to find new opportunities quickly and easily. For many millennials, the notion of one income per person died with Lehman Brothers and Bear Stearns in 2008. The subsequent job market disproportionately impacted our generation as many of us found ourselves to be the first fired and last rehired.
Multiple surveys show millennials as the most dissatisfied segment of the labor force and have identified flexibility in when and how they work as their primary concern. As many of my generation sought to supplement their incomes with temporary work, the gig economy emerged. Also known as the sharing economy, the gig economy is the broad proliferation of freelance engagements as a significant portion of wages in the labor market. It is the blurring of the lines of what we know as permanent jobs in the formal economy. It has provided consumers with new and innovative products and services like Uber, Airbnb, Etsy, and others.
Millennials embraced freelancing and the gig economy more fully than any other preceding generation as a way to pay the bills while pursuing diverse interests such as design, tech, activism, and arts. We aspire to a meaningful work-life instead of the traditional career path as defined by our parents’ generation. According to the Freelancers Union, 38 percent of millennials are engaged in freelance work, compared to 32 percent of all other age groups, and 82 percent are optimistic about the future of freelancing. Furthermore, the gig economy might be even bigger than we have initially realized. Economists Larry Katz and Alan Krueger are conducting a study to prove their hypothesis that the gig economy is expanding, despite a report to the contrary in The Wall Street Journal in 2015. According to the two researchers, the share of the employed population filing 1099 and Schedule C tax forms increased in the 2000s, while other traditional measures of self-employment decreased over the same period. Furthermore, a review of their preliminary interviews with “gig economy” workers has shown that individuals with both standard and freelance employment engagements often do not identify as having multiple jobs, even in cases where the non-traditional income is significant, as they do not see their side gig as a regular job. Katz and Krueger estimate that 60 percent of such workers derive at least 25 percent of their incomes from freelance gigs.
Technology and the gig economy combined to kill the traditional nine-to-five workday in the minds of millennials and gave birth to co-working. Co-working is the practice of freelancers and unaffiliated professionals sharing a workspace. These venues can be as simple as the local coffee shop with a free Wi-Fi connection or as sophisticated as individually leased workstations with shared administrative functionality. The millennials of the 21st century are building co-working spaces as support systems and social networks in much the same way that the millennials of the 20th century, who came of age at the height of the Industrial Revolution and a rapidly changing economy, built the modern labor movement. The notion that networks and hubs make for successful freelancers dovetails with the ubiquitous social networking platforms that have defined the era into which millennials came of age. Examples include WeWork, a membership-based community of freelancers and entrepreneurs sharing professional office space in multiple cities in North America and Europe, and The Frontier@RTP, free drop-in space/incubator for freelancers and entrepreneurs located in the Research Triangle Park. Several large firms outside of the tech sector have experimented with flexible workplace solutions with mixed success. Bank of America’s My Work program allowed participants to work remotely as a means to reduce the amount of real estate in its massive portfolio. At its peak, the program could boast well over 30,000 members, but it gradually lost support from upper management and has been significantly rolled back.
Industrial firms are not immune from having to meet the needs of a younger labor force. Young workers at industrial employers likely want modern amenities in their workplaces, just like their brethren in more urban locations. Many characteristics of industrial properties — such as large lot sizes, single-use parcels, large buffers, and in some cases, isolated locations — conspire to make difficult the acquisition and retention of young and talented employees. Industrial property owners and operators face a task that is challenging though not impossible.
Where possible, it is important to identify the amenities and conveniences that matter to the target population in the area and provide them on-site. If they value transit, provide shuttles to centrally located pick-up points. If they value access to restaurants and your property is far from good options, encourage local food trucks to bring what’s good to you. Offer discounted rates on ride-share or car-share platforms like Uber, Lyft, and Zipcar if the target population expresses an interest in flexibility.
Fearing competition from other knowledge clusters in more urban and amenity-rich locations, Research Triangle Park of North Carolina is a good example of a largely industrial property that has repositioned itself to appeal to a younger worker, as was demanded by its tenants. While there is no panacea capable of closing all the gaps, firms must make the effort to meet the needs of this growing segment of the labor force or risk the inability to compete for their talent and facilities managers the obsolescence of their product.
To most of us freedom is found in the cities. They offer us amenities, access to social activities, diversity of cultural experiences, and mobility. Our experiences stand in stark contrast to our parents’ generation who believed the car to be the ultimate symbol of American independence. By and large, millennials define auto-independence as a privilege, as automobiles represent costly burdens that hinder rather than support our desired lifestyles. We grew up watching our parents climb into their vehicles each morning before sunrise to battle traffic for up to an hour each way, in some cases, to drive to bleak and far-flung office parks from even more remote subdivisions. We watched as our parents missed important events during our formative years, ruined their health through lack of physical activity, and stretched themselves financially to sustain an inherently unsustainable lifestyle at the periphery. And while we appreciate the sacrifices they made for us, we have politely declined this vision for our future.
Millennials are the first generation to be born and raised in the digital age and see mobile computing as a way to organize and simplify our lives. Car ownership in the under-25 cohort decreased from 73 percent to 66 percent between 2007 and 2011. Our aforementioned financial constraints have delayed our entry into the housing market. Our homeownership rate decreased from 44 percent in 2004 to 37 percent in 2011 and we accounted for 70.3 percent of the shortfall in expected housing formations between 2007 and 2011. Sixty-seven percent of millennials are renters and are more likely to live with roommates or family; 14 percent of millennial homeowners have returned to renting compared to 4 percent of the general population doing the same. Exclusionary zoning codes in many jurisdictions have limited the rental housing stock in the suburbs making it difficult for us to live there even if we wanted to. According to Nielsen, 62 percent of us prefer mixed-use to sprawl, and 40 percent of us intend to live in a mixed-use area in the future. We’ve reversed nearly 100 years of steady suburbanization as urban growth outpaces suburban growth for the first time since the 1920s. We’re most highly concentrated in cities that reflect our progressive values with Austin, Texas, boasting the highest concentration of millennials in the country at 120 percent the national average. Washington, D.C., is the only city on the East Coast in the top 10 markets for millennials at 109 percent. Suburban communities have long relied on successive waves of young families relocating there from cities nominally in search of better schools and cheaper housing. These waves have slowed significantly as millennials are increasingly choosing to raise their families in urban environments. New Urbanism, pioneered by Peter Calthorpe, applies urban principles to suburban development and helps smaller cities and towns across the country to compete with urban communities for the favor of older millennials and their higher incomes. Ironically, boomers could face multiple problems during the downsizing phase of their lives: 50 percent of boomers want smaller, more centrally located homes when their children leave, putting them in direct competition with millennials for what is a constrained supply of such units. Boomers will also face low demand for their suburban homes as millennials have shown a strong preference for urban environments.
“Just wait until you get older. Just wait until you have your own kids.” Skeptics of the trend toward urbanization still believe that millennials will make the same tradeoffs as our parents did once we come to our senses — that we will sacrifice proximity and access for schools and elbow room as soon as babies force us to grow up. These “Concern Trolls,” to borrow a particularly millennial term, often point to the explosive growth of suburban communities like Hoboken, N.J., and Arlington, Va., as proof that this demographic shift is a fad rather than a trend. Lost in the fawning coverage of places like Arlington and Hoboken is that they both have direct rail access to their respective regional employment hubs. In fact, Arlington is home to the Rosslyn-Ballston Corridor, which is perhaps the finest example of a real estate/public transit public-private-partnership in the nation. Arlington and Hoboken possess a luxury that most communities don't have, and thanks to the difficulty of approving rail transit projects in this country, won’t have for the foreseeable future. That millennials have flocked to inner-ring, transit-connected suburbs does not suggest a victory for the American suburb but for the virtue of transit connectivity.
Millennials have more debt, less disposable income, and less free time than any generation that preceded us. On the other hand, we have more education and more avenues to meaningfully and profitably apply this knowledge, which is impeded by the orthodoxy of the traditional nine-to-five workday. Our salvation as a generation will come in the form of an embrace of work as a portfolio of cash flow streams or deferred to assuage the vanity and insecurities of the boomers who manage us. In short, boomers, you had a great party and left us with a sizeable bill. We’d appreciate if you didn't quibble with how we choose to pay it.
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