For anyone interested in the next big opportunity for multifamily firms, the statistics provided by demographers are staggering. Generation Y, also known as the echo boomers, accounts for only 7 percent of the U.S. population, but 21 percent of spending. Latinos will possess a trillion dollars of buying power by 2010. And the baby boomers, who are just beginning to retire, add up to 76 million people.
Unfortunately, numbers only present the barest outlines of these three demographic stories expected to shape and support the apartment market in coming years. They only tell multifamily CEOs how many renters to anticipate; they don't indicate how to capture the interest (and the rent payments) of these would-be residents.
That's why we included a session on demographics at our recent MFE Conference, held Oct. 17-19 in Las Vegas. Moderated by Multifamily Executive Editorial Director Boyce Thompson, the program featured Jack Kern, director of research for Archstone-Smith Trust; Bruce Innes, vice president of marketing for
The Shelter Group in Baltimore; and Moe Vela, president and CEO of Comunidades, a consulting firm specializing in serving Latinos.
As the panelists discussed echo boomers, seniors, and Latinos, it quickly became clear that apartment firms will have to change and adapt everything from their properties to their policies if they want to be successful with these groups. "Twenty years ago, you could build apartments almost anywhere and they would lease up," Kern told the group. But that's no longer the case.
All of these demographic groups have expectations and attitudes that will influence their housing decisions–and the financial performance of multifamily firms–in the years to come. As Vela suggested to the audience, net operating income is suffering at many apartment properties "because Latinos are being underserved" in terms of providing "culturally welcoming" color schemes, interior design, and outdoor settings. And such updates shouldn't be limited to moderately priced properties. "Not all Latinos are on welfare. Not all Latinos are illegal immigrants. Not all Latinos are [Class] C renters," Vela reminded everyone.
Echo boomers also require a fresh approach. These young Gen Y renters multitask like crazy, use technology with ease, celebrate diversity, and want a "killer lifestyle," according to Kern. "They have the same fundamental needs as their parents, but their level of intensity is so much greater in terms of everything they do." That's worth remembering for many reasons. "When you think of [echo boomers] as renters, also think of them as employees and investors in your company. These are important sectors in all different ways," Kern said.
Then there are the baby boomers. "They will change housing, just as they've brought radical change in every institution they've gone into," from higher education to the workplace, predicted Innes. "They'll want a say in how buildings are run, staffed, and regulated, and I think that will give the industry some indigestion." Before executives reach for Tums, however, they'll want to call an architect, because these baby boomers will need serious storage space. "If you don't provide storage, they're going to buy it off-site," Innes said. "Talk about ancillary revenue!"
Given baby boomers' trillions of dollars in wealth, there's no need to give that away.
MARK YOUR CALENDAR
Grab your PDA and block out Oct. 4-6, 2006, because that's when you'll want to be at the MFE Conference, held next year at The Venetian in Las Vegas. Watch for more details next spring!