Multifamily Executive Special Report: This is the second in a three-part series investigating the myths and realities of three controversial demographic groups that will impact multifamily housing demand in the next decade. The final installment on the emerging renter bracket of single women will appear in our November issue.
Katherine Wang is like many of her friends. And, in some ways, that's not a good thing for apartment executives. The 24-year-old graduated from the University of California, Los Angeles in 2006. After school, she took her first job in publishing but stayed in her college apartment—with four roommates. Then the economic realities of the real world hit. First, there were the student loans. Then the car accident, forcing her to buy a new car. Suddenly, she was back home with her parents, who lived 29 miles away in San Gabriel, Calif.
Wang isn't alone. She estimates that more than 50 percent of her friends have moved back home with their parents. Many make good salaries and want to put their money into cars and vacations. “A lot of us are working and saving our money,” Wang says. “It's really expensive to get a place by yourself—easily around $1,000 a month.”
It doesn't hurt that Wang and other members of the Generation Y demographic generally get along with their parents, according to a 2007 survey from The Pew Research Center for People and the Press. In the survey, “A Portrait of ‘Generation Next': How Young People View Their Lives, Futures and Politics,” nearly half of the people surveyed said they saw their parents daily.
The apartment industry knows this and realizes that the trend among Gen Yers to move home is a serious threat in an economic slowdown. “The thing with Generation Y is that they have a very close relationship with their parents,” says Ed Lange, executive vice president and COO of BRE Properties, a San Francisco-based REIT that owns 21,808 units along the West Coast.
Industry executives and property managers have been eagerly anticipating the arrival of Gen Y, although there is some debate over whether they've been living in apartments for a while or are just arriving. Some say the 74.8 million individuals born between 1977 and 1994 make up Gen Y; others say it's the 80 million individuals born between 1982 and 1995. No matter their exact age range, this tech-savvy, trend-setting generation—called everything from “millennials” to the “echo boom” of Baby Boomers—is believed to be armed with $200 billion a year in purchasing power, according to a 2006 report from Resources Interactive, a marketing firm based in Columbus, Ohio. For years, many in real estate clung to the notion that this wave of young professionals would emerge from college and enter leasing offices en masse, driving demand for rentals until almost 2030 (when the last of the generation turns 35 and homeownership rates skyrocket).
At least, that was the hope. Unfortunately, the economy seems to be slowing this migration. Even for those Gen Yers entering the rental market, the same rules don't apply—apartment owners can't use traditional playbooks to market, design, and serve the millennials. Whether it's using new technologies to market to them or figuring out how to make apartments affordable to them, apartment owners will need to think outside the box to lure this generation, which presents challenges that their older siblings, parents, and grandparents didn't.
This is the second in a series of stories exploring the myths and realities of three demographic groups that promise to drive multifamily demand over the next decade. MULTIFAMILY EXECUTIVE examined each trend, analyzed the data, and culled anecdotal evidence from executives in the field. Here's how the Generation Y phenomenon is unfolding at multifamily properties.
Gen Y has some of your best renters right now.
For more than a decade, the apartment industry looked forward to the arrival of Wang and her peers. Between 2008 and 2020, the U.S. Census Bureau reports that approximately 57 million members of Gen Y will reach the age of 22—the beginning of prime rental age.
“There's a huge bottleneck coming through,” says Dan Oltersdorf, vice president of residence life at Campus Advantage, an Austin, Texas-based company that provides strategic planning, counseling, and property management services for student housing companies and has firsthand knowledge of Gen Y and its tendencies. “[The demand's] been hitting in higher in education for the past 10 years.”