Young adults ages 22 to 30—those “Millennials” who are a target demographic for many of the new apartment properties hitting the market—are likely to be in their first or second post-college home away from their parents. But it’s becoming more and more possible that their next-door neighbors could be their parents … or at least people their parents’ age.
That empty-nesters whose children have grown up and gone to college or work are downsizing by selling their suburban homes and moving into apartments is old news; the magnitude of this trend is what’s surprising developers.
Todd Thomas of Dallas-based developer Encore Multi-Family told the audience at a recent Interface Multifamily Texas conference that he never thought about empty-nest Baby Boomers wanting to rent at a new Uptown Dallas property. That is, until they started showing up to pre-lease units.
With that experience at front of mind, he told attendees, “With the empty-nesters renting, doing a deal with just a few twos [two-bedroom units] would be suicide.”
Subsequent panelists and other apartment industry experts said future projects will likely have a unit mix that includes more two-bedroom and three-bedroom units to attract renters ages 55 and older.
Many of these Boomers are moving to urban-core properties that are sprouting up nationwide. Tired of having to mow the lawn every week or repair the roof every year, they sell their house and move closer to the action. Like Millennials, empty-nesters might move to be closer to work and good restaurants, cultural centers, and downtown parks.
But developers and property managers shouldn’t focus solely on empty-nesters, say economists at apartment-market research firm Axiometrics. About 800,000 new renter households were formed from the Boomer set from 2010 to 2013—a rate of about 200,000 a year. Of those, about half rented single-family homes, according to Axiometrics.
Though many in the kids-have-flown-from-the-roost group have downsized to apartments, others have been victims of the foreclosure crisis of 2007–2010. They really didn’t want to downsize, so they rented single-family homes. Others are renting smaller homes to stay in their neighborhood.
Still, there are 100,000 new apartment renters per year among the Boomer generation, though they’re spread across markets throughout the nation. So while property planners certainly need to account for empty-nester demand, which is expected to remain high through at least 2016, Millennials remain the primary renter generation, and much of the planning should center on that cohort; Millennials are still the core driver of the apartment market.
On the other hand, the fact that older folks are surprising pre-leasing agents comes as a surprise in itself. After all, recent studies have shown that empty-nesters are taking to apartment living pretty well.
A 2013 report by the Joint Center for Housing Studies at Harvard University estimated that 2.2 million seniors who will be 65 or older by 2023 will enter the rental market, about half of the total projected renter growth by that time.
A Fannie Mae study, however, found that the proportion of Boomers living in detached, single-family homes is down only 0.3 percent.
A CBS News report featured John McIlwain, a senior fellow for housing at the Urban Land Institute, who not only is studying the senior renting trend, but is also living it. He sold his house in Chevy Chase, Md., to move to Dupont Circle in Washington, D.C., he told the network.
“There is a significant portion of the Baby Boomer generation that is opting to go to the cities,” McIlwain told CBS. “I think this is the beginning of a long-term trend.”
McIlwain acknowledged that hard data on the trend are difficult to find, but he’s seen visual evidence of it in about 40 cities he’s visited in the past few years, CBS reported.
The rush of empty-nesters to apartments has developers wondering how to best serve both Millennials and Baby Boomers.
Though the two cohorts enjoy amenities such as swimming pools, workout rooms, Wi-Fi, and dog parks, Millennials are more likely to want more social attractions, such as TV lounges, bars, and such, according to Zillow.com. The Boomers, conversely, the website said, prefer more-luxurious trappings, such as state-of-the art kitchens, high-end bathrooms, and walk-in closets.
Additionally, Millennials tend to prefer one-bedroom apartments, whereas Boomers favor multiple-bedroom units, to accommodate a home office and/or visiting children and grandchildren.
Speakers at the Interface conference half-jokingly debated whether to separate Millennials and Boomers by floor, having them meet only in the elevator or lobby.
But Millennials and Boomers might have at least one thing in common: The aforementioned CBS News report stated that some of the empty-nesters moving into apartments are divorced or widowed and are re-entering the dating scene.
There might be advantages to having an older or younger wingman.