The ever-expanding real estate market is recognizing a startling statistic: millenials already outnumber baby boomers. Millenials are members of the generation born between 1982 and 2000. Their tastes are markedly different than the generations before, and real estate developers such as the Timberlane development group are profiting off the recognition of those differences.
The Timberlane Firm is making a healthy profit off transforming rundown, distasteful looking apartment buildings located in potentially desirable neighborhoods into a hub for millenial renters. Timberlane is only four years old, but currently holds a real estate portfolio worth$160 million, logging annual yields of 11.2 percent. While the group started renovating small buildings in Seattle, they have since expanded to Los Angeles and Salt Lake City and are leveraging their strategy for success.
What Do Millenials Want?
Young professionals in urban areas have specific wants and needs. First, while many millenials may want to purchase a home, they aren’t yet ready to make the leap and the committment. They are struggling with more student debt than any previous generation and facing an economy that has yet to raise wages in accordance with inflation. So for the time being, most millenials may be resigning themselves to renting.
Millenials are very financially savvy – which is why they are interested in making wise real estate investments. Typically they avoid buying outside their budget. Rent or housing payments that are too high is one sure way to get into financial trouble. Making rent or a housing payment is top reason people get title loans, according to research from Pew.
What tops the millenial wish list when they start their search for property?
Location and Amenities
Location still reigns supreme, but it is what is situated within that location that offers the largest draw for this age group. Millenials are attracted to “hipster” neighborhoods with coffee shops, antique shopping and organic grocery shopping options. Even more importantly, millenials would like to be able to walk to all of these places. Sure, they want a parking spot for their car, but does the building have bike storage? That might matter more for this environmentally-conscious age group.
Another part of what appeals to millenials may surprise developers and turn the market on its head. Millenials are willing to sacrifice space for amenities and location. They like large public entertaining patios in their buildings. They want a gym, a deck and a pool. Since they are settling for a studio or a one-bedroom, it’s up to developers to make up for the lack of room in their apartment for attractions elsewhere.
Will Millenial Tastes Shift as Time Passes?
Younger generations may seem fickle and harder to predict for older developers who have been in the industry for years. Will these preferences and trends last? Should developers invest millions in catering to this demographic? What if their tastes alter as the years go by?
Timberlane Firms are betting that if tastes do change, their will be more people to fill the vacated apartments left behind, possibly the next generation after the millenials. In addition, properties don’t lose their value overnight. Developers may miss a major opportunity if they avoid catering to millenials out of fear.