Millennials Emerge As Buyers. Here's What That Means For The Industry
Millennials are emerging as homebuyers, driven by their increasing age, wealth and high rents. Understanding how their preferences differ from other generations’ is integral to capitalizing on this shift with properties designed to meet their needs. Polaris Pacific vice president and project director Matt Felt talked about how owners, developers and marketers are appealing to Millennial homebuyers.
Bisnow: To what do you attribute the appearance of a new wave of Millennial buyers? How do this younger group’s housing preferences differ and how are they influencing development?
Felt: In the San Francisco Bay Area markets we are just seeing the emergence of the leading edge of Millennials — people between 28 and 35 — wishing to purchase. They’re primarily driven by rising rents, which make buying financially prudent. They mainly show interest in the high-density urban housing on the lower-cost or entry-level end of the spectrum.
They don’t demonstrate the same desire to have parking; instead, proximity to public transit and job areas are a huge factor. They also display an affinity for community — a neighborhood feel — that’s fostered in an urban environment that still offers the proximity to services they demand.
Bisnow: How is this Millennial emphasis on community influencing design?
Felt: Developers are taking note of this preference and are placemaking, integrating retail, restaurants and green space into mixed-use projects. They’re also delivering more transit-oriented developments. The assets with a prime location and a good amenity set are unsurprisingly performing the strongest.
With Millennials looking at entry-level price points, developers are providing smaller homes and more amenity space. Outdoor areas are a primary focus because of the climate. We also hear prospective buyers expressing a wish for co-working space, state-of-the-art fitness centers and areas to host guests, like a private dining room that can accommodate a dinner party.
Bisnow: Why is Millennial demand for townhomes so robust?
Felt: This is mainly due to land constraints in desirable core locations. Building stand-alone single-family homes isn’t cost-effective anymore, even in the suburbs. Townhomes offer a great alternative — they’re sort of an entry-level compromise between the traditional home and apartment.
Single-family home resale appreciation has had double-digit growth post-recession, and recently launched townhome communities in the valley have sold quickly.
Bisnow: Although still too young to be purchasing, Generation Z will likely have a different set of criteria and demands for housing. What do you anticipate these will be, and how can marketers and developers prepare?
Felt: While we have some time before Generation Z, we do have to prepare nonetheless by studying the discrepancy in purchasing habits between generations, and making sure the physical spaces they’ll occupy manifest these. One trend that we see is that, while Millennials do research and purchase things online, Generation Z actually seeks out face-to-face interaction.
They’ll talk to experts in person, and they’ll go to brick-and-mortar stores to get advice before making a purchasing decision. Even though they’re digital natives and ultra tech-savvy, they crave the human connection.
Bisnow: How will ride-sharing services and the projected proliferation of autonomous vehicles alter urban development?
Felt: Reducing the number of single occupancy commuters goes a long way toward alleviating congestion. Whether driverless cars will be adopted by commuters in suburban markets remains to be seen. In urban areas, most projects now do not have 1:1 parking because of enhanced public transit. Less parking on-site means more free space for walkways, recreational space and parks.
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