But, they are so much more than an age range. Millennials have come to represent a new era of society that is inextricably linked to technology. They are a generation that is supposed to be dramatically different than previous generations. And, by 2020, millennials will represent roughly 50% of the global workforce. That means their way of doing things will become the norm.
So what does that mean for real estate?
Where are they living?
Millennials are known for their love of all things urban. But, that might be a function of age, not inherent demographic values. According to a recent survey by ULI, six out of 10 millennials expect to live in a detached single-family home within five years.
The drive to suburbanization is the same for millennials as it has been for other recent generations: marriage and kids. Although it is true that millennials are putting off marriage and family until later in life, that doesn’t mean they are putting it off indefinitely. Seventy-five percent of millennials still plan to get married, which will likely prompt the next suburban exodus.
But, they aren’t going to buy. At least not yet. According to the National Association of Realtors, millennials don’t want to buy a house for a variety of factors:
- They want the flexibility to move around because they don’t like their job
- They have piles of student debt loans
- They have recession-induced “spending anxiety”
Many suburbs are trying to urbanize with the hopes of drawing in millennials. The combination of new suburbs, rising rent prices, and homeowner benefits might just encourage some millennials to make the jump.
Don’t hold your breath for them buying cars, though.
What sectors are they most impacting?
Millennials are making waves in almost every sector of commercial real estate.
The biggest impact is being felt in the office sector. Whether it’s true or not, millennials will forever be inextricably linked to the open office floorplan. Their aversion to cubicles in favor of open spaces, shared common areas, and whiteboards has left an indelible mark on offices all across the country.
Millennials are also known for their untraditional work behaviors. The 9-5 became the 8-6 became the 24/7 as the work day adapted to globalization and technology. Early birds are in from 7am-6pm, night owls are in from 11am-10pm, we don’t bat an eye at 3am emails. Your cell phone is an extension of your arm and now talks to your car, computer, 1Password, and more.
There has also been an emphasis on “healthier” offices. Daylight is becoming a necessary feature for all employees and spaces. When walls and cubicles are still needed, design trends lean towards frosted glass and lowest possible walls to maximize access to daylight. Storage, copy rooms, restrooms and phone booths are clustered in the middle.
Millennials are doing a fair share to shape retail, as well, largely due to their pure purchasing power. According to Accenture, millennial shoppers spend an average of $600 billion a year in the United States alone. That number is expected to exceed $1 trillion by 2020.
Since these consumers are much more tech-savvy, and have come to age alongside the internet, e-commerce is a necessary component of their retail sales. Retailers are finding that the key to success is a seamless integration between brick and mortar stores and online presence. Physical stores and websites are working hand-in-hand instead of canceling each other out.
As a result, the whole experience of retail is changing — consumers have apps that get them the best price, from anyone, anywhere. Many companies have begun repositioning their retail locations in recent years to make the store an involved experience.
All of this e-commerce activity is changing things for industrial buildings too.
Well, to cater to these types of e-commerce tenants, developers need to build a different type of warehouse. For one thing, these facilities need taller roofs, between 36 and 40 feet, about eight feet above what used to be the standard. Part of the reason for the higher ceilings is that the column spacing is wider apart, creating more room for products.
Rather than the typical retail model, which calls for shipping entire pallets of items to stores, online retailers keep more products in smaller quantities that need to be individually chosen by workers. Warehouses are also commonly larger, at upwards of 1.5 million square feet to accommodate e-tailers.
Will they change CRE as an industry?
You bet. There is no doubt that millennials are changing commercial real estate properties. But they’re also changing the industry, as well.
The industry is beginning to realize that they are in a war for talent. The next generation of CRE leaders expect a different work environment with mobility, modern tools, and data at their fingertips. The companies that lag behind are finding it increasingly difficult to recruit top CRE talent and are suffering from a growing talent gap. This next generation of talent is demanding change in its employers, encouraging new ways of working and new technologies to drive the business forward.