There has been a lot of talk about the new millennials as of late. At recent conferences, I heard Scott Rechler from RXR and Billy Mack speak of how this demographic is transforming cities where they want to live and work. This trend is clearly pronounced in New York City and is driving office and residential rents to all-time highs in neighborhoods such as Midtown South and Downtown Brooklyn.
It wasn't until Cushman & Wakefield's 1st Quarter press conference that I realized the magnitude of this trend. This age group which consists of ages 15-34, accounts for 86.8 million people in the US compared to the Baby Boomers, ages 50-69, who number only 76.5 million. As the Baby Boomers move into retirement age, it will be the millennials who will begin to make up the largest percentage of the work force.
In taking a look at the New York Metro Area's job growth, it is clear where these millennials are working. Out of 720,000 jobs added in the last five years, 644,000 were created in New York City, where as the suburbs only account for 76,000.
(For more on NYC's outlook, see related video interviews with Cushman & Wakefield's
Ken McCarthy and Bob Knakal.)
In looking at office vacancy rates in the city, it demonstrates even further where the demographic is focused. In 1Q 2015, C&W reported that overall vacancy in Manhattan dropped to 9.2%, whereas Midtown South, where many of the tech and startups reside, proved to be the tightest market at 7%. Manhattan average asking rents are also at their highest overall quarterly rate since 4Q 2008 at $69/sf.
It is also no surprise that WeWork is expanding exponentially as they cater to this age group. In NYC, they are located in at least 16 buildings for over one million SF. They are now looking to expand into London, no doubt another city, where the millennials are thriving.
The urbanization trend fueled by the millennials is also having a major positive impact on property pricing in gateway cities, where these markets recovered nearly twice as quickly as those in major non-markets. According to C&W, pricing in gateway cities have surpassed peak levels by 16.9%.
NYC is certainly one of the largest beneficiaries. The 1st Quarter of 2015 was unprecedented with an astonishing $20.8 Billion in sales. This price would smash 2007's record of $63 billion if it kept up. Brooklyn also set an all-time record in the quarter with $2.3 billion in sales. The markets where the millennials are moving seem to be an investor's best bet.
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James Nelson
James Nelson is a Principal and Head of Tri-State Investment Sales in Avison Young’s New York City office.
Since Nelson’s start in the real estate industry 19 years ago, he has played an integral role in the New York City real estate market. He leads a team of professionals in a variety of client service offerings, including asset disposition, asset recapitalization, market research and financial analysis. His proficiency and capability is unmatched in all aspects of the acquisition and disposition of investment-grade real estate, as well as development and redevelopment transactions, on behalf of both institutional and private capital clients across all property types.
Prior to joining Avison Young, Nelson most recently served as Vice Chairman of Cushman & Wakefield, where he ran a successful investment sales team that marketed over $1 billion in deals in New York City and throughout the country over the past two years alone. He was also ranked as the number one Investment Sales broker at the firm nationwide in 2016. Prior to joining Cushman & Wakefield, Nelson was a partner and top producer for Massey Knakal for six of their last eight years and was named the company’s youngest partner in 2004. While at Massey Knakal, James was involved in the sale of over 400 properties and loans with an aggregate value of over $3.8 billion.
