LOS ANGELES—Is the multifamily industry ready for the wave of demand that's set to hit the market? In looking at the demographic trends that are most impacting the industry, there are two forces at play. There are Millennials, or Echo Boomers, who will be entering the market in droves. There are also the Baby Boomers, who have much more disposable income than their younger counterparts and are expected to sell their homes and downsize. Experts at RealShare Apartments yesterday at the Westin in Downtown L.A. took a closer look and weighed in on the two groups.
According to Greg Willett, VP of MPF Research, there are currently two types of Millennials. Mainstream Millennials, he said, comprise 39% of the market-rate apartment renter base. Their average income is $49,568 per household. “There are lots of these households in every type of neighborhood where small units are the dominant choices and the propensity to renew upon lease expiration is the lowest across any renter segment.”
The second Millennial group Willett pointed to is “the stereotype that everyone thinks about.” Moneyed Millennials have a higher average income, about $131,331 per household, Willett explained. “They comprise 15% of the market-rate apartment renter base, live in the urban core or high-rent suburbs, almost never the low-rent suburbs, and small two-bedroom units are the top floor-plan choice.”
Another group of renters are Luxe Lifestylers—mostly affluent couples in their mid-30s or older, with average age at 52 years old. They comprise 7% of the market-rate apartment renter base, Willett explained.
But not all Baby Boomer renters are Luxe Lifestylers, he added. Another group are independent seniors (66 years old, on average), which comprise 10% of the market-rate apartment renter base. “They live in conventional product, not in properties specifically designed for senior housing.”
So who is driving the market? The consensus among panelists were Millennials. “Baby Boomers are contributing but the next 10 years will be driven by Millennials,” said Erica Linn, manager of research and publications at Yardi.
Willett agreed, getting more specific. “Millennial females,” he said, pointing out that “most college degrees go to females and most of the older kids that are still living at home are males.”
And according to Willett, “the downsizing empty nester isn't an imaginary trend, but it isn't the driving force and won't change the world dramatically.”
Brad Cribbins, COO of Alliance Residential, pointed out the stats on the number of kids still living at home, in some cases impacting those people who are looking to downsize.
Linn added that the majority of boomers, based on surveys, might be downsizing but they aren't downsizing to an apartment lifestyle. “They still want to be able to have the kids over. When homeownership declined across the board, many went to the shadow rental market.”
As far as those living at home, Linn noted that there are about 4.5 million more young adults living at home than there were six years ago. “Eventually there will be a pop and those kids will fly the coop.”
One major concern on panelists' mind was wage growth. “How deep is the pool of people that can sustain the rental growth that we have seen,” asked Cribbins.
Willett was not as concerned, noting that while affordability is a concern, he really has seen the majority of people matched up with what they can afford. “Don't believe the numbers you see out there…those gigantic income-to-rent ratios aren't real.”
The RealShare Apartment two-day event still continues through the rest of today at the Westin Bonaventure in Downtown L.A. and walk-ups are always welcome. See you there. More than 60 high-level speakers and nearly 2000 in attendance at this year's event. The RealShare Conference Series is produced by ALM's Real Estate Media Group, which also publishes Real Estate Forum and GlobeSt.com.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
