Turning Millennials Into Your Biggest Asset

With the delivery of over 315,000 units, new apartment completions has reached an all-time high, the highest level in over a quarter century. While this may cause concern to those worried about an oversupply in markets, industry experts forecast that the rental industry is expected to remain strong. Experts say there may be a shift away from the over-built luxury Class A inventory designed to cater to higher-earning renters, and that this shift will create an increased demand for value-oriented Class B and C properties located in opportunity zones. What is the driving force behind this? The answer lies within a cohort of creative, tech savvy, Coachella attending, avocado-toast loving young adults that we have come to know as the Millennials.

WHO ARE MILLENNIALS?

Millennials account for a quarter of the U.S. population and make up just under 25% of consumer discretionary purchases, “estimated to be over a trillion dollars in direct buying power.” (Who are Millennials, 2019). These 20 and 30 year olds are shunning or delaying homeownership now choosing to remain renters instead.

GENERATION RENT

Beyond the obvious challenges to homeownership including rising mortgage rates and housing prices, many Millennials simply aren’t in the position to purchase a home. Most are still paying off their student loans or saving up for down payment. And having come of age during the Great Recession where they witnessed their parents’ homes sink into an underwater mortgage, many Millennials aren’t ready to commit to homeownership just yet. It makes sense why these would-be first-time homebuyers - labeled as “Generation Rent” - are forgoing a mortgage and choosing to continue renting. A recent survey of 1,000 renters between the ages of 18 and 34 found that nearly 80% do not plan on trading rents in for a mortgage anytime soon. (Rent.com, 2019).

CHANGING OUR INVESTMENT STRATEGIES

High demand, low vacancy and steady rent growth? It is no wonder why investors are putting their money into rental properties. Considering that “Generation Rent” accounts for nearly half of the renters in the U.S. , the real estate industry as a whole needs desperately to

undergo a renaissance in investment strategies in order to capture the needs of these millennial renters and tap into the growth opportunities they are creating within the rental industry. Investors are wise to keep a constant pulse on the trends of this cohort as Millennials may prove to be your biggest asset.

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Written by Jessie L. Choi (Lopez)

for REK Partners

June 28, 2019

References

Who Are Millennials? (2019). Millennial Marketing. Retrieved on June 26, 2019 from http://www.millennialmarketing.com/who-are-millennials/