There is so much coverage about how millennials are changing the commercial real estate industry that it’s easy to forget about other generations. Yes, in broad strokes, millennials want creative office spaces and mixed-use environments where they can live, work and play. But you know what? Baby boomers want that, too.
In the multifamily sector, boomers are having a major impact. As this generation’s children move out of the house and boomers enter retirement age, they’re realizing that they don’t have much use for a large single-family home. And when they look to downsize, they want what millennials want: walkable environments with grocery stores, restaurants, public transportation and various other services. Like millennials, boomers aren’t as keen to use a car for their daily errands and entertainment as they were in the past.
From homeowners to renters
Multifamily Executive recently cited a Freddie Mac report that asserted that by 2020, an additional six million baby boomers who are now homeowners plan to rent. This trend stems from a desire to pay less for housing, an interest in finding facilities that have retirement amenities, the inconvenience of lawn and property maintenance, and aspirations of living in a walkable community.
Another recent report said that boomers have already accounted for half of the country’s rental demand over the last decade. Additionally, several of these potential renters are seeking luxury apartments, driving demand for more upper-end products from developers.
In many ways, this trend shouldn’t be too surprising. Let’s face it, homeownership isn’t what it used to be. Since the housing crash just under a decade ago, people are skeptical of putting their money in real estate. It’s also tougher for owners to build equity in their homes than it was in years past.
Bloomberg reported that the number of renters 65 or older will reach 12.2 million by 2030, more than double the number that did so in 2010. And when it comes to the desire for multifamily housing in urban areas, boomers are actually competing with millennials for the limited supply that is available for these types of properties.
Supply continuing to tighten and push rents up
This is good news for developers and commercial real estate owners. In Marcus & Millichap’s latest national multifamily report, the firm pointed out that apartment rents are continuing to rise. First-quarter apartment rents were up 5.9% year over year, and that is with increased supply on the market that has led to a slight dip in vacancy rates.