If you think that commercial real estate is the playground of the rich and industry for experienced people in their 50s or 60s, you couldn’t be more wrong. Millennial investors are increasingly investing in commercial real estate and redefining the industry with their new millennial lifestyle trends.
But why are millennials interested in commercial real estate and how are they influencing industry trends?
Well, there can be three key reasons why. These include:
- They majorly rent properties for years, before they buy their own house
- Millennials are putting their trust in tangible assets, and
- This demographic prioritises Proptech, or technology integration in real estate
The 80s and early 90s-born millennials are also known as Generation Y.
According to Pew Research, millennials are the largest generation of the workforce with a whopping purchasing power of over $200 billion.
Moreover, for the first time ever, this year the millennial population will exceed the Baby Boomers in the US.
So, the millennials with their higher risk appetite, and asset-light financial approach are rapidly redefining commercial real estate trends and forcing industry experts to rethink the future of the market.
Millennial and Gen Z Lifestyle Trends In 2022
1. Health and wellness
Millennials prioritize health and well-being above anything else.
From having a home gym to meditation rooms and massage rooms, this generation focuses on improving both their mental and physical wellness.
And post-COVID, the awareness, and adoption of necessary measures for healthy living have skyrocketed.
2. Value for convenience
The busy lifestyle of millennials has forced them to strongly value convenience.
Time is very valuable to millennials, therefore, they are constantly looking for solutions to protect it. Born and raised in a digital era, millennials are accustomed to instant gratification.
Thus, they seek out properties that are designed to maximize efficiency and provide easy access to nearby amenities.
3. Social media is life
Life without social media is unimaginable for millennials and Gen Z. Platforms like Facebook had revolutionized the way people connect on a digital platform.
However, more recently platforms like Twitter, Instagram, and LinkedIn are dominating the social media network.
Apart from socializing with friends and family, these platforms are also great tools for news, information, marketing, and business.
4. Millennial housing crisis
Millennials are a generation that is burdened with lots of financial challenges like student loans, economic downturns, and a rise in unemployment.
Over the last few decades, the prices of residential properties have been constantly increasing. Moreover, millennials are not that interested in their parent’s properties as they lack a certain appeal.
As a result, the shortage of affordable homes is causing a housing crisis in the market.
6 Ways Millennials Are Changing The Commercial Real Estate Trends In 2022
1. Reconfiguring office space
Millennials are the first generation to break the stereotype of working.
They are constantly challenging the traditional concept of restricted office spaces and small cubicles.
Hence, they believe it can be done from various places and not just from a desk.
Rather they prioritize collaboration and socializing at the workplace. As a result, the modern office is transforming its layout by adding more common and open spaces for interactions.
As a result of these habits in the workplace, the last couple of years witnessed a significant decrease in average time spent at the office.
Brought up in a rapid technology-advancing world, millennials like to implement technology in their work for better efficiency and productivity.
Tech amenities like high-speed wifi and digital and collaborative tools in the workplace help them get the job done easily.
Google had made plans for a long time to transform its work according to the latest millennials and Gen Z lifestyle trends.
The pandemic acted as a catalyst in bringing these changes to life faster.
It’s setting up designated rooms to bring virtual employees and in-person employees together in one place.
Furthermore, Its Silicon Valley HQ has converted parking spaces into an outdoor camp office. Providing their employees with more open and spacious floor space.
Google’s new meeting room concept: Campfire, Source: NYTIMES
2. Rental takes over homeownership along with relocation
A Harvard report states that almost two-thirds of the millennial population prefer renting to buying a home.
Compared to other generations, the millennial generation has a much lower rate of homeownership.
According to the report, this generation witnessed major economic downturns, huge college debt, and an increasing unemployment rate.
As a result, rentals like multi-family apartments seem like a much more suitable and appropriate option for them.
The real estate market has changed a lot in the past couple of years.
The millennial housing market is completely different when compared to older generations. Moreover, nowadays jobs require a lot of traveling, thus purchasing a residential property makes no sense to them.
This resulted in the growth of multifamily property leasing in the last couple of years.
So far we’ve established that millennials are huge investors of the multifamily rental market.
Therefore, real estate investors, property managers, and developers should update properties according to the following millennial lifestyle trends.
- Getting the necessary amenities
Millennials are all about economic living while adding value to the property. Their priorities are the conveniences and improvements that improve the quality of life.
According to Upwork, about 36.2 million Americans will work from home. Therefore, amenities like better wifi and coworking spaces will definitely be an attractive feature.
- Digital payment
According to a study by Deloitte, 80% of millennials use digital transactions as a mode of payment. Using rent collection platforms and payment apps is more reliable and easy to use for millennials.
- Virtual and self-guided tours
Millennials lead a busy lifestyle and cannot afford to spend time physically inspecting or viewing the property.
They don’t want to go through all the lengthy processes of taking appointments and driving to the location. Instead, virtual tours of the property can help them get an entire detailed view with a few simple clicks.
- Proptech tools
Using Proptech tools like improved HVAC systems, automated indoor environment control systems, IoT devices, and AI improves property performance and streamlines operations. As a result, it keeps you ahead in the competitive market.
- Leaving less carbon footprint
Retrofitting old buildings using clean and green technology. For example, switching to LED lighting structures, smart thermostats, efficient HVAC, and getting the property LEED certified.
3. Migration from cities to the suburbs
We’ve already discovered that due to financial challenges millennials prefer renting to purchasing a property.
But it doesn’t end there, rents in metro cities have been sky-high for a long time. When it comes to expenses, millennials are not able to save much.
As a result, the past few years have seen a sudden increase in the migration of mostly employees to the suburbs and secondary marketplaces.
Secondary markets and suburbs are attracting more people with their affordable rents.
Moreover, COVID accelerated the drive of migration with the increase in remote work culture.
According to Pew Research Center, one out of five Americans of ages 18 to 89 moved to suburbs during the pandemic.
Source: Realtor.com
4. Embracing technology like never before
Commercial real estate developers need to take a huge leap in technological advancements to adapt to the need of millennials.
Technology is an important sector that has now become a necessity instead of a nice-to-have feature.
We’ve already seen the importance of technology in office and multifamily apartments.
Besides these, there are other ways how millennials are impacting the CRE industry with technology. As the youngest millennial slowly enters adulthood, this generation’s investment power also increases.
Up until now, CRE investors have been satisfied with face-to-face meetings keeping technology as the lowest priority.
However, all that is going to change with the new generation of millennial investors.
Millennial investors are using technology not only to implement changes in physical spaces and designs but also in lead generation.
Using technologies like artificial intelligence and data analysis can lead to better market insights, and social media platforms can result in better lead generations and generate new business.
Join the Lilypads community to use the best lead generation tools to grow your business.
5. A balance between E-Commerce and Retail Stores
As expected, this busy generation has a habit of online shopping via E-commerce websites. It has forever changed the way how we look at shopping.
E-commerce benefitted millennials as it provided a convenient shopping experience that suited their busy lifestyles. E-commerce giant like Amazon has been dominating the online shopping sector with over 58% of total online sales.
Moreover, the pandemic saw a major increase in sales and traffic of eCommerce businesses and indicates a promising outlook for the industrial real estate sector.
However, this doesn’t mean that physical stores will become obsolete.
Even after the huge growth of eCommerce websites, the majority of retail sales were from physical stores. Companies need to rethink the design of their retail space based on the shopping habits of this tech-savvy generation.
Adding experiential retail ideas like omnichannel experience, personalizations, implementing AR technology to try out products, offering value-added services, and more. These help in engaging customers for a longer period.
6. Sustainable Living
Millennials are the most eco-friendly generation ever. Their level of awareness and concern for a sustainable environment surpasses any other generation. They tend to look for establishments, companies, automobiles, and cities that align with their viewpoint.
This lifestyle choice of millennials has a strong impact on the commercial real estate industry.
Commercial real estate developers are incorporating various sustainable features to target the vast millennial market.
Features like adaptive reuse help to repurpose and renovate properties saving costs as well as reducing construction wastes.
Integrating AI into the property improves building operations and automates maintenance saving energy and reducing carbon footprint. Lastly and more importantly getting your establishment LEED-certified is like putting an eco-friendly badge on the property.
The Lilypads Bottomline
Is It A Good Time To Invest In Commercial Real Estate?
You might be wondering why is it a good time to invest in commercial real estate? Well, irrespective of any economic or external factors, commercial real estate investments have always been a preferred choice of investment.
However, the increase in the millennial population has introduced new changes and trends in the market. The majority of the renters and tenants are millennials.
To be successful in the long run, commercial real estate professionals must study these trends and understand what millennials desire. They must be quick to adopt these trends to capture the millennial market in commercial real estate.