Some have blamed tighter lending conditions. Others have blamed a difficult job market, underemployment, and/or stubbornly low wages. Another theory is that, having seen the real estate crash of the late 2000s lay waste to lifetimes of hard work and financial discipline for so many, some millennials are gun-shy about making the jump into home ownership.
And yet another theory being offered by developers is that there has been a paradigm shift and that millennials are simply looking for something different out of life.
Billionaire real estate mogul Jeff Greene has been quoted by The Real Deal, a South Florida real estate news publication, as saying that “millennials are much more interested in experiences than things — they would rather climb a mountain than buy five extra pairs of jeans.”
And according to a press release from his company, Josh Delk, vice president of Transwestern Development Co. in Austin, Texas, says the result is that millennials are leading a “growing demand for more efficient, affordable living space that is close to numerous amenities.” Despite earning wages that aren’t keeping pace with rising rents, Delk says that younger generations still “want to live in the middle of restaurants, bars and entertainment areas.” And to lead this type of lifestyle, they are willing to sacrifice space, and often, ownership. For now, they are supposedly choosing social time over the traditional American dream of owning a home.
Greene has responded by proposing a 12-story mixed use project in West Palm Beach featuring 400 “micro” units, each only about 450 square feet in size. Greene’s project will offer people the chance to enjoy a new building with the latest and greatest amenities, the convenience of downtown living, and the lifestyle flexibility resulting from substantially smaller rent payments. And Greene isn’t alone.
The Miami Herald recently reported that moving-company and arts mogul Moishe Mana isformally proposing putting up a building consisting entirely of what’s been dubbed “micro-units” — compact, hyper-efficient and affordable apartments meant for young singles who want to live in dense urban neighborhoods and get around primarily on foot and public transit.
A similar development being exclusively marketed by my team, The Jack Coden Group of Keller Williams Realty — Miami, is called The Wave and has been approved for Shorecrest in Miami’s Upper East Side. The Wave is slated to be a mixed-use development, featuring ground-level commercial space and over 400 smaller rental units aimed at younger professionals seeking an affordable, chic, urban living space that has walkable work and play opportunities.
Another impressive new development is planned for downtown Miami called MiamiCentral. The development will feature 800 rental units aimed at young entrepreneurs and business professionals. MiamiCentral will be amenity-laden and have 180,000 square feet of commercial space, with plans for restaurants, nightlife, fresh markets and more. It is unclear how many of the units will be of the “micro” variety, but the project is clearly targeting this young adult shelter shift.
My agents work with millennials on a daily basis. Many of these millennials are, in fact, looking to rent instead of buy. However, our renter clients are usually looking to rent simply because they cannot buy. Whether it’s not having enough money for a down payment, insufficient credit or some other factor preventing them from getting a loan, our renter clients are usually renting because it’s their only option.
We do not often encounter someone who tells us that they want to rent so that they can have more money to eat, drink and play. That said, when we do hear it, we’re likely hearing it from a millennial.
We also find our agents interacting with a disproportionate number of millennials who could buy but that appear “afraid to pull the trigger” on buying a home. These millennials are active online, attempting to monitor the market as closely as they can from their computers and smartphones, often appearing to be somewhat frozen in inaction due to information overload. And they sometimes wind up staying in rentals partially due to a fear of making the wrong decision as they try to time a market that simply cannot be timed.
We know that millennials, generally speaking, aren’t marrying, having kids or buying homes. Human nature says that this will likely change at some point.
But until then, whatever the reason, the bottom line is that we are seeing a very real increase in demand for rentals, especially for smaller and more affordable rentals. Expect to see this trend continue at least in the near term and for developers to continue positioning themselves to capitalize on the shifting paradigm.