The Millennial generation is the largest in history. Millennials are often regarded as launching two major real estate trends: the shift to urban living and the preference for renting over home ownership. However, recent surveys conducted by Harvard University and Zillow indicate that most Millennials want to buy a home but make their decisions based on affordability.
Millennials are being priced out of city centers and are moving to the suburbs, which are no longer the quiet places their parents remember.
The Urban Land Institute’s 2017 Emerging Trends in Real Estate research found that, contrary to common opinion, 75% of all 25- to 35-year-olds in the top 50 U.S. metropolitan regions reside in the suburbs. The younger generation is redesigning the suburbs to include interesting restaurants, shops, entertainment venues, transit hubs, and offices with a creative flair. Because of this shift, multi-family and office buildings in the suburbs are hot commodities in the commercial real estate market.
As mentioned in the recent Bloomberg News article “Suburban Offices Are Cool Again.” As a fund, investor and/or sponsor, you have to be “early to the party,” so to speak, by recognizing this trend and making several private equity real estate investments in “smart” suburbs (those well-positioned with plentiful jobs, numerous recreation options, and quality schools).
They argued in Bloomberg that there might not be a super-cycle of urbanization. Both urban employment and suburban job growth are expected to remain strong among millennials. Additionally, suburban expansion may sometimes outstrip urban expansion. City or suburb, the best locations for real estate investments are those that allow for freedom of movement during the day and do not close their streets at night.
It’s Worth It to Invest in Suburbs
According to projections made by ULI, millennial families will be drawn to areas that offer educational opportunities and open space but are outside the central metropolis. The real estate thinks tank projects that demand suburban office space will increase in the coming year, as stated in its trend report for 2017. As investors, we think it’s vital to mine the opportunities in smart suburbs, particularly as property valuations near downtown grow and affordability becomes an ever-greater issue. It is especially true as the issue of affordability becomes an increasingly larger problem. The members of our acquisition team who are “boots on the ground” are looking for urban features that will attract and keep Millennials who live in the suburbs.
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