In PART ONE of this post we took a look at how the baby boomer generation is primed to impact the future of the economy in a big way, affect market trends and influence the commercial real estate industry in the coming years.
Today, in part two, we’ll be taking a look at their equally economically powerful counterparts, millennials.
To briefly recap, the baby boomer and millennial generations comprise a combined 61% of the total population. This means that their likes, dislikes and even mere preferences hold a lot of sway on the future of the market and in turn the future of the commercial real estate industry.
By shifting the focus away from property types and onto the types of generations who live, work and shop in those properties, we can gain new insights and examine possible trends for the coming years.
Now that you’re all caught up, let’s examine how millennials are already shaping the future of the marketplace.
Born between 1980-2000 and totaling about 80 million Americans, millennials spend approximately $600 billion annually already. By 2020 when the majority of them will have entered the workforce, they are expected to be responsible for a much as $1.4 trillion in spending per year, representing 30% of total retail sales.
With that in mind, let’s examine a few of the millennial trends that are set to have the largest impact on the commercial real estate industry in the coming years.
First, millennials are going to have a big impact on the future landscape of office spaces. This is due in large to this generation’s preference to view the office no longer as a place dedicated to individuals tasks, but as “a meeting place for a diverse group of people to gather, share and collaborate,” stated a report by Jones Lang LaSalle. The report when on to explain that, “offices are becoming places where people with common goals, but diverse sets of skills meet to generate new ideas.”
However, not only is the interior landscape of our office spaces and the dynamics of how we function within the walls of those spaces set to shift, millennials are also having an impact on the very location of those offices as well.
More than anything millennials crave community and collaboration, and this translates into a deep love of mixed-used, walkable, live, work, play environments. And while many millennials are being drawn to urban downtown areas for this very reason, research has shown that the suburbs are not dead. However, if they wish to adapt to this shift in demand will have to prioritize creating mixed-use, walkable neighborhoods that are transit accessible.
One interesting impact that the, tech savvy, online shopping, millennial generation will have on the commercial real estate industry in the coming years is in the industrial sector.
With the rising demand for online shopping and faster delivery times, comes an increased demand for industrial distribution and fulfillment centers. “An estimated 30 percent of the U.S. industrial big-box demand has a correlation to e-commerce, and this will not abate anytime soon. Major retailers continue to open new fulfillment centers that offer access to the nation’s key population centers and infrastructure, and are opening smaller centers to enhance coverage in secondary markets.” stated La Salle. “Currently, around 59% of the country’s population shops online; millennials, a generation raised on technology, comprise the majority.”
Lastly millennials place a large priority on price, having lived almost half their life during the great recession, “they habitually use mobile devices to compare prices while shopping in stores and tend to favor value-oriented retailers like dollar stores, second-hand stores, drug stores and off-price retailers,” commented La Salle. Shop’s topping the millennials most visited list include: Forever21, Old Navy, Marshalls, Target, Walmart, Macy’s, Kohl’s, TJ Maxx, Urban Outfitters and JCPenny.
Millennials are a tech-savvy, ambitious generation who want to be “in the know,” love to participate and engage, crave authenticity, are tremendously influenced by their friends and want to make a difference with their lives. But it’s also important to keep in mind that these millennials are just now coming into their own, entering the workforce and about to start families. Keeping tabs on this demographic over the next several years will give many investors a leg up to be prepared for the shifting demands of the future marketplace.