Gen Y—those between the ages of 16 to 33—represents about 25 percent of the population in the country and is now larger than the baby boomer generation, which is shrinking
This is a real boon to the apartment industry, points out M. Leanne Lachman, president of real estate consulting firm Lachman Associates, because so many of them are choosing to rent—and many of them can’t, or don’t want to, buy a home.
The Gen Y group keeps getting larger for a number of reasons, including the fact that immigrants to the United States typically come as young adults—and rent. This group is expected to continue to expand over the next 15 years.
Additionally, because young people are staying with their parents longer, the industry is seeing a lot of pent-up demand. In fact, in the last year, about 1 million new households were formed, and while that is fewer households than it should be, Lachman projects that this will increase by 300,000 to 400,000 per year. Therefore, once job creation ramps up, “there could be a big jump in rental demand,” she notes.
And this is not a short-term trend. Through 2017, she adds, there are going to be more than 4.3 million people turning 22 each year (though analysts used to use 18 as the age people left home, young people have delayed forming new households). This number is expected to remain above 4 million until 2025. And, of course, fewer people looking to purchase a home also bodes well for the multi-housing industry.
“Compared to where we were several years back, you’re seeing people defer decisions on home ownership to later in life,” affirms Alan Pollack, principal and co-founder of Chicago-based Providence Management Co., which owns about 1,500 units, many of them suburban. “You’re seeing a trend where job flexibility trumps owning real estate for the younger generation. People want to keep all their options open, and renting permits that.”
But with the housing market crash, it’s not just Gen Y renting apartments. In fact, Pollack sees the renter pool more as a barbell, with the 24- to 34-year-olds on one end and baby boomers, many of them former—voluntarily or involuntarily—homeowners, on the other end.
What does Gen Y want?
The industry often touts Gen Y’s desire to be in downtown, active areas near public transit. But this doesn’t necessarily equate to city life; in fact, notes Pollack, “if somebody has a five-minute commute in the suburbs to a terrific job, and there are theaters, restaurants, shopping, parks, nightlife, people are fine with that.” In fact, he observes, some people prefer it.
This observation is in line with “Generation Y: America’s New Housing Wave,” a 2010 report co-authored by Lachman. The report, which discusses Gen Y’s housing preferences, points out that a majority of Gen Y lives in the same region in which they were born.
“A very high proportion that say they are city people grew up in the city, so this ‘back to the city’ movement is very overstated,” Lachman notes. “What our work showed is that most Gen Y people really like where they grew up, and they also really like their families. Wherever they grew up is really where they want to stay, so they are not all flocking to the cities.”
In fact, with the exception of certain “magnet cities,” Gen Y finds suburban life appealing, notes Lachman, who adds that they may prefer transit-oriented areas in denser multi-use nodes within the suburbs.
As a result, she observes a much lower mobility rate within the country. While this may in part be the result of today’s economic climate, she has also seen far fewer people moving across state lines.
While they delay forming new households, once people of this generation do move out of their parents’ homes, they prefer to live without roommates; according to Lachman, they are content living in studio apartments—as long as there are enough common spaces for socializing.
Pollack, however, has observed a trend that seems to speak to the contrary. Though the current state of the economy likely plays a role, he finds that larger apartments that allow for roommates seem to be in higher demand.
Despite the fact that they prefer to live alone, Gen Y renters are particularly partial to their pets, points out Lachman, so communities that are not pet-friendly can say goodbye to their chances of attracting a large percentage of this population. And, she advises, those communities that do allow animals should try to incorporate features such as dog parks and runs into their offerings.
Marketing to everyone
With the renter pool expanding and encompassing a variety of demographics, a successful marketing campaign should identify a desired target market, according to marketing expert Lori Snider, founder of The Lori Snider Co. The industry, she adds, has the tendency “to try to be everything to everyone,” which often doesn’t work.
“What you’re going to do with a student community is completely different from what you would do with a community that is geared toward professionals between 35 and 45,” she points out.
With most prospects searching for apartments online, it’s important to examine your web presence and social media campaign—and make sure it’s relevant to your current residents and prospects. With the website, “make sure that it’s speaking to each audience,” says Snider, who suggests featuring people across demographics on the site. Additionally, she adds, design the site in a way that part of it has a “younger, hipper vibe,” while another part remains “a little bit more conservative.”
Of course, be sensitive to the fact that different demographics shop, purchase and communicate in different ways, reminds Pollack. “Your staff needs to be able to speak to both groups,” he points out. While seniors might prefer communicating on the phone, a young professional is more likely to indicate a preference for text messaging.
And, Snider cautions, “don’t forget about the importance of the drive-by,” and ensure that signage showcases the architecture and vibe of the community as a whole.
Additionally, find a message that appeals to all groups but differentiate it for each demographic, suggests Snider. While “a great location,” for example, appeals to everyone, it’s important to highlight what it is about the location that makes it so great, from the point of view of each demographic. A location near public transportation might be important to Gen Y because of its proximity to nightlife, but baby boomers might be more interested in the fact that the community is just five minutes from the ballpark.
Identifying your demographic early on allows marketers and property managers to create an environment where prospects would want to live, says Snider. Model homes, for example, have all too often been “very nice and opulent—and pretty much anything but memorable,” she observes. “We’re trying to appeal to everyone, and we’re trying not to insult anyone’s taste. If you really target your demographic, you can have more fun in that arena, and you create something that’s memorable and has some personality for that demographic,” she advises.
While setting up a model for each demographic would be ideal, most communities don’t have this luxury. But apartment communities can still be memorable using just one model; Snider recommends, for example, having a poster in the model that lists “‘five reasons you are going to love this apartment.’ We don’t share enough visually with our clients about why [they should choose us],” she says.
Of course, part of the appeal of your community is going to be what you offer—and selling it. According to Pollack, both Gen Y and baby boomers demand a high level of service and quick turnarounds for maintenance requests.
Amenities and floor plans can also be easy selling points for a variety of demographics. Pollack, in fact, sees active baby boomers wanting a number of the same features as Gen Y renters, such as fitness centers and dog parks.