Millennials Target Customers
Do you wonder if the new urban core apartment construction is out of sync with the target customer?
If you look a look the number of permits that have been granted in these primary markets in the last 12 months, there is a lot of new product coming on line. Developers and operators are developing a significant part of their inventory so as to provide housing for the Millennials. It is estimated that a third of these new units are in areas that would be considered as the “Urban Core”. These are the areas that the Millennials covet. Because of construction and land cost, these new apartment units will be priced at a minimum $2.25 to $3.00 a square foot. In some markets (NYC, Los Angeles, Seattle) the square foot rental will at least another $1.00.
Millennials currently represent one third of the population. “Millennials are defined by the Pew Research Center as Americans born between 1981 and 1997, and represent approximately one third of the population. The data represented in the following map was taken from the Minnesota Population Center's 2014 "American Community Survey" …. to show exactly where Millennials are right now in terms of salary. The medians ranged from $18,000 in Montana to $43,000 in Washington, D.C.”
If one takes note of the median income for Millennials on a state income basis, the math just seems not to work. You might make a case for Seattle and New York City being in sync with its reported high paying technical and financial jobs. Yet in a lot of cases you scratch your head when you think about millennials being the coveted target customer that are in many cases hobbled with significant student loans reported to be on average of $29,000 per borrower.
At the end of the day, these units will be absorbed either by pricing adjustment, the “Boomer” developing a taste for the urban life style or the doubling up of Millennials. In certain markets there has been a pullback in delivering new Urban Core product. But the fact is the pullback will not stop overnight. If construction has started, there is a 99% chance it will be completed. New job growth could be a correcting factor but, in all likelihood rental pricing adjustments will occur. The reality is that this generation will not realize the financial successes of their Boomer parents and new housing products will be developed to serve this demographic group.
Bill Hamilton http://www.multi-housing.solutions/