By 2025, Millennials are expected to occupy 75 percent of the workforce, and it is estimated that by 2015 they will have a combined purchasing power of $2.45 trillion worldwide. As this generation, which has been dubbed the “consumers to change it all,” comes to wield a substantial amount of purchasing power, monumental shifts could occur in commercial real estate (CRE).
Why does this generation stand to completely change the CRE landscape? It could be attributed to the digital revolution that Millennials grew up in and that forever transformed society. This era of radical innovation molded a new Millennial behavior set and belief system that is worlds apart from previous generations. Some of the most notable Millennial viewpoints disrupting how this generation works, lives and plays, and that could eventually impact CRE, include:
- Urban not Suburban Living: Millennials favor living at the intersection of where they work, live and play. Nielsen reports that 62 percent of Millennials indicate they prefer to live in the type of mixed-use communities found in urban centers, “where they can be close to shops, restaurants and offices.” This preference could be driven by many Millennials’ decision to delay marriage and children. Just 22 percent of Millennials are currently married, according to Pew research.
- Digitally Driven Living: Tethered to their devices, Millennials are sleeping with their smartphone, and according to Nielsen, 83 percent literally do. With the ability to work, live and play essentially anywhere at any time, this generation’s always-on nature could prove to have a profound impact on CRE, especially on office space.
- Residents of the World: Flexibility and freedom are at the heart of Millennial living. Their desire for a more nomadic lifestyle could play a part in their preference for renting not home ownership.
So what CRE sectors could experience the greatest transformations as a result of the Millennial value system? A few examples include:
- Office: As Millennials increasingly opt to live in densely populated and energetic urban centers, as well as work from and near their homes there could be a dramatic shift in how office space is utilized. For example, there could be the collapse of the suburban office park and erosion of new office development.
- Retail: While arguably the most technologically savvy generation, Millennials still rather shop in-store – according to a new study by OpinionLab, Millennials prefer shopping malls over shopping carts. However, to develop the more personalized and seamless shopping experience Millennials long for, brick-and-mortar retailers are reshaping their physical space to offer more of an experience.
- Industrial: While studies have shown Millennials have a penchant for in-store shopping, they still rely on e-commerce. Jones Lang LaSalle’s Millennials Outlook cited that, “By 2020 they (Millennials) will account for 30 percent of (online) retail sales.” This growing use of e-commerce could power an increased movement of goods that could require more fulfillment and distribution centers ultimately leading to a more vibrant industrial sector.
- Residential Development: Historically disenchanted with home ownership, many Millennials continue to rent versus buy. This preference may be more a result of economic circumstance than intent, as Millennials have faced high unemployment, high barriers to credit, and substantial debt stemming from the rising cost of education. And while the financial tides are turning as the economy recovers and provides Millennials more opportunity for home ownership, their preference for the freedom and flexibility renting affords may continue to outweigh the American dream.
Looking for guidance from one of the top real estate accounting firms? Contact Mark Abrams at 404.874.6244 and or simply fill out our form below and we’d be glad to help.
This article first appeared in Commercial Property Executive.