LOS ANGELES—At the annual USC Gould Real Estate Law and Business Forum yesterday, Leanne Lachman, president of Lachman and Associates and the Executive in Residence at the Columbia Business School, joined a team of Gen Y‘ers to discuss how this new generation is changing consumerism and affecting the real estate market. The Gen Y response panel included Alexander F. Knott, VP at Wells Fargo; Jamie Lee, CEO of Jamison Realty; Daniel K. Liffmann, Sidley Austin LLP; and Matthew Lucido, CEO of Porter Inc.
According to Lachman, Gen Y, which includes those born between 1978 and 1995, is now larger than the baby boomer generation, and as such of are major source of demand in the market. Four in 10 millennials consider themselves to be urban people, living either downtown or in another neighborhood within urban boundaries. Because of Los Angeles’ unique urban geography, Los Angeles has a higher percentage of millennials who consider themselves suburbanites.
Due to this focus on city living, millennials crave a entirely different consumer experience than their baby-boomer parents. Millennials value “interest over comfort,” according to Lachman, and would rather pay for experiences than goods. This means that customer service and design are extremely important to the millennial consumer, who would shop in the traditional brick-and-mortar store so long as they get an experience and service they wouldn’t otherwise have shopping online. Likewise, millennials will pay for services, like laundry and dog walking, to by back leisure time in their lives. These are consumers who are looking are goods and money in a very different way from past generations.
Lachman explains that “in terms of socio-economic maturity, 30 years old is what 20 once was.” For this reason, experts must look at millennials turning 22 to estimate future housing demand rather than the former standard, age 18. This is important to note because millennials are generally renters, looking at large multifamily and mixed-use properties that offer social space and services onsite as well as private living space they do not have to share with a roommate.
The response team agreed with Lachman’s assessment of Gen Y. Liffmann added that this is a generation that has a very different idea of debt than previous generations. They are not looking to borrow money they can’t pay back in a realistic timeline, if they borrow money at all. He also noted that the stigma around living with your parents has evaporated and we are reverting back to an older model where multigenerational householders were normal.
For those living on their own, Lee of Jamison Realty used the example of a Koreatown office building her company converted into multifamily housing. She explained that the units can be as small as 600 square feet, but need high-end finishes and onsite amenities to make up for the smaller space. The property completed construction, and had an 85% occupancy rate by the yearend with average rents of $2.75 per square foot.
In terms of consumerism, Lucido described millennials as a convenience economy, spending money on services that help ease their lives. Purveyors of goods have sometimes as little as a seven second window to capture a millennial’s attention, so easy websites are key to captivating these audiences.