Multifamily and the Millennials

LOS ANGELES-This is an exceptional time to be a builder in the multifamily residential market. After years of restrained construction, the industry's supply and demand are nearing a balance. As jobs are being created and the economy recovers, positive household formation is also returning. With its sustainable job growth, Coastal Southern California is one of the nation's many regional markets that is stabilizing and in turn, this region is able to absorb new construction.

There are two key demographic drivers in today's market. The first demographic is the Baby Boomers. They want quality senior living—more specifically, communities that will provide them active lifestyles from post-retirement through continued and acute care.

Southern California's high-density multifamily sector also has significant demand from Gen Y (or “Millennials”), seeking high amenity, high-density urban living. Millennials make up about 25 percent of the nation's population and fall between the ages of 11 and 31. Approximately four million of these individuals will turn 22 every year, through the year 2020.

Compared to preceding generations, Millennials are more transient. Their wish—or need—to remain free to move from job to job trumps home ownership. A large part of this group is turning to rental housing as their best and most desirable residential option. This demand is attracting investor capital flow as well as construction loans, and debt from various sources.

Much of today's culture is delivered by digital and social media which influences trends and decision making among Millennials. These renters do a large amount of online research via social media to locate living environments that fit their independent needs and lifestyles. Moreover once they are settled, they are inclined to spread their opinion via social networks, which could translate as a plus for owners. A large part of their decision is based on their impression of the architecture, quality of the finishes, a 24/7 base of onsite amenities, as well as proximity to retail, dining, and easy access to public transportation.

Building for Millennials requires a highly collaborative approach with the owner/ client and design teams. That starts with a keen focus on the multi-faceted needs of the residents who will ultimately live in the community.

SL Residential recently re-positioned a 180-unit urban fractured-condo in Los Angeles for a client who realized the market demographics surrounding the location of their project had undergone a transformation during the four-year recession (as the project sat idle for two years) and the program had been more oriented toward mid-market condo ownership.  

Given the current high amenity luxury rental target market, the client was able to modify and upscale the amenity package to more trendy needs of younger, more independent residents—such as high-tech, cloud-based exercise bikes—while also updating the colors, quality and finish materials of the unit interiors for more trendy multifaceted lifestyles. Lastly the client re-set the project image with a totally new entry lobby / concierge plaza and business center that rivals any high-end luxury hotel. The completed look is a statement of how today's Millennials can be attracted and retained for sustainable livability.

Greg Sadick is a VP at SL Residential Inc. The views expressed in this column are the author's own.