How Millennials Are Impacting Southeast CRE

ATLANTA—From population growth to economic strength, the Southeast is giving commercial real estate developers, investors and advisors something to write home about. Economists predict expansion in Southeast metros as the post-housing bust markets post sold growth and boost overall commercial real estate demand.

The Southeast is bucking the national population growth trend. While growth is slowing overall, US Census data released in March reveals the Southeast is leading the nation's population growth, with Orlando topping the list at 5.4%.

“The Southeast is growing and will continue to grow from a population perspective, and that creates opportunities for the real estate industry,” says Bob Peterson, chairman and CEO of real estate investment, development and advisory firm Carter in Atlanta. “When you've got solid growth in the population, you're going to have solid growth in construction business.”

Commercial real estate industry watchers see plenty of emerging and growing trends in Southeast markets, from collaborative officing to affordable multifamily to live-work projects. Mixed-use remains a hot trend but another “M” word—Millennials—is demanding even more attention from developers across diverse property types.

“There is a lot of talk in the industry about creative office and collaborative environments, but what that means to each company is different,” says Marc DeLuca, eastern regional president of KBS Realty Advisors, a buyer of commercial real estate and structured debt investments headquartered in Newport Beach, CA. “In some office markets we are seeing fully open floor plans and in other markets we are seeing traditional offices but with a design that gives a feeling of openness that still allows a confined work space to provide an area free of distractions.”

One consistent Southeast trend DeLuca sees: Companies want to be more productive with happy, healthy employees that like where they work. One solution is to incorporate collaborative workspaces in the mix and locate in areas with abundant amenities, such as restaurants, athletic activities, mass transit, retail and nearby residential.

“The obvious ongoing trend is the continuing movement of Millennials to the urban core,” says Peterson. “They want to live in a place where they don't spend half their life in a car. Now as Millennials age a little bit and start having children, the desires may change. Many folks in the South have not really grasped the long-term benefits an urban life completely. There are still a lot of people that want their yard and space, so that's going to factor in at some point.”

The Southeast is one of the most affordable regions in the US for Millennials, according to RealtyTrac. Fayetteville, NC, Atlanta-Sandy Springs, Jacksonville, FL, Nashville-Davidson and Greenville, NC were listed among the most affordable housing markets for Millennials. Of course, this demographic is not the only one that needs affordable housing.

“There's also no question that the affordability of housing is a real barrier for folks,” Peterson says. “That's why the multifamily apartment market has seen tremendous growth and a tremendous amount of construction. We're seeing rising rents and very strong occupancy rates.”