U.S. households are renting at an all-time high over the last 50 years. The market share of multifamily rental construction starts averaged 95 percent[1] in the third quarter. Lifestyle changes, economic inflation, and faster design builds have “raised the roof” for investment returns too.
Also standing tall is a surge in mid-rise districts and urban living, prompting over 380,00 housing[2] starts in 2016.
While numbers are telling, and tenant occupancy rates soar, are demographic shifts triggering the payout? “Yes,” according to Jeffrey Sica, President and CEO, of Circle Squared. “There’s a generational pull among millennials, Gen X, and baby boomers aggregating an extended boom for investors. The younger set feels squeezed financially, others are sandwiched somewhere between nuptials and parental caregiving, and empty nesters are looking to downsize. These are the signs of the times, with mixed-use and multifamily poised to continue to grow.”
Before cashing in on this trend, pay attention to these market segments, income brackets, and economic premiums.
Millennials (Age 20 to 34): Delaying Major Life Events
With less work experience, more student loan debt, and weaker employment prospects, millennials feel the pinch. A report by Business Insider reveals national student debt now totals over $1.4 trillion[3]. The fair trade? Young adults are skipping the mortgage payment commitment in favor of rentals, micro suites, and co-living spaces. While this has caused a 35 percent drop[4] in home ownership, there’s another perk to preceding residential buying: short-term commitments.
In a survey conducted by GenFKD, millennials anticipate working (and possibly relocating for) an average of nine different jobs[5] over the course of their careers. These urban hipsters, by all accounts, are increasingly mobile enjoying the freedom of apartment hopping and nomadic travels. The nuclear family shattered, and marriage a distant milestone[6], Millennials embrace the money-saving allure of co-habitation – all 400 square feet of it.
Generation X (Age 35 to 50): Prime Earning Years
The forgotten middle “child” flanked between tech-savvy Gen Y and retiring boomers, comes equipped with deeper pockets and steadier earnings. But the Gen X cohort, impacted by the housing crises and Great Recession, has caused homeownership rates to fall below 62 percent. As reported by Builder Online, Gen X is below the overall rate of homeownership for the nation.
Perhaps their mid-life transitions are to blame. Those in their 50s include downsizing divorcees and empty-nesters. And the younger set is said to rent, with kids in tow, due to careers and lifestyles. Luxury amenities like kid-friendly playgrounds, in-house gyms, and common areas also create an atmosphere of resort-style living.
Baby Boomers (Age 51 to 70): Downsizing, Leisure, and Retirement
The Boomer set might as well be called the “migration generation.” They’re uprooting their home-base to follow their children to major cities while relishing the cultural benefits of metropolitan life. In fact, the number of renters age 55 and over rose 28 percent between 2009 and 2015. Some projected 5 million U.S. baby boomers are also expected to rent their next home[7] by 2020.
Much like millennials, they’re in a money crunch. Over 66 million Americans lack retirement savings and selling their homes can bring about quick returns[8]. The natural desire to enjoy their grandkids, the attractiveness of luxury high-rises, and the ease of less property maintenance, also presents a viable draw. Savvy builders and investors take note…
Strength in Numbers
Exclusive research conducted by the National Real Estate Investor[9] highlights:
- Multifamily properties scored highest and most popular among top real estate investors
- 3 percent believe that occupancies will continue to rise over the next 12 months
- And stable capital markets prove prominent, with no change in the amount of debt (48 percent) or equity (44 percent) available in the multifamily sector over the next year
Ultimately, the multigenerational renter is offered a vast playground suitable for varying ages and active lifestyles. At Circle Squared, we recognize the changing demographics are investing in neighborhood enhancements and breaking ground on new and exciting projects.
Your investments are your nest egg. It’s time they stood firm too… as high as the tallest building. Leaps and bounds ahead of the commercial housing curve.
Visit our website and learn more about the benefits of real estate investments and how you can work with us in 2018.
Investors should be aware of additional risks associated with alternative investments due to factors such as economic and political instability, regulatory requirements, increased volatility, illiquidity, higher management fees, lack of performance history, currency fluctuation, and differences in auditing and other financial standards and that these risks can be accentuated in alternative investments. Alternative investments may be suitable only to those who understand and are willing to assume the economic, legal and other risks involved.
The foregoing is not a complete list of the risks involved with alternative investments. You should thoroughly review all pertinent offering documents with respect to alternative investments with your financial, legal and tax advisors to determine whether the investment is suitable for you in light of your investment objectives and financial circumstances.
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[1] (DIETZ, NAHB Eye On Housing 2017)
[2] (Walter, NHMC 2017)
[3] (Holodny, Business Insider 2017)
[4] (Sisson, Curbed 2017)
[5] (Staff, FKD 2017)
[6] (Bahrampour, The Washington Post 2016)
[7] (PYMNTS 2017)
[8] (Hendricks, INC 2017)
[9] (Bodamer, National Real Estate Investor 2017)