GENERATION Y Gregg Logan, Managing Director, RCLCO MARCH 2013 URBAN - - PowerPoint PPT Presentation

IMPACT OF DEMOGRAPHIC TRENDS:

GENERATION Y

Gregg Logan, Managing Director, RCLCO

MARCH 2013 URBAN LAND INSTITUTE

WHAT HAS THE GREATEST IMPACT ON REAL ESTATE CHOICES:

ECONOMICS, PREFERENCES, OR LIFESTAGE OF THE ACTIVE MARKET GENERATIONS?

 Post recession: “Everything has changed”!

– Has it really? Has it really?

 Many surveys completed on generational differences, attitudes, preferences

– Like measuring the depth of a river at different places?

 Do generations have fixed attitudes values  Do generations have fixed attitudes, values, and preferences or do they change based on life experiences?

– Or buy what they can afford among the choices

• ffered?

ULI March 2013

1

THE BIG DEMOGRAPHIC TRENDS IMPACTING REAL ESTATE

 BIG shifts in U.S. population composition, driving

demand patterns different from previous decades

– Generational as well as changing ethnic and racial composition of the population

• More Hispanic, Asian, and mixed-race, less Caucasian

p , , ,

– Immigration, critical and yet not well understood – Economic impacts

• Not merely workers coming for lowskilled job opportunities—highly

advanced science, math, and biotech

– Shrinking average household size

• 82% of household growth will be singles and couples without children

living at home

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BIGGEST DEMOGRAPHIC CHANGES

 Boomers, ages 49 – 67

• 1946 – 1964

– Biggest wave of population ever to move into “empty nester”, “pre-retiree”, and “retiree” life stages in history has begun

 Gen Y, ages 13 – 31

• 1982 – 2000

First wave of Boomer children moving into – First wave of Boomer children moving into adulthood, becoming independent households

• Impact on work spaces
• Impact on work spaces
• Impact on retail
• Impacts on housing of all kinds

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3

GEN Y:

MILLIONS OF 22-YEAR OLDS BY YEAR

4,100,000 4,200,000

WAVE OF GEN Y

3 800 000 3,900,000 4,000,000 4,100,000 3,600,000 3,700,000 3,800,000 3,400,000 3,500,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2

Number of 22-Year Olds NOTE: Number of 22-year olds is based upon birth rate and does not factor in death rates and migration.

SOURCE: U.S. Centers for Disease Control and Prevention

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GEN Y AND BABY BOOMERS:

LARGEST MARKET SEGMENTS NATIONALLY, FLORIDA

Generation Born Age Pop. % of Nation Florida Pop. % of Florida Generation Born Age Pop. Nation Pop. Florida Eisenhowers Before 1946 64+ 41M 13% 3.4M 18% Baby Boomers 1946 – 1964 45 – 64 80M 26% 4.9M 26% Gen X 1965 – 29 – 45 62M 20% 3 6M 19% Gen X 1980 29 – 45 62M 20% 3.6M 19% Gen Y (Millennials) 1981 – 1999 10 – 29 85M 27% 4.7M 25% Gen Z (?) 2000 and After 0 – 10 42M 14% 2.3M 12%

ULI March 2013

SOURCES: RCLCO, using Claritas; National Center for Health Statistics 5

GENERATIONS (IN MILLIONS)

90 United States 60 70 80 90 30 40 50 60

(millions)

10 20 30 Gen Y Gen X Boomer Eisenhower

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GENERATIONS (IN MILLIONS)

6 Florida 4 5 6 2 3 4

(millions)

1 2 Gen Y Gen X Boomer Eisenhower

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LIFESTAGE INFLUENCES REAL ESTATE DEMAND

Y Student Rental Rent As C l / Young F il Mature F il Buy 2nd Empty Nester Buy R ti Year Student Housing Rental Housing Couple / 1st Home Family Own Family Own Buy 2nd Home Nester Downsize Own Retire Home 2010 Gen Y Gen Y Gen X Gen X Baby B Baby B Baby B Eisen 2010 Gen Y Gen Y Gen Y Gen X Baby B Baby B Baby B Baby B 2015 Gen Y Gen Y Gen Y Gen X Gen Y Baby B Gen X Baby B Gen X Baby B Eisen Baby B 2020 Gen Y Gen Z Gen Y Gen Y Gen Y Gen X Baby B Gen X Baby B Gen X Baby B 2025 Gen Z Gen Y Gen Z Gen Y Gen Z Gen Y Gen X Gen Y Gen X Gen Y Gen X Baby B Baby B

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RECENT HOUSEHOLD GROWTH BY GENERATION

Total Net Household Formation United States, 1995 – 2011

2,500,000 1 000 000 1,500,000 2,000,000 500,000 1,000,000

• 1,000,000
• 500,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

• 2,000,000
• 1,500,000

Eisenhowers+ Baby Boomers Gen X Gen Y

ULI March 2013

SOURCE: U.S. Census Current Population Survey 9

GEN Y’S RENTER PROPENSITY TODAY IS SIMILAR TO GEN X, WHEN THEY WERE AT THE SAME AGE

Percent Renters by Generation United States, 1992 – 2011

90%

Percent Renters

1995: Oldest Gen X 30 – 71% Renters 2011: Oldest Gen Y 30 – 69% Renters 70% 80% 90%

2000: Oldest Gen Y: 19, 1995:

40% 50% 60%

2011: Oldest Gen Y: 30, Gen X: 46, Boomers: 65 Gen X: 35, Boomers: 54 1995: Oldest Gen Y: 14, Gen X: 30, Boomers: 49

20% 30% 0% 10% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Eisenhowers & Greatest Generation Baby Boomers Gen X Gen Y U.S. Overall

ULI March 2013

y

SOURCE: U.S. Census Current Population Survey 10

GEN Y HEADSHIP RATES ARE LOWER THAN GEN X AT THE SAME AGE

0 70

Household Headship Rates

Household Headship Rates by Generation United States, 1992 – 2011

1995: Oldest Gen X 30 – 0.27 2011: Oldest Gen Y 30 – 0.22 0.50 0.60 0.70 0.30 0.40 0 50

2011: Oldest Gen Y: 30, Gen X: 46 2000:

0.10 0.20

Gen X: 46, Boomers: 65 Oldest Gen Y: 19, Gen X: 35, Boomers: 54 1995: Oldest Gen Y: 14, Gen X: 30, Boomers: 49

0.00 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Eisenhowers & Greatest Generation Baby Boomers Gen X Gen Y U.S. Overall

ULI March 2013

SOURCE: U.S. Census Current Population Survey 11

GEN Y—LARGER CONCENTRATION OF NON- FAMILY HOUSEHOLDS AT SAME STAGE AS GEN X

Distribution of Household Types by Generation United States

1995 – Oldest Gen X 30 2011 – Oldest Gen Y 30 70% 80% 90% 100% 70% 80% 90% 100% 40% 50% 60% 70% 40% 50% 60% 70% 0% 10% 20% 30% 0% 10% 20% 30% 0% Baby Boomers Gen X U.S. Overall

Married Family Unmarried Family Non-Family HH Group Quarters

0% Baby Boomers Gen X Gen Y U.S. Overall

Married Family Unmarried Family Non-Family HH Group Quarters

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Non Family HH Group Quarters Non Family HH Group Quarters

SOURCE: U.S. Census Current Population Survey 12

HISTORICAL CHANGE IN OWNER HOUSING STOCK

78,000 80,000 74,000 76,000 70,000 72,000 66,000 68,000 64,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total Owner Units Occupied Owner Units

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CHANGE IN OWNER HOUSING STOCK

1,500 2,000 1,000 , 500

• 500

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

• 1,000

Change in Owner Units Change in Occ Owner Units

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HISTORICAL CHANGE IN RENTAL HOUSING STOCK

40 000 45,000 50,000 30,000 35,000 40,000 15 000 20,000 25,000 5,000 10,000 15,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total Renter Units Occupied Renter Units

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CHANGE IN RENTAL HOUSING STOCK

1,000 1,200 600 800 200 400

• 400
• 200

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

• 600

400 Change in Rental Units Change in Occ Rental Units

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HOUSING PRODUCTS AMERICANS LIVE IN NOW

Distribution of Households by Product Type

62% 61% 61% 60% 3% 3% 3% 3% 3% 3% 3% 3% 12% 12% 12% 13% 6% 6% 6% 6% 14% 14% 14% 14% 2008 2009 2010 2011 63% 63% 63% 63% 62% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 11% 11% 11% 11% 11% 6% 6% 6% 6% 6% 15% 14% 14% 14% 14% 2003 2004 2005 2006 2007 63% 63% 2% 3% 3% 3% 11% 11% 7% 6% 14% 15% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2002 2003 Owner SFD Owner 1-4 Units Attached Owner 5+ Units Attached Renter SFD Renter 1-4 Units Attached Renter 5 Units+ Attached

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WHAT’S BEEN SAID ABOUT GEN Y:

• Most digitally connected

generation; smart phones, F b k T itt

• High expectations of

advancement, salary, Facebook, Twitter

– Knowledge is power and its just a click away

, y, mentoring

• Switch jobs frequently, lack

loyalty OR

• Delaying adulthood compared

to other generations

• Marrying later, kids later

loyalty, OR

• Coming of age with great

recession made frequent change necessary y g

• Closer to their parents than

Boomers were

• Sense of entitlement

change necessary

• Want to live in urban

environments, desire lk bili

• Sense of entitlement,

narcissism, and rejection of social conventions walkability

• Less religious

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IMPORTANT TO BE WEALTHY?

Percent High School Seniors and entering Percent High School Seniors and entering College Freshman saying “being wealthy is very important to me”: is very important to me : –Baby Boomers: 45% –Generation X: 70% –Generation Y: 75% Generation Y: 75%

ULI March 2013

SOURCES: University of Michigan Monitoring the Future; American Freshman Survey; UCLA 19

IMPORTANT TO KEEP UP WITH POLITICS?

Percent High School Seniors and entering Percent High School Seniors and entering College Freshman saying “it is important to keep up with political affairs”: to keep up with political affairs : –Baby Boomers: 50% –Generation X: 39% –Generation Y: 35% Generation Y: 35%

ULI March 2013

SOURCES: University of Michigan Monitoring the Future; American Freshman Survey; UCLA 20

WHERE PEOPLE WANT TO LIVE, BY GENERATION

25% 42% 46% 47% 47% 34% 25% 39% 38% 38% 47% 42% 14% 15% 14% 18% 31%

60+ 50-59 40-49 30-39 18-29 (Eisenhower) (BB) (BB & Gen X) (Gen X) (Gen Y)

City Suburban Small Town/Rural

ULI March 2013

SOURCES: 2011 National Community Preference Survey; National Association of Realtors, March 2011 21

GENs X, Y, AND Z VERY DIVERSE COMPARED TO MATURE SEGMENTS

70% 79% 49% 55% 57% 51% 45% 43% 30% 21% Under 10 10-29 30 - 44 45 - 64 65+ White, Not Hisp Not White

ULI March 2013

SOURCE: American Community Survey 22

THE ACTIVE MARKET USA–HOUSEHOLDS IN TURNOVER, BY GENERATION: KEY TO UNDERSTANDING HOUSING DEMAND

40 0% 45.0% 50.0% 30.0% 35.0% 40.0% 15.0% 20.0% 25.0% 5.0% 10.0% 15.0% 0.0% Gen Y Gen X Baby Boomers Eisenhowers Owner Households Renter Households Total Distribution

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DISTRIBUTION OF PREFERRED PRODUCT TYPES BY GENERATION

35.0% 40.0% 25.0% 30.0%

Other Mobile Home

10 0% 15.0% 20.0%

Mobile Home Apartment or Condo SFA/TH SFD

0.0% 5.0% 10.0%

Gen Y Gen X Baby Boomers Eisenhowers This is the distribution of the active market given the owner product type preferences. Conclusion: Strong preference for single-family detached across all generations more attached for Gen Y

ULI March 2013

detached across all generations, more attached for Gen Y .

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IMPORTANCE OF HOUSING FEATURES*

0% 10% 20% 30% 40% 50% 60% 70% 80%

Purchase price/mo. rent Interior space/sq. ft. Interior design/layout Building/home security Parking availability Building/prop. amenities Green features/sustainability Age of home/building

*% of respondents ranking each feature 1st 2nd or 3rd

ULI March 2013

SOURCE: ULI/Lachman Associates Survey, Summer 2010

% of respondents ranking each feature 1st, 2 d, or 3 d

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GEN Y: GREATEST URBAN INTEREST

 About 10.5% currently live downtown…  …another 7% would like to live downtown, or about 18% downtown, or about 18%  About 30% would like to live in the City  Urban places with appeal to Gen Y:

• Have a virtual, wired world co-existing

with the physical environment

• Incorporate technology
• Cool places to hang out and text each
• ther…
• Fun restaurants and bars
• Music and art

ULI March 2013

SOURCE: RCLCO; National Association of Realtors Survey

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GEN Y: NO COOKIE-CUTTER COMMUNITIES, NEIGHBORHOODS, HOMES, OR PEOPLE

Survey Question: Most important characteristics of your ideal community or neighborhood:

Must Have… Gen Y Gen X Di t f h h ld 73% 74%

ideal community or neighborhood:

Diverse types of households (singles, couples, families) 73% 74% Diverse types of people (mix of 78% 77% yp p p ( races and ethnic backgrounds) Different housing types & styles 77% 74% Different income levels 42% 40%

SOURCE: RCLCO consumer research

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WALKABLE MOST IMPORTANT COMMUNITY FEATURE TO GEN Y

Survey Question: How important are the following community features in your home or community selection process?

71%

home or community selection process?

48% 29% 55% 45% 55% 52% 45% 55% 45% 29% Green Walkable Near Transit Wellness Learning No/Limited Role Important/Vital Role

ULI March 2013

SOURCE: RCLCO Consumer Research 28

ACTIVE MARKET (HOUSEHOLDS IN TURNOVER)

45% 50% 30% 35% 40% 15% 20% 25% 0% 5% 10% G Y G X B b B Ei h Gen Y Gen X Baby Boomers Eisenhowers Owner Households Renter Households Total Distribution

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DISTRIBUTING THE ACTIVE MARKET BY CURRENT RESIDENCE LOCATION

25% 30% 20% 25% 10% 15%

Eisenhowers Baby Boomers Gen X Gen Y

0% 5%

City - Downtown City - Residential Area Suburban Mixed Suburban Ngd- HH Only Small Town Rural

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GENERATIONS IN TURNOVER: WHERE THEY WANT TO LIVE

25% 30% 20% 25% 10% 15%

Eisenhowers Baby Boomers Gen X Gen Y

0% 5%

City - Downtown City - Residential Area Suburban Mixed Suburban Ngd- HH Only Small Town Rural

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ACTIVE RENTER MARKET: PREFERRED LOCATIONS IF THEY COULD CHOOSE

25% 30% 20% 25% 10% 15%

Eisenhowers Baby Boomers Gen X Gen Y

0% 5% Like owners, more renters across generations prefer suburban

City - Downtown City - Residential Area Suburban Mixed Suburban Ngd- HH Only Small Town Rural

ULI March 2013

mixed-use environments.

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30 YEAR TREND: ATTACHED HOUSING MORE POPULAR WHEN HOME AFFORDABILITY IS LOWER, LESS WHEN PRICES FALL

90% 100% 60% 70% 80% 40% 50% 60%

5 + Units 2 to 4 Units 1 Unit

20% 30%

1 Unit

0% 10% 198 198 198 198 198 199 199 199 199 199 200 200 200 200 200 201

ULI March 2013

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

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SUMMARY OF GEN Y AND CURRENT TRENDS TO REAL ESTATE DEMAND

 Demand shifts from outer suburban to inner suburban and urban properties

Demographic? Preference? Res lt of “the great reset” ith

• Demographic? Preference? Result of “the great reset” with

“closer” being less expensive?

 More online shopping, but less sq. ft. real estate space per capita for office and retail space per capita for office and retail  Residential places with more diversity, more mixed- use or multi-use, convenience  More infill; more thoughtful greenfield  Less space for residential too?

• Younger less affluent households
• Younger less affluent households
• Smaller household sizes
• Meanwhile home sizes have been increasing for 20 years



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 Sizes smaller with recessions, then rebound

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CHARACTERISTICS OF GEN Y ATTRACTING PLACES

 Not a look or feel, but places that facilitate a lifestyle  Environments that facilitate “connections”  Environments that facilitate connections

• Virtual, Physical, and Social connections
• Wired gathering spaces
• Human scale, good street network, parks, and space

Human scale, good street network, parks, and space

• Aesthetically inspiring
• Walkable
• Fun—you want to be there
• Shopping and restaurants you can’t find at every mall—

unique

• Great neighborhoods—mix of uses
• Diverse people
• Diverse people
• Transit or transit ready
• Convenience

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DISCUSSION QUESTIONS

• What else is critical for us to know to understand this generation? To meet this generation’s

current and future real estate needs?

• Do the things we believe about Gen Y’s preferences simply reflect where they are in their

life-stage and therefore we should avoid ‘straight-lining’ these trends into the future? life stage, and therefore we should avoid straight lining these trends into the future?

• Will Gen Y start to look more like Gen X one day, i.e. move to the ‘burbs when they have

kids?

• How much of Gen Y’s real estate behavior is explained by coming of age during the worst

recession in recent history and being under employed? recession in recent history and being under-employed?

• Do these Gen Y trends and attitudes we’ve discussed apply to all of Gen Y, i.e. it’s a very

diverse group—are we catching the nuances among various ethnic groups?

• We know that Gen Y is impacting the rental housing market now; when will they impact the

for-sale market?

• What about the debate over whether or not they still value homeownership? Anecdotal

evidence says ‘no’ yet ULI surveys say ‘yes’?

• What are we saying about Gen Y today that we said about Gen X 20 years ago? How do

What are we saying about Gen Y today that we said about Gen X 20 years ago? How do we make sure we’ve got it right? How will we know when we’re wrong?

• How do we act on this knowledge about Gen Y? If we want to create aspects of the built

environment to appeal to this generation, what should we be including?

Where? What? Features? Amenities? Size? Styles? Prices?

ULI March 2013

– Where? What? Features? Amenities? Size? Styles? Prices?

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IMPACT OF DEMOGRAPHIC TRENDS:

GENERATION Y

Gregg Logan, Managing Director, RCLCO

MARCH 2013 URBAN LAND INSTITUTE