- Demographic Trends of the Millennial Generation…
- Market Consolidation…
- Advancements in Technology…
There are 3 “Game Changing” forces impacting real estate in 2018 that will continue to force change moving into the next decade. They are the Millennial Generation, Consolidation and Density, and advancements in technology.
The Millennial Generation’s (those born between 1980 and 1995) entrance into adulthood is causing significant change to the real estate industry and will continue to impact the industry for decades to come. In many ways, the full effects of the change are yet to be determined as many of these young adults are just now coming of age and moving into the workforce. The demographic and lifestyle characteristics, some economic driven and others socially driven, of this group are altering their buying decisions in the real estate market. Primarily, they are not making buying decisions. Instead, they are choosing to rent in higher numbers than historically seen in previous generations. Homeownership rates among millennials under the age of 35 have fallen from 41% to 36.5% in the past twenty years.
Millennials as a group are burdened by significant student loan debt, have high unemployment rates in comparison with historical figures, and show a higher propensity to delay marriage and starting a family as compared to previous generations. These, among other factors, are decreasing household formation (demand for single family housing) and increasing the demand for rental housing.
Another macroeconomic trend which is affecting, and will continue to affect, the real estate markets is that of consolidation driven by rising energy costs, the increasing awareness of carbon footprint, and low maintenance lifestyle choices. As the costs of energy rise globally and population growth in many US cities is expanding, it is placing a rising premium on housing proximity to the workplace. As a result, infill projects and vertical development are on the rise to meet this trend away from the urban sprawl and associated lifestyle. Additionally, mixed-use developments which place office, housing, and retail under the same roof, are seeing an explosion in popularity and associated demand.
Overall, companies and individuals are more aware than ever of their carbon footprint. Based on this factor, as well as significant demographic changes in the workforce which place a high emphasis on flexibility; the composition, size, and construction techniques for modern office buildings have shifted. Workers are utilizing less square footage. Cubicles and private office space has been replaced by the open or flex office concept. Urban real estate developers are seeking tax credits, long term cost savings, and greater carbon-friendly construction techniques.
The ever-increasing pace of Technology
Advancements in technology are changing everything about the way we live and work in America. Transportation is poised on the brink of a massive transformation as the reality of computer-piloted vehicles moves closer every year. This shift could have significant impact on the real estate market as the morning commute is no longer time spent away from work, but an opportunity to catch up on email and polish off a report. Advancements in wireless internet/data devices have released workers from the shackles of the desktop computer and have much to do with the recent explosion in the open-concept office design. The recent advancements in data storage, coupled with increasing data transfer speeds, have led to a revolution which is moving businesses into the cloud and away from physical storage. This is further decreasing the need for brick and mortar space, increasing the need for home office space, and expanding possibility for a more mobile workforce. The industrial, transportation, office, retail, and housing sectors will all be significantly affected by advancements in technology over the next decade.
Should you, or anyone that you know, have any questions related to this post, please do not hesitate to reach out via phone, email, or text. I am passionate about helping others along their real estate journey.
Nick Schlekeway – March 26, 2018