The multifamily market is growing as a direct result of Millennials moving into new markets. The Millennials are the largest demographic group since the Baby Boomers and will create a similar level of economic impact over the next several decades.
The majority of Boomers are free of dependents and no longer need larger, multiple bedroom homes. This does not mean, however, that all of them are looking to downsize or — if they do decide to downsize — opt to move into a multifamily property. But it is, without question, a demographic that deserves its fair share of attention in the market.
Some insiders have suggested that Baby Boomers could be the result of a 60 percent increase in renters come 2023. They cite a Kansas City Federal report depicting a dramatic overall shift from single-family homes to multifamily properties. This is great news for multifamily property owners given two massive demographic groups — the Millennials and the Boomers — will both be simultaneously fueling a surge in multifamily rental demand. There is increased talk of Boomers ditching the suburbs for urban condos, and that conversation is largely expected to continue.
There are some naysayers, though.
In the midst economic recession and the onslaught of the housing crisis, Boomers had far more incentive to stay in their current homes for fear of losing a chunk of their nest eggs. But as rates made a dramatic turn for the better, many of those boomers continued to live in those same homes with no indicator of a major multifamily shift. Chris Matthews of Fortune Magazine continues to point out that a 2010 AARP study revealed 9 in 10 Baby Boomers said they would prefer living in their current homes for as long as possible. This analysis, however, does not include much data from 2013 or 2014, years that would more accurately define the shift if one were occurring.
And assuming that shift is occurring, multifamily property owners face the challenge of trying to capture two demographics from opposite ends of the spectrum. The youth movement is always the traditional fuel to the industry’s fire, but what if you mix in a massive influx of renters above the age of 55?
Multifamily builders will be starting to reconsider the traditional formatting of the properties they build. No longer will the divisions of one-bedroom, two-bedroom, and studio be adequate enough to appeal to a generation that lived the majority of its life behind white picket fences of the suburbs. As they grow older, they will also want to have the opportunities for specialized care while maintaining their independence. They will want amenities and communities that are as wholesome and well strategized as what they experienced in the ‘burbs. No longer will the fitness center and lounge-only model be adequate for the change to come.
Just as multifamily builders and investors have prepared and adapted to Gen Y, so they must adapt to an evolved and lucrative Boomer revival.