The Institutional Real Estate Inc Sponsorship brochure, Connected-Investor Focused, We connect people, data and insights, sponsorship, events, IREI Products
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NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT MANAGERS 48 NAREIM Quality housing from a Millennial's perspective might look like this: near the heart of the community, within a good school district, walking distance to transit, sized with efficiency in mind – think around 1,600 to 2,200 square feet, minimal yard to maintain, alley served, access to parks to make up for that smaller yard, intermixed with a variety of housing types to emulate a foregone urban life, and hitting a price point that is achievable for the comparatively late bloomer. This may include townhomes, duplexes, or historically creative solutions such as bungalow courts, where a cluster of smaller single-family homes share a common outdoor space. An appropriate mix would help supplement the rapidly expanding capacity of suburban rental apartments, while maintaining enough density to support the types of urban amenities that some will leave behind. Additionally, these higher levels of density could support and maintain the culture of sharing that is so common in Millennials' lives. Waiting only two minutes for an Uber to pick you up at your door in Park Ridge or hopping on a Divvy bicycle to cruise around a park in La Grange? It might as well be the Bridgeport neighborhood in Chicago! These examples are just a few potential solutions to help satisfy what may be projected as an underserved market. It does not have to be "I can only have this in the city" or "I can only have this in the suburbs". Middle-density housing, however, is more difficult to execute and is not the forte of Midwest housing developers. Additionally, this type of housing could be considered land greedy when compared to mid-rise housing, thus making it easy to dismiss without much further thought. Though the identification of this underserved housing market is made with confidence, investments in this arena may rely on the ideal scenario where market meets a municipality with capacity and vision. Identifying the Millennial Friendly Community Whether near Chicago or another major job center, there exists an exorbitant number of suburbs. Not all of them have the capacity or desire to meet the needs of a generation seeking a new home without giving up the conveniences of an urban lifestyle. Some municipalities do not have the necessary direction or have an existing population that is resistant to change. Introducing a lower price point of seemingly "urban" housing types may bring undesirable residents in their eyes. Many of these communities are established in their ways. What investors must search for are communities that create the "right" barriers to entry. Attributes of worthwhile communities include inherent aspects of tangible criteria already established, such as quality schools, access to transit, a TIF in place, and at least the potential of a quality downtown; however, the intangibles may include visionary leadership, competent staff, a community supported master plan, and a hunger to establish public-private partnerships to get the job done. These intangibles are too often overlooked and underappreciated by investors that are simply identifying market capacity, favorable demographics, and minimal barriers to entry. Finding the right community to partner with may build a lasting relationship between village leadership and investor, which could make repeat investments lower-risk and less competitive in a market that may be starved for a refresh in both its population and housing stock. Sure, they might expect high-quality, but finding that community with a vision and commitment to improve their downtown and willing to take a risk on allowing a Millennial- welcoming environment should reveal investment opportunities both now and into the near future. With foresight and a willingness to listen to a public partner, investors have a chance to unlock some of the untapped potential of the suburbs. Millennials are Making Their Move As housing deliveries have increased in the suburbs from 2016 to 2018, while decreasing in the urban core, investors are fully aware of this trend of the pendulum swinging towards the periphery. The question becomes: are we building the correct housing in the right locations? In some cases, yes, but honing in on those communities that support the criteria of a generation preparing to buy something that may not yet exist is key. Millennials will demand a variety of housing types, sizes, and locations. Not one product will satisfy an entire generation. Though it is easy to articulate generational stereotypes, Millennials – like the generations before and after – will live in cities, suburbs, and everywhere in between. Millennials will generally have children later. They could have debt. They may even budget their money well – for all those older generations out there, we just spend it differently. An intelligent investor will continue to seek the right place at the right time, but consider this: ask the nearest Millennial where they see themselves in five years.