Millennials Actually Like the Suburbs
By Tierney Plumb | Shared Post from the Hightower Blog
For the past few years, the media has churned out a steady stream of stories describing how city-loving millennials are driving a re-urbanization of the U.S.
But not so fast. As it turns out, the white picket fence life is still desirable for the young age group, according to a new report from CBRE.
Census data shows domestic net migration out of cities and into suburbia. We chatted with the author of the report, CBRE director of research and analysis Darin Mellott.
By the numbers
The most recent annual data from 2014 shows that 2.8 million people moved from the suburbs to cities that year, but 4.6 million did the opposite. That means the death of suburbs isn’t nigh.
“This news is quite shocking to some people because of how much life that prevailing narrative that has taken on its own,” he said.
Millennials, or those mostly born between 1980 and 1995, make up the largest age group in the country and the biggest segment of the U.S. workforce. But census data does disagree with the media when it comes to where they actually live and where they have been moving to.
About 30% of millennials live within urban areas. The remaining balance doesn’t appear to be rushing to city centers; in 2014, 529,000 people between 25 and 29 moved from cities to suburbs, while only 426,000 did the reverse.
For the younger end of the spectrum (ages 20 to 24), the flow’s direction was even more pronounced, with 554,000 becoming city dwellers and 721,000 trading cities for ‘burbs (keep in mind some of that represented relocation into parents’ basements).
Among the oldest millennials and the tail end of Gen X, negative net migration was even more: 1.2 million people aged 30 to 44 moved from cities to suburbs, while 540,000 did the contrary.
So what do they want?
Space and an urban feel rank high on the list. A recent survey showed that 81% of young people (classified as millennials and those born in the late 1970s) want three bedrooms or more in their place.
That preference means suburbs would be the more likely pick when it comes down to family formation and affordability, he said. “It’s hard to afford a three-bedroom in Manhattan.”
In another study, nearly two-thirds of millennial-aged respondents self-identified as suburbanites or rural people.
Still, country mouse types aren’t everywhere. Millennials love urban perks, like access to public transit, shops, restaurants, and offices. Just because millennials appreciate city living doesn’t translate into demand for downtown real estate.
Suburbs can grow on younger demographics once injected with urban qualities.
In San Jose, for example, mini mixed-use developments like Santana Row have plunked down a myriad of restaurants, bars, and housing that replicate the environment found an hour north in San Francisco. Similar redevelopments on the outskirts, dubbed “hipsturbia” and “urban burbs,” are popping up more and more.
Why the increase? As millennials leave cities, they still crave certain amenities and more developers are reacting to that request, he said.
Western cities like Phoenix and LA are seeing pockets of strong suburban activity, he said, and that same phenomenon is occurring in suburbs of New York and New Jersey. “Those pockets share common characteristics—that is suburban areas with urban qualities,” said Mellott.
Exceptions to the rule
Of course, the report doesn’t aim to make a blanket statement across the board about millennials and suburbia; keep in mind no two property markets are created equal, and each market has its own dynamics that play out on various levels and in unique ways,
And there are definitely downtown markets across the country that have outperformed—and will continue to outperform, in some cases—suburban markets.
For example, McDonald’s Corp. recently announced plans to move its headquarters from the suburbs to downtown Chicago.
“While we are continuing to suburbanize, that doesn’t mean dynamics are negative in cities,” Mellott said.
Some big firms are realizing that an urban setting is a big selling point when it comes to attracting and retaining new talent. And in San Francisco, Silicon Valley-based Facebook is considering adding a ton of square footage in San Francisco. And LinkedIn recently tacked on an entire office building in downtown San Francisco to appeal to city lovers.
While there’s some truth to the idea of the resurgent urban core, it is also fair to say the extinction of the suburbs and millennials’ love of cities have been “greatly exaggerated,” he concluded. His study aims to dispel erroneous thinking that millennials are anti-suburb.
“We are trying to form a more informed and intelligent conversation around these topics. Suburbs aren’t dying,” he said.
Tags: Hightower Blog, Millennials, Property Management, Real Estate Trends