It’s an age-old debate—cities or suburbs? Age-old it may be, but it’s also a debate for the young of age, as millennials start to sink their teeth in more long-term real estate. What does that mean for the current state of CRE? In short, the migration has created a bit of a power shift.
According to the Urban Land Institute (ULI), more that 2.6 million Americans have relocated from the city to the suburbs in the last two years. A vast majority of these individuals are millennials—young people often characterized as haters of the suburbs and lovers of all things bright and full of opportunity, from New York City to Los Angeles (forgetting everything in between). However, as millennials age and start families, the hustle and bustle of the big city is becoming less and less appealing.
Instead, they are seeking out the next big thing, constructing a sort of pseudo-city environment in nearby suburbs. Millennial-centric suburbias often consist of close proximity to a nearby metropolis, a plethora of modern amenities, and plenty of urbanesque night life to keep even the most restless young people sated. However, this is not exactly great news for the New Yorks and the Californias of the world.
It’s estimated that, by 2025, millennials will make up about 75 percent of the workforce, according to a recent study by the Brookings Institution. In other words, if this suburb-positive trend persists, cities will have their work cut out for them to retain talent.
“The first phase is millennials moving to the suburbs for larger, more affordable homes and access to schools, so adequate single-family and multifamily housing will be necessary,” a U.S. Bank senior researcher told ULI. “Retail follows rooftops, so retail development will follow in order to meet the new residents’ requirements. Finally, we may begin to see more emphasis on employment centers as residents decide they want to work closer to where they live.”
Of course, the process will be a slow burn, as student debt as well as an income typical of a still-young workforce has kept most millennials from investing in long-term residential real estate. However, it’s safe to say that, should ULI’s prophecy come to fruition, it will certainly have implications for modern commercial real estate.
That being said, a lot can change before 2025 rolls around and millennials have taken over the workforce. So don’t pack your bags and move to the suburbs just yet—the city still has plenty of shine left to give.