How Millennials are Changing the Face of Commercial Real Estate
Everyone is talking about millennials today. Economists, pundits, politicians and business people have all weighed in, as their generation became the largest proportion of the overall workforce in 2015.
What effect, if any, is this having on the commercial real estate market?
Many of the most significant effects are driven by this generation’s dramatically different habits of work, play and travel. From alternative commutes to remote work, any business that employs millennials needs to address these factors and structure their organizations and real estate accordingly.
The rise of telecommuting
Simply put, millennials love telecommuting and working from home. Deloitte’s 2016 Millennial Survey confirmed a few key insights about them:
The practical effect of this is a reduced need for office space on any given day. In some cases, employees will share desks or rotate freely through dynamic, open-plan offices. Senior millennials in executive positions are equally enthusiastic about this dynamic – according to Deloitte, 56 percent of those in this category enjoy the ability to work remotely and on a flexible schedule.
Moving forward, scaling up an enterprise and hiring new staff won’t necessarily obligate a business to acquire the same square footage they might have needed before.
New priorities for location and lifestyle
Just because millennials don’t prioritize office space the same way, however, doesn’t mean that CRE professionals can’t market to them effectively. One of the biggest differences between them and previous generations is their decreased willingness to endure long commutes.
Millennials just aren’t as car-centric as their parents in general – in fact, a study from the University of Michigan showed that only 60 percent of 18-year-olds now hold a driver’s license, down from 80 percent in the 1980s. An analysis of millennials’ driving habits versus those of Gen X and Gen Y by a professor at the University of North Carolina found that the reasons for this were varied, but a changing – and largely negative – view of cars was responsible for as much as half of the decrease in total driving miles.
As a result, many young people must be willing to compromise in other areas, including the neighborhoods they live in and the size of their houses and apartments. A business that seeks to hire a significant number of millennial employees should take these factors into account.
In addition, increasing use of mass transit changes the favored location for an office significantly. Spaces near major commuting and transport hub may continue to rise in value, while those located farther afield in places where commuting by car is the best option may see demand drop.
How to tackle these changes
It’s time to break with some of the conventional wisdom of how to manage partnerships seeking office space and commercial real estate. Increasingly, these businesses will be staffed, managed or even owned by millennial entrepreneurs.
It’s critical to understand your local geography and get a grip on how people are commuting, where they prefer to work and how far they’re willing to go.
The market may be changing in several key areas, but that doesn’t mean opportunities are going away – you just need to know where to look. Whether you are looking to relocate your office space to cater to your millennial workforce or you’re wanting to make sure your next investment property has some optionality in these changing times, let us be your trusted commercial real estate advisor.
By Micah McCullough, CCIM
Vice President | NAI UCR Properties