Millennial impact on real estate
By the year 2025, America will primarily be a cashless society that has shifted to rental housing. The government will levy taxes and fines on buildings not classified as “green,” and Amazon will control 15 to 20 percent of grocery sales through an efficient delivery system.
These predictions represent some of the ways millennials, a huge population cohort, will impact commercial real estate. At least that’s the opinion of Christopher Lee, the keynote speaker Tuesday at the 7th annual Commercial Real Estate Forum sponsored by Commonwealth Commercial Partners and Lingerfelt Commonwealth Partners at the Westin Richmond Hotel.
About 300 people turned out to hear a provocative discussion as Lee, a Los-Angeles based consultant and speaker who heads CEL & Associates, highlighted some of his 100 predictions on the impact of millennials on the real estate industry.
“You’re at the place where there’s a huge generational transfer going on from the aging boomers – and I know this is a scary thought –” he said, “to the millennials. They are truly reshaping our industry from how commercial real estate is bought, sold and reoccupied.”
According to the U. S. Census Bureau, millennials refer to people born between 1982 and 2000. They now number about 83.1 million and represent more than one quarter of the nation’s population. Their size surpasses that of the 75.4 million baby boomers. According to the census, millennials are more diverse than the generations that preceded them, with 44.2 percent being part of a minority race or ethnic group, which, according to the census, is a group other than non-Hispanic, white.
Lee noted in his remarks that the generation was shaped by seminal events such as the Columbine massacre, 9/11, the Great Recession, and social networking.
His company’s research drew this profile, flattering and unflattering, of the age group: “What’s scary is that 10 percent of them believe Judge Judy is on the Supreme Court, and 77 percent can not name a senator from their home state,” said Lee.
Millennials were overprotected by their parents, he added, and were the first generation in some cases who had mothers who were better educated than their fathers.
They also were exposed to a higher quality of education, are suburb multitaskers, and they are the first generation to know more than their parents, because of the Internet, Lee said.
So what does all this mean for commercial real estate?
Plenty, he explained. This generation is driving a bump in online retail sales, a drop in home ownership, and a focus on more social responsibility, including volunteerism and sustainable building.
The commercial real estate marketplace used to be building centric, and is moving to a more service- and customer-centric model based on relationship building and finding solutions that millennials prize so much. “For millennials, it’s all about making a difference,” he said.
“We’ve shifted form a boots-on-the ground mentality to a mentality of predictive analytics. “Today’s leasing agents and brokers use smart phones and iPads to service clients and store and share data, Lee observed.
This generation likes to telecommute, and they are renting longer, because many don’t have the down payment to buy a home, a situation frequently due to student loans and credit care debt. “They don’t trust the banks,” Lee added, and they’re not afraid to seek out alternative funding sources such as crowdfunding. In addition, many seek other income generators.
Lee said his millennial-age daughter and her roommates, who live in a university town, made $5,000 one year by renting out their home via Airbnb to alumni coming for football games and parents of college-age students coming for university tours.
Lee, who wrote a 2012 book entitled, “Transformational Leadership in the New Age of Real Estate,” shared a few other predictions from his crystal ball:
• Within a decade 50 percent of today’s real estate brokers will be gone, and some of their work will be done by certified underwriters and accounting and law firms.
• Home ownership, currently at about 63 percent of Americans, will drop into the high 50 percent category, as the country shifts to a rental-based society. “In about 5 to 7 years, aging boomers will move into urban areas with walkable communities and rent their homes out to millennials who have children and want a more suburban environment,” he added.
• In the near future, women could comprise nearly 40 percent of the C-suite positions within real estate. This will occur, Lee said, because the majority of young people attending college today –nearly 70 percent — are women.
• “Don’t be surprised if Amazon controls 15 to 20 percent of grocery sales.”
As delivery systems become more efficient, people will be able to order online and pick up groceries at massive receptacle centers that could be placed at 7-11 stores around the country. “You’ll get an email when your order is ready and a code will be sent to your phone, and you can open the receptacle door automatically,” Lee said.
• By 2020, millennials are expected to spend $1.4 trillion annually. With many of them preferring to shop online, this could cause some shopping centers to become obsolete.
• The footprint of office space will continue to shrink. It has already shrunk from 350 square feet per employee during the heyday of the baby boomer generation to 150 square feet. Millennials like creative, open spaces where they can collaborate and socialize.
“You are at the beginning part of a generational shift that is fundamentally changing the way we do business. You need to raise the bar and say, ‘What is our millennial strategy? How are we addressing recruitment? Every single component has to be addressed with this generation,” Lee said.
Besides Lee, the forum also featured a panel of speakers including Mark Claud, CEO of Commonwealth Commercial Partners; T. Gaylon Layfield, III, president and CEO of Xenith Bank; Peter J. Stone, director at New York-based Fortress Investment Group; and Bradford Sauer, vice president of Sauer Properties Inc. in Richmond.
The forum speakers agreed with some, but not all of Lee’s predictions. For instance, with so many new competitors building grocery stores in Richmond, they expect people here to continue to drive for the most part to brick and mortar stores for groceries.
Millennials in the audience also shared their reactions. Marisa Norona, who works in marketing for Free Agents in Richmond, said Lee was “on point, although some of his statements were a little broad” and don’t apply across the board. She did agree that members of her generation thrive on teamwork and enjoy feedback on how they are doing at work.
Michael Morris, a staffer in retail brokerage for Commonwealth Commercial Partners, likes to telecommute when he can, and would like his own office. “I get distracted so easily,” he said of the open space where he works now.
About 45 percent of Commonwealth Commercial’s 400-person staff is composed of millennials, said Claud. While some of what Lee said resonated, Claud said his younger workers are motivated, diverse and an asset to his company.