The Demographics of Real Estate Investments

Summary

Jeremy Zarin, a senior real assets analyst at Marquette Associates, discusses the impact of Millennials on real estate investments. Instead of traditional factors like cap rates, Zarin highlights demographic trends. With 80 million Millennials, this diverse, tech-savvy generation influences housing, income, employment, and more. The presentation covers how Millennials' preferences and behaviors affect the four main real estate sectors: apartments, industrial, retail, and office. From renting trends to e-commerce growth, Zarin underscores the significant role Millennials play in shaping the future of real estate investments.

Takeaways

• 📊 The NPI (NACREIF Property Index) is a composite of real estate investment performance from a large pool of commercial properties in the private market.
• 🏢 The four main property sectors in the NPI are apartments, industrial, retail, and office, which are the focus of the presentation.
• 👥 Millennials, born between the early 1980s and late 1990s, are nearly 80 million strong and are having a significant impact on real estate investments.
• 🏙️ Millennials prefer urban living, public transportation, and walkable neighborhoods, influencing demand for rental properties and multifamily housing.
• 💰 Lower incomes and higher student debt are affecting Millennials' ability to buy homes, but many express a desire to own in the future.
• 🛒 E-commerce growth is driving demand for industrial real estate, with companies like Amazon seeking locations close to high-density areas for faster delivery.
• 🛍️ Brick-and-mortar retail is declining, while experiential services and e-commerce resistant formats like groceries and fitness centers are thriving.
• 🏠 Homeownership rates are at historic lows, with Millennials delaying buying homes and instead renting for longer periods.
• 🏢 Companies are moving offices from suburbs to central business districts to attract Millennial talent, leading to suburban migration trends in the office sector.
• 🔮 Millennials' preferences and demographic trends will continue to shape real estate investment opportunities across all sectors for the next 50 years.

Q & A

Who is Jeremy Zarin and what is his role?

Jeremy Zarin is the senior real assets analyst at Marquette Associates. He discusses the impact of the millennial generation on real estate investments.

What is the NPI and its significance in commercial real estate?

The NPI, or the Nareit Property Index, is a composite of real estate investment performance from a large pool of individual commercial real estate properties. It is significant as it represents investment performance across various property sectors, primarily apartments, industrial, retail, and office.

Why is the millennial generation important in the context of real estate investments?

The millennial generation is important because they are the largest generation in American history and their preferences and behaviors significantly influence the demand and trends in the real estate market.

What are some key characteristics of the millennial generation that impact real estate?

Key characteristics include cultural diversity, gender balance, technology savviness, preference for urban living, a focus on work-life balance, environmental consciousness, and mobility, which all influence their housing choices and real estate market trends.

How does the millennial generation's housing situation differ from previous generations?

More than 3/4 of millennials live on their own, with 26% owning and 50% renting. However, a significant portion still lives with their parents, and their current homeownership rate is relatively low compared to previous generations.

What is the current employment status among millennials?

62% of millennials work full-time, 15% work part-time, and 9% are in school, interning, or volunteering. They are expected to represent about 75% of the workforce by 2030.

How does the millennial generation view work-life balance and efficiency?

Millennials value work-life balance and are efficient workers. They are willing to work long hours on projects but dislike waiting for data and prefer not to waste time.

What is the current state of student debt among millennials and its impact on homeownership?

Nearly half of millennials have no student debt, with 38% never having had it and 10% having repaid it. While student debt is significant for some, it appears to be less of a deterrent to homeownership than widely reported.

How is the millennial generation influencing the apartment and multifamily sector?

The delay in significant life milestones such as marriage and home buying by millennials has led to increased demand for renting, making the multifamily and apartment sector favorable.

What impact does the growth of e-commerce have on the industrial sector from a real estate perspective?

The growth of e-commerce is driving demand for industrial buildings closer to high-density populated areas for faster shipping, leading to an increase in the square footage of fulfillment centers.

How are millennials changing the retail sector?

Millennials are shifting spending from traditional brick-and-mortar stores to service-oriented retail and e-commerce resistant formats like perishable goods and essential services.

What is the trend in the office sector related to millennials?

There is a trend of suburban migration, with companies relocating from the suburbs to central business districts to be closer to talent, benefiting areas with good transportation networks and proximity to train stations.

What does the future hold for real estate investing considering the millennial generation's impact?

The millennial generation's dominance and preferences will continue to shape the real estate market, with a diversified investment approach across apartment, industrial, retail, and office sectors potentially offering the best risk-adjusted returns.