Have you ever heard that saying, “the trend is your friend”? If you have, you already have a leg up when it comes to investing in the multifamily space. We’re going to take some time in this blog to explore the demographic trends in apartment dwellers. After all, these dwellers will make or break your investment and it is therefore incumbent upon us to know what we’re getting ourselves into!
Fortunately, you have picked an outstanding asset class in terms of immediate, medium to long-term upward trends. You could even go so far as to say that multifamily is here to stay. The Baby Boomers, Gen Xers (yours truly), the Echo Boomers, immigrants and single head of household groups are all part of the wave of customers that will fill multifamily apartments for years and years to come.
There are several long-term trends working to bolster the multifamily market and they revolve around what each generation is going through as they grow up, get jobs, mature and retire. Let’s start with the Baby Boomers. Sometimes discounted as a driving force, this group is returning to the apartment market in force after buying houses and raising families in their younger years and there are about 77 million of them. Between 2009 and 2025, it is estimated that this group will grow an astounding 76% (see credits below).
As if this weren’t a strong trend in and of itself, the Echo Boomers (or Millennials, or Generation Y) are coming. Actually, they’re here and more are coming. Grandsons and granddaughters of Baby Boomers, this group is even larger than their forefathers. Born in the period between 1980 and the early 2000s, this 80 million population generation plays a significant role how multifamily projects are used, designed and built in today’s market. As the age of the rental population declines, we’re witnessing first-hand the Echo Boomers entering the multifamily market in a dominant way.
Several additional factors surrounding Echo Boomers spell good news for those considering multifamily investment. First, the rent-buy math still favors apartments. When that math will turn corner we don’t know, but until then, apartment dwelling makes fiscal sense. Next, the Echo Boomers have been tackled by a weak job market (necessitating the need for mobility), slow economic growth and high student debt, each factor conspiring favor renting in the near and mid-term. Finally, this generation (and likely future generations) are less interested, generally speaking, with leaving a large footprint. More Eco-conscious than their predecessors, living close to city center in a smaller dwelling, with amenities suitable for the tech savvy is what this group is all about.
Look out beyond city center and out into the burbs, another trend in multifamily demographics is emerging: the immigrant population. Immigrants and their families, searching for large, three-bedroom apartments in safe neighborhoods and good schools is driving the suburban multifamily market in much the same fashion that Echo Boomers are driving the urban multifamily market. This bodes well for the apartment investor whether they are interested in a garden-style complex or a high-rise apartment building.
Each of these groups is adding fuel to a strong multifamily market. Some say the strongest market since the Depression. And although in recent months, some investors have shied away from apartment investing owing to a perceived oversupply of multifamily units, demand has kept pace. This is not a surprise either. Given the confluence of particularly the Baby Boomers, the immigrant population and the Echo Boomers, the upward trend we are witnessing in the multifamily segment is supported in the short, medium and long-term. This is good news for multifamily investors.
Credit for certain facts outlined in this blog are due to the following articles:
CREtirement 