SANTA BARBARA, CA—The Baby Boom generation will lead the way in apartment demand growth, followed by Millennials, says a new research report from Yardi Matrix. The report also notes that demand for rental housing seems likely to increase strongly “for another decade or more.”
Prepared by Paul Fiorilla, associate director of research at Yardi Matrix, the report says Boomers have been “underrated” in the discussion around multifamily demand, which has tended to focus on Millennials. Yet the 50-plus age cohort is projected to grow twice as fast over the next 15 years as the number of Americans ages 25 to 49, and Boomers have been renting in increasing numbers as they approach retirement age.
Citing an analysis by the Federal Reserve Bank of Kansas City, Fiorilla writes that Boomers increased apartment occupancy by 1.3 million units between 2007 and 2013, compared to a 459,000-unit increase in occupancy among 20-to-34 year-olds during that time frame. “Put another way, 70% of the increase in multifamily occupancy in the current cycle came from Boomers, compared to 24% from Millennials.”
Although Yardi sees increased development as a necessity to meet the demand for units, Fiorilla’s report says that construction should be targeted, “since it will be increasingly important for housing to cater to the needs and aspirations of specific consumer groups. Developers must be careful to build the type of product with amenities that will attract tenants. What’s more, demand won’t be consistent across the country but will be concentrated in pockets” with the strongest job growth and the highest concentrations of Boomers and Millennials.
“This report shows a compelling need for apartment supply growth over the long term, which should give all of us in the industry a measure of confidence in the future,” says Jeff Adler, VP at Yardi. “Obstacles to prudent supply growth at the local level are as much a concern as access to capital, the traditional driver of supply.” Click here to access the complete report.
