Affordable mid-sized tech hub cities, select city-center neighborhoods, and close-in big city suburbs that offer short commutes and urban amenities stand to benefit most as millennials in the U.S. settle into their 20s and 30s, according to new research from TH Real Estate, an affiliate of Nuveen (the investment manager of TIAA).
The new report, which explores the lifestyle choice impacts of both younger (aged 19–29) and older (aged 30–36) millennials on the U.S. commercial property market, outlines a number of cities, real estate sectors and property types that potentially stand to benefit, among them:
- “Flight to Suburb Metros” in cities such as San Francisco, Los Angeles and New York — As older millennials look to establish households and prioritize family life, they will stay close to urban centers, preferring areas with short commutes and urban amenities, potentially giving a boost to suburban office properties and well-located lifestyle shopping centers with a market dominant or specialty grocer.
- “Millennial Magnets” such as Chicago, Salt Lake City, Phoenix, Austin, Orlando, Charleston and Raleigh — The preference of younger millennials to work in the technology sector, and in livable communities with a lower cost of living compared to other big cities, will position these affordable tech hubs to continue attracting people in their 20s. This will create attractive investment opportunities for select multifamily properties, particularly in emerging and redeveloping urban neighborhoods, as well as in certain office nodes and shopping centers.
- “Tech Super Hubs” such as Boston, Denver, Seattle, Portland and Washington, D.C. — While tech-related job growth will attract younger millennials, the high cost of living will continue to provide a tailwind to city center multifamily properties, select office submarkets and high street retail neighborhoods in the urban core of these hub cities.
“Our research indicates that both older and younger millennials will eventually migrate to the suburbs of either the metros they currently live in, or to the suburbs of more affordable metro areas with favorable job growth. However, the impact of these lifestyle choices on U.S. cities will present varying investment opportunities, depending on each community’s job growth prospects, affordability and commercial property landscape,” said Melissa Reagen, head of TH real estate research U.S.
“Research on Generation Z [aged 18 and younger] is only just beginning, but indications of divergent lifestyle preferences as compared to millennials are emerging, which will further impact commercial real estate opportunities as the children of Generation X [aged 37–53] enter the workforce. Watch this space!” continued Reagen.
