Are Baby Boomers the New Millennials in Multifamily?
When comparing rental demand by age segments, Baby Boomers stand out as the fastest growing group across the entire rental market spectrum. Millennials, on the other hand, continue to flock to large apartment buildings.
Age Composition of Renters within Asset Class
Apartment living is conventionally associated with young adults looking to be near downtown job centers and the buzz of city life. However, recent trends show that retiring Baby Boomers and seniors are giving up their suburban homes for the convenience of service-rich urban neighborhoods and apartment buildings with varying amenities.
The latest American Community Survey (ACS 2016), lends support to this trend. Data from the ACS shows that Baby Boomers are catching up with younger renters, growing significantly faster in some rental classes.
Apartment buildings have a significantly larger share of younger renters. As shown below, individuals in the 20- to 39-year-old age group represented a 43% share of all renters in small buildings by the end of 2016. This is a larger share compared to all other adult renter categories in this asset class.
In contrast, the share of older renters was 15 percentage points higher in large apartment buildings, which were still dominated by 20 to 39-year-olds.
Looking at the rental market as a whole, single-family rentals included the highest share of individuals below 20 years old. This information indicates the presence of younger families with children.
The above observations are supported by the average renter age across asset class, which increases from single-family rentals to large apartment buildings.
Baby Boomers’ Growth Outpaces Millennials
Notwithstanding their dominant share, Millennials were not the fastest-growing age segment in the context of the broader rental market.
As shown below, Baby Boomer renters grew at a more robust annual rate of 5.4% in small apartment buildings and 4.9% in single family homes. As noted in a recent blog, these asset classes served nearly 70% of all US renters in 2016.
Baby Boomer growth in large, amenity-rich apartment buildings comes in slightly below the Millennials, but with an impressive overall tally of 4.5% growth over 2014-16.
The emergence of older retiring renters with deeper pockets is an exciting opportunity for small property managers and investors. At the same time, is also calls attention to the need for convenience, such as accessibility and 24-hr services in older buildings.