The Changing Rental Preferences of Aging Millennials
As Millennials age, their preference for rental accommodations continues to diversify across apartment types, with small apartment buildings now positioned to cater more to the youngest renters in this cohort.
How Big is the Millennial Apartment Market?
The impact of Millennials (born 1982-1999) on the rental market is only just beginning to fully manifest itself, as the youngest of this cohort enter adult life.
As shown below, according to data from the American Community Survey (ACS), while adult Millennials (18 years or older) comprised a 22% share of the overall American population of 321 million, they form a significantly higher share of the nearly 39 million apartment renters in 2015.
At the same time, considering price differences across apartment building types, Millennials represented a higher share of small building renter population at 36%. This figure is 5% higher than their share in the more expensive large buildings.
Going deeper, segmenting the Millennial market by younger (18-25 years) and older (26-33 years) renters shows differences in building preferences, which are likely to play out fully in the coming years.
As shown below, younger Millennials comprised 18% of all small building renters, only 1% lower compared to their older counterparts.
This difference gets wider in large buildings with higher rents, where the older Millennials, further into their careers, come in 3% higher in the overall renter share.
Millennials Outpace Overall Rental Demand Growth
Adult Millennial renter growth continues to outpace overall apartment demand, even as market observers brace for the impending generational shift toward the post-Millennials (born after 2000).
As shown below, Millennial apartment demand is expanding at twice the pace of the overall renter growth across all apartment types — at an annual rate of 7.2% in small buildings and at an even higher rate of 11.5% in large buildings, fueled by older Millennials.
Small building developers and property managers will benefit from a more nuanced understanding of the exceptionally diverse Millennial demand segment, including age, as explored here.