Multifamily Reset on the Horizon as Gen Z Knocks at the Door

As the generation behind Millennials, known as Gen Z, begins to reach adulthood, the apartment market seems ready for a reset. Property managers will need to adjust their strategies to maintain their assets’ appeal.

Millennials Dominate Multifamily Demand

Rental preferences by age group have driven the apartment market, which over the post-crisis decade has undergone significant shifts due to the urban-oriented Millennials and renting Boomers.

While still flourishing, the multifamily market looks ripe for another significant reset, as the youngest of all Americans — known as the Post-Millennials or “Gen Z” — enter adulthood.

We use Pew Research Center’s cohort classifications, which defines Gen Z as the individuals born in or after 1997, with the first few of this cohort entering adulthood in 2015.

According to the recently released Pew series, initial comparisons indicate similarities between Gen Z and the Millennials. This suggests favorable conditions for multifamily demand over the next decade. Chief among these similarities is the acceptance of diversity, which is the cornerstone of urban living, as well as their high familiarity and uptake of technology.

As depicted below, this emerging landscape shows that while Gen Z made up a 30% share of all renters by the end of 2017, only 4% were 18 years or older.¹ Millennials comprised the largest group of renters, accounting for a 32% share of the national total.

(Please click around for detailed chart information)

Gen Z Renters Rising Rapidly

Looking only at adult renters (18 years and over), the emerging Gen Z segment formed a 5% share of the overall population living in small asset multifamily and 4% in large asset multifamily, as shown below.

(Please click around for detailed chart information)

Millennials dominate all asset classes, peaking at close to a 50% share in small apartment properties and about 40% in large properties.

The rise of the Gen Z cohort resulted in a 4.2% share gain in small asset multifamily and a 3.2% gain in large asset multifamily between 2015 and 2017, as shown below. Over the same period, the share of all other groups declined, with the exception of Millennials in large apartment properties.

(Please click around for detailed chart information)

While the emergence of Gen Z renters as a demand group remains in its infancy, they are rapidly becoming a market-driving force.

For property operators, courting Gen Z renters may involve strategies similar to those successful with the Millennials. However, they will need to put greater focus on deployment of technology to further improve the overall renter experience, including the leasing process, payments, and community participation.

1 All data is sourced from the American Community Survey (ACS), unless otherwise stated. ACS statistics are sample-based estimates of the compositional profile of the total population in the given year of data collection, and include a margin of error.