As a commercial real estate specialist with over 18 years of experience, I’ve witnessed firsthand the industry being reshaped by the rising millennial generation. Known for their different lifestyle priorities and values compared to previous cohorts, millennials are poised to become the dominant commercial real estate consumer group in the coming years.
Key Takeaways
- Millennials have distinct preferences that are transforming commercial real estate spaces, including the desire for mixed-use, sustainable, and tech-enabled properties
- There are unique investment opportunities tailored to attracting millennial tenants and buyers, like coworking offices and multi-family rentals
- Commercial brokers and landlords should adopt strategies to cater to millennials, through social media marketing, flexible lease terms, and building community
Table of Contents
Millennial Preferences Transforming the CRE Landscape
The millennial influence on real estate is already apparent today. As this group enters their prime earning and spending years, their preferences are dictating new trends:
- Experiential retail and mixed-use spaces enable millennials to conveniently live, work, and play. Retail centers now focus on creating immersive social experiences through spaces like craft breweries, coworking lounges, and Instagram-worthy design.
- Environmental sustainability, such as LEED-certified green buildings, and cutting-edge technology like smart home automation appeal to eco-conscious millennials.
- Flexible floorplans, shared workspaces, and short-term leasing options cater to millennial remote and gig economy workers.
Landlords and commercial developers would do well to lean into these millennial-friendly directions to future-proof their properties.
Seizing the Investment Opportunities
Savvy real estate investors should have millennials top of minds as an emerging consumer segment with major growth potential. Some promising areas I’ve identified:
Coworking and flexible office spaces
- With remote work exploding, short-term officing better suits millennials’ on-demand needs versus locking into long leases.
- Thoughtful amenity design and community-building foster loyalty among millennial members.
Multi-family rentals and condos
- Homeownership lags with millennials due to economic hurdles like student debt. Quality rental units in amenity-rich buildings cater perfectly.
- Transit-oriented developments with walkability in urban cores align with millennial lifestyle priorities.
Retrofitting existing properties
- Adaptive reuse to incorporate millennial MUSTs like pet-friendly policies, fitness centers, and social community spaces.
- Historic building preservation maintains architectural charm while upgrading interiors and technology.
Proptech startups
- The intersection of real estate and technology attracts millennial entrepreneurial talent.
- Companies innovating in areas like digital leasing platforms, IoT smart buildings, AR/VR, and micro-mobility present investment opportunities.
Adapting Brokerage Strategies for Millennial CRE Success
As a commercial real estate broker, I’ve adapted my methods to resonate better with millennial clients and tenants. Here are some key strategies:
Leveraging social media and digital platforms
- Maintaining an active social media presence with rich visual content for listings provides crucial millennial engagement.
- Enabling touring via 3D virtual walkthroughs and drone footage videos aligns with tech-savvy millennials.
- Adopting eSignature lease approvals and online portals with document access makes for seamless digital transactions.
Curating hyperlocal retail and perks
- Integrating conveniences like coffee shops, fitness studios, and pet care attracts millennial tenants to a property.
- Highlighting proximity to public transit, bike lanes, EV charging and carshare also appeals to their lifestyle.
Building community and hosting events
- Shared work lounges, outdoor terraces, and community events help foster connectivity.
- Networking opportunities can support millennial entrepreneurs in crossing over from living to also working in the building.
Offering flexibility wherever possible
- Providing shorter-term leases (12 months versus multi-year), built-in expansions, and movable design elements accommodate change.
- Tech-enabled, paperless management through online work orders, electronic payments, and app connectivity removes friction.
Why Are Millennials Becoming Key Players in Commercial Real Estate Investment?
As the largest generation in the U.S. workforce, millennials are poised to become the most dominant investors in commercial real estate in the coming years. With their unique perspectives shaped by coming of age during the 2008 financial crisis, tech revolution, and climate change awareness, millennials are rapidly changing the CRE investment landscape.
How Millennials are Changing the Investment Landscape
Millennials value experience, community, convenience, sustainability, and technology integration. This is driving demand for more mixed-use spaces, creative office designs, pet-friendly rental units, smart buildings, and outdoor amenities. Millennials prefer open, flexible spaces near urban cores with transit access like coworking offices, adaptive reuse conversions, and new green multi-family projects.
Proximity to retail, fitness, and community events also ranks highly. As developers cater to these millennial preferences, investment opportunities are arising around shared office spaces, multi-family rentals, affordable micro-units, and proptech startups.
The Rise of Millennial Real Estate Investors
Despite economic hurdles like student debt, millennials are entering commercial real estate investing through new pathways. The mainstreaming of crowdfunding platforms has given more millennials access to CRE deals with lower capital requirements. Partnership models are also enabling millennials to collectively fund niche projects like micro-retail and shared office spaces.
With an entrepreneurial spirit and inclination toward property technology, many millennials bootstrap their own proptech startups or invest in ones that resonate with their priorities around experience, convenience, and connectivity. Their appetite for risk and eagerness to disrupt outdated industry models shake up traditional commercial real estate investing.
Challenges Faced by Millennials in Commercial Real Estate Investing
The top challenges millennials face are access to capital and lack of experience. With lower incomes and net worths due to their lifestage, millennials find it harder to come up with large downpayments for CRE investments and qualify for loans. Established players also tend to overlook millennial investors as unproven.
Cryptocurrencies could become an investment vehicle for tech-savvy millennials. Partnerships with veteran investors through crowdfunding help millennials gain credibility. Government incentives around affordable housing and sustainability catering to millennials can assist with access to favorable financing. Despite hurdles, the sheer size and resolve of this generation promise their influential role in investing in commercial real estate’s future.
What Are the Emerging Trends in Commercial Real Estate Geared Toward Millennials?
As the largest buying demographic in the U.S., millennials’ preferences are creating shifts in commercial real estate trends. Developers and property managers are adapting their offerings to appeal to millennial values around experience, technology, sustainability and convenience. Research shows spaces catering to millennials command higher rents and lower vacancy rates, so they promise strong ROI for those who embrace them.
The Demand for E-Commerce Friendly Spaces
With e-commerce booming, millennials are fueling demand for smaller warehousing to support online retail, supply chain, and last-mile logistics operations. Millennials are both the entrepreneurial force behind many e-commerce companies, as well as their core customer base who value fast, convenient delivery. Light industrial properties located closer to urban submarkets are seeing strong leasing activity to become fulfillment centers. Many incorporate sustainability features as eco-consciousness resonates with millennials both as employees and consumers.
Integrating Technology to Attract Millennials
Cutting-edge technology integration ranks high on millennials’ wish lists for commercial spaces. From smart home automation features to keyless building access, and paperless management apps to in-unit voice controls, millennial tenants and buyers select properties that intertwine tech and real estate.
The COVID-19 pandemic further accelerated the adoption of touchless doors, contactless payments, and remote working capabilities. Landlords and retail operators use data analytics on millennial usage patterns to continually enhance technological convenience. Environments embracing this tech-forward ethos lure entrepreneurial millennials.
Examining the Role of Mixed-Use Developments in Meeting Millennial Needs
Mixed-use complexes enabling millennials to live, work, and play in one convenient spot are hugely popular. In fact, studies have shown that up to 62% of Millennials choose to live in these types of mixed-use communities. Think multifamily residences integrated with hip co-working lounges, craft coffee shops, fitness studios, and creative retail.
Outdoor terraces for community gatherings and networking events foster connectivity. The multifaceted environments speak to a millennial desire for full lifestyle integration. Developers proactively partner with local businesses, brands, and restaurants already resonating with millennials to curate an authentic, hyper-local experience within these new mixed-use complexes.
Financing Millennial-Focused Projects
Developing commercial spaces with the millennial cohort in mind requires tailored financing strategies. Two promising directions I’ve used with clients:
Tapping into government-sponsored incentives
- Programs to support affordable housing, historic preservation, and sustainable building upgrades can plaque multi-family projects.
- New Markets Tax Credits also stimulate investment into distressed areas being revitalized by millennials.
Crowdfunding and partnership models
- Forming syndicates to collectively fund niche projects like micro-retail and shared office spaces.
- Giving platform access to smaller-scale investors resonates with millennial priorities.
Best Practices for Development
As millennials increasingly become the target demographic for commercial spaces, I advise clients on best practices for aligned development:
Conduct user research
- Focus groups, surveys, and interviews to solicit input from millennials on their unmet needs.
- Monitor promising millennial-led startups for new directions like next-gen food concepts.
Prioritize transit-oriented locations
- Urban centers and walkable neighborhoods rank high for car-lite millennials.
- Proximity to rail stations, bike infrastructure, and rideshare pickup areas keeps projects accessible.
Consult millennial advisors
- Architects, designers, and tech consultants in their 20s-30s incorporate peer insights.
- Co-creation spaces with local artists and millennially-run businesses also enhance appeal.
FAQs
How are millennial preferences changing commercial real estate spaces?
Millennials highly value experience, community, convenience, sustainability, and technology integration. This translates into demand for more mixed-use spaces, creative office designs, pet-friendly rental units, smart building features, and outdoor amenities.
What kinds of commercial properties do millennials prefer to live and work in?
Millennials tend to favor open, light-filled flexible spaces near urban cores with transit access. Coworking offices, adaptive reuse conversions, and new green multi-family projects appeal. Proximity to retail, fitness, and community events also rank highly.
What commercial real estate investment opportunities exist targeting millennials?
Developers are focused on building new or retrofitting existing properties to become millennial magnets. Shared office spaces, multi-family rentals, affordable micro-units, and proptech startups present strong prospects.
How can commercial brokers better attract and retain millennial clients?
Leveraging social media marketing, showcasing spaces via digital tours, enabling paperless transactions, and building community connections resonate with millennial commercial tenants.
How will millennials shape the future commercial real estate landscape?
Experiential retail, sustainable mixed-use spaces, pre-fabricated micro living, and networked smart buildings will become more mainstream thanks to millennial trailblazing today. Their economic influence and sheer numbers cement their key role in CRE’s future.
How can commercial real estate firms appeal to millennial buyers?
Commercial real estate firms can appeal to millennial buyers by adopting transparent and tech-savvy practices, offering eco-friendly and sustainable property options, and providing flexible leasing terms to cater to the changing needs of this generation.
Why are first-generation investors hesitant to invest in commercial real estate?
First-generation investors may be hesitant to invest in commercial real estate because they lack experience in the industry, may not know who to trust for advice, and could be risk-averse due to their unfamiliarity with the market.
How are millennials and Gen Z impacting the force in the commercial real estate market?
Millennials and Gen Z are impacting the force in the commercial real estate market by driving demand for more sustainable and tech-enabled spaces, influencing the design and functionality of commercial properties, and shifting the focus towards more experiential and community-oriented developments.
Conclusion
As the premier generation reshaping commercial real estate in their image, millennials will undoubtedly leave a lasting impact for decades to come through changing norms they usher in today.
I anticipate we’ll see an acceleration of the trends outlined in this piece, leading to further proliferation of millennial hubs woven into neighborhoods. The economic challenges millennials face currently may constrain some of their preferences, but innovation and collectivism run strong as well among this cohort.
Real estate players who understand and cater to this powerful generation now will have a competitive leg up in unlocking the future landscape. I urge investors, developers, and brokers to lean into what makes millennials tick, as they hold the keys to tomorrow’s commercial property kingdom.
If you’re looking to buy, sell, lease commercial space, or invest in aligned development, schedule a consultation with me to discuss how we can tailor fit strategies to millennial preferences.
With nearly 20 years of experience in tenant and landlord representation, I bring robust expertise on today’s landscape along with a perspective on optimizing for the evolving future. Whether seeking education or a trusted advisor on your next project, I welcome the opportunity to help assess options and define an approach tailored to integrating millennial-friendly elements for enduring value.
