The flight to suburbia has long been a defining trait of generations of late-20 and 30-somethings seeking cheaper living, more space and good schools.
Millennials are no different; despite their well-documented love of downtown lifestyles, recent census data reveals that older Millennials are more than twice as likely as their younger counterparts to move from the city to the suburbs, as vice versa. This is not to say cities are emptying out of Millennials. Many remain city-bound, particularly those who are college-educated. But older Millennials, those with children, and those with lower incomes are increasingly heeding the call of suburbia.
“People seem to think of Millennials as being stuck in time, in a way. But they’re only human, and human desires change over time,” says Ryan Severino, Chief Economist, JLL. “Many older Millennials are keen to settle down—get married, have kids, enjoy a little more space. And guess where all those things have happened throughout the last century? The suburbs.”
There is, however, one big difference between what Millennials now do when they settle in the suburbs compared with their parents’ generation.
Today’s 30-somethings are more likely to stick with the renting cycle once they’ve reached the suburbs, rather than immediately purchasing a starter home. That’s in part due to the United States’ ongoing single-family housing affordability issues and historically high student loan debts.
U.S. tax reform may push more people to continue renting—at least in the short term—as the new law limits deductions for mortgage interest. But tax reform is not a death knell for home ownership, says Severino. “The majority of Millennials still aspire to buy their own home,” he says.
Suburbia’s timeless offer: More space to grow
In the short-term, Millennials are likely to continue to rent as they save up for a down payment – yet with children to consider, the priorities at the top of their amenities list is rather different to their younger years.
Good local schools, for example, are now more important than good local restaurants. “A lot of interest is driven by young people coupling up and having their first child, and becoming concerned about school options,” says Christine Espenshade, Managing Director for JLL’s Mid-Atlantic Multifamily team. “School ratings are becoming one of the key areas of consideration for multifamily investors because they know people will pay a premium to be located near a good school.”
Employment is another big draw. The labor market is tighter now than it was only a few years ago, and many jobs are located in the suburbs.
“Recently, we’ve been seeing faster employment growth in suburbs than urban areas,” says Severino. “While there have been many major headquarters relocations to cities, many small- to medium-sized businesses are entrenched in suburban communities.”
Plus, some of the biggest corporations are investing in both urban and suburban locations, from Apple’s headquarters in Cupertino to Google’s digs in Ann Arbor.
And of course, a $1,200-a-month home in the suburbs comes with more space than an equivalent costing one in the city. “Apartments are slightly larger in the suburbs,” says Espenshade. “For example in the DC market, tenants can get around 250-300 square-foot more for their dollar in suburban apartments compared to urban buildings. They’re also more likely to find ‘extras’ in the suburbs like a den, which could be perfect for a nursery, or larger gyms and pools—at the same price point.”
The desire for more space can be well served by the growing trend toward more garden-style developments—low-rise buildings surrounded by green space. According to JLL’s recent multifamily outlook, garden-style transactions surged 70 percent in 2017, while high-rise transactions decreased by 60 percent.
Getting the edge in today’s suburban multifamily housing
Of course, not all suburbs are created equal, and neither are the housing developments within them. There are a few top draws for Millennials who consider leaving the cities they love.
“Suburbs that have fared well offer the best of both worlds,” says Severino. “Today’s popular suburbs look more like mini cities than the cookie-cutter blocks of yesteryear. They offer walkable, central areas with stores and restaurants, as well as some mix of transit.”
And Millennials’ expectations are also high in terms of modern buildings with high-quality finishes. “Millennials aren’t interested in older buildings with 8-foot ceilings and outdated lobbies,” says Espenshade. “Younger tenants want high efficiency washer/dryers and great connectivity within their own units, and buzzing communal areas outside it.”