Four commonly held assumptions about Gen Y that are true, but maybe not in the exact way that you think.
When you think about Generation Y, what comes to mind? For most of us in the apartment industry, we tend to picture a very homogenous group. This group prefers apartments over single-family homes. They love urban living. They’re all about the environment. They’re very social. And on and on and on. All of those things are true—for a large segment of the population.
But it’s easy to overgeneralize. The reality is that this is the most diverse generation in our country’s history. Ethnic diversity brings lots of different experiences, attitudes and desires. That means that successful apartment operators can choose not one, but multiple strategies to be successful in drawing Gen Y renters over the next 10 to 20 years.
Demographic Makeup
We can assume there will continue to be a large stream of Gen Y renters flowing into the apartment market over the next couple decades, but we can’t assume that they’ll be similar to the renters you have today.
When those who are older than Generation Y talk about Gen Y, whether it’s a supervisor, a speaker or an author, they often fall back on sharing their opinions based on what they have seen, heard or experienced through their own children, friends or colleagues.
The problem with viewing that generation through that narrow lens is, of course, that no one person or even a social circle represents a generation. This has always been true, but never truer than it is with Gen Y. There’s a lot more diversity in the Gen Y segment, compared to what has been seen with Generation X or the Baby Boomers.
About 39 percent of today’s 20-somethings are Hispanic, Black or Asian, according to the Pew Research Center, which based its findings on U.S. Census data. When applied to the total Gen Y group, it represents 30 million people who are the apartment industry’s customers now or are likely to become their customer base during the next decade or so. America is a melting pot, yes, but it has more unique ingredients than ever before.
It’s also important to realize that Gen Y includes everyone born between 1980 and 2000. Today, the apartment industry is only dealing with the first wave of Gen Y-ers. A 29-year-old is part of the group, but so too is their 20-year-old sister and 12-year-old brother-in-law. While all are members of Gen Y, they are so far apart in age that different characteristics exist.
What this means is that the industry must be careful about putting a face on Gen Y. There are many faces. It’s not a homogeneous group, and ethnicity and age are only two examples of that. Given the many backgrounds and cultures and interests, how can anyone assume all Gen Y-ers want the same thing in an apartment? Yes, a segment will be drawn to new urban construction with electric-car charging stations and rooftop lounges. But apartment owners need to see that for what it’s worth—a niche within Gen Y. It’s not the only model to use when trying to attract Gen Y renters. It’s just the first one to emerge. There are a number of other niche possibilities that opportunistic apartment operators and developers will identify over the next decade or so.
Housing Preferences
We can assume Gen Y-ers will be renters longer, but we can’t assume they’ll continue to choose apartments.
We know Gen Y-ers are more likely to rent into their 30s for all the well-known reasons you’ve undoubtedly heard countless times–desire for mobility and flexibility, fear of home value fluctuations and a lack of savings to meet increased home-purchasing standards, for example. But apartment operators must be aware that just because residents aren’t ready to buy single-family homes, that doesn’t mean they can’t be tempted to live in them—especially as they get married and have kids. This is doubly true when you consider the changing demographics.
Census data shows that Hispanics—who accounted for more than half of U.S. population growth over the past decade—opt to marry and have children at a younger age than do whites. And that could be a trigger point leading them to go looking for more spacious quarters.
The single-family rental business has seen the same bounce apartments have in the past couple of years. As investors buy houses at rock-bottom rates (often in foreclosure), many of those properties are ending up back in the rental pool. Apartment operators, especially in the suburbs, must make a strategic choice: Do you write off that audience or do you compete? The trend these days is for apartments with smaller floor plans and more community space. But strategic apartment operators and developers will be able to stem the loss of tenants to single-family home rentals by going in the other direction: offering larger floor plans and amenities like connected garages.
Urban or Suburban
We can assume lots of Gen Y renters love urban living, but we can’t assume that’s the only place they want to be.
Whenever you hear about Gen Y-ers you always hear about how they want to live in high-density, walkable urban areas. And there is plenty of evidence that this is certainly true for a lot of people, but it’s probably not as widely true as most of us think. The Census recently released some very interesting findings from its 2010 survey. It shows that, in general, suburbs continue to grow faster than urban areas. Furthermore, the data also shows that the big population growth centers for ethnic minority households over the past decade have been the first-ring suburbs, not the urban core.
Urban living may be cool for the 20-something today, but fast forward to when Gen Y-ers start churning out children of their own and we’ll see a lot of them moving back out to the ‘burbs—near and far—and for one primary reason: schools.
Communication
We can assume Gen Y-ers like to talk to people, but we can’t assume that they want to talk to you.
Is that too harsh? Here’s what I’m trying to say: Yes, many young adults value community. What that means is that they want to interact with each other, but a big chunk would love to never have to set foot in a leasing office or make a phone call downstairs. That’s viewed as “forced interaction” (not good), as opposed to “natural interaction” (good).
Here’s the point: As Gen Y-ers become the largest segment of the renter base, operators must adapt their communication methods. There are lots of ways to do this, such as online leasing, online renewals, online maintenance requests, etc. You get the idea.
Here’s an example: I have a 28-year-old friend who lives in the Uptown Dallas area—a very trendy, urban environment for young adults. He recently told me a story that I thought was very telling. He had been out of his apartment for a couple of days and came back to find a lease renewal packet taped to his door. He was furious, and complained—in an e-mail, of course—to the property manager that when you put something on the door and he can’t pick it up quickly, it becomes an advertisement that he’s not home. He asked them to e-mail him such things, and he was told that the company had a policy against putting lease renewal details in e-mails. A policy against e-mailing? Wow.
Generation Y member Jay Parsons is National Market Analysis Manager for MPF Research, a RealPage company. He can be reached at jay.parsons@realpage.com.
NSC Members Share Their Insight, Data About Generation Y Characteristics
Gaining Approval
Gen Y is technologically savvy and capable of accessing information quickly. They can easily sort out authentic information from “spin.” Multimedia technology has given them a short attention span for messaging. They need visual engagement through photos, images, and videos. They desire rich content without a lot of fluff. If your business workflow isn’t easy and frictionless, Gen Y will give up on you. But if they are interested in your community, get excited, because you made the cut. –Esther Bonardi, Yardi Systems
Social Media Messaging
“We continue to see mobile usage and social engagement increase exponentially; not surprising, given that research shows 81 percent of Gen Y consumers use Facebook every day, often from a mobile device,” says Arlene Mayfield, President, Apartment Guide. Cisco released a survey in November about Gen Y and Mobile that got quite a bit of attention. Among its findings was that 40 percent of college students and 45 percent of young employees would accept a lower-paying job if it had more flexibility on device choice, social media access, and mobility than a higher-paying job with less flexibility. –Margette Getto, Apartment Guide
Marketing Models
Research has shown that members of Gen Y are changing their decision-making method for purchases in significant ways. The old “awareness marketing” model reached out to a large number of consumers, but only a small percentage converted in the end.
Today, we see the “engagement model” taking over as a response to their tendency to turn to their social network for help when make a purchasing. If they are happy at then end of the transaction, they share their experiences with their “friends,” if they are not satisfied they share their experiences, too. –Joanna Ellis, Ellis, Partners in Management Solutions
Transaction Trends
Online communication is the preferred method for many Gen Y multifamily consumers. This is true for online leasing and making rental payments. It’s also the case when residents move out with a balance and are turned over to a collection agency.
–Jorge Baldor, ResidentCheck and ResidentCollect
Comfort and Mobility
Gen Ys are driven by comfort and mobility. They want a place to live that is as nice or is nicer than where they started. If they wish to “re-boot” their current life situation, they can through apartment living. They also want to avoid making the potential mistakes that they have seen their parents make when it comes to single-family home ownership—such as the hassle of buying, caring for the home and losing money on their real estate investments. Generation Y is aware, practical and more savvy than they are given credit for.
–Tim Babcock, Blu SKY
Sense of Community
SatisFacts’ “Inside the Head of Online Renters” study shatters some Gen Y perceptions. For example, similar to all respondents, only 15.7% visited a community’s Facebook page in their search – ratings sites were nearly four times more used. Unlike strong demand for resident portals, community Facebook pages rated dramatically lower. Some 49.9% reported they would never visit their property’s page, and only 16.8% would use it to communicate with residents. Staff service delivery topped the charts regarding impacting Gen Y’s renewal decisions; “sense of community,” activities and community Facebook pages rated well below 3.00 (five point scale) – the latter rated lowest of all items. –Doug Miller, SatisFacts Research
Technology and Bandwidth
Generation Y are huge consumers of technology and bandwidth, so communities should be prepared to meet these expectations. One J Turner Research study found that nearly one-third (31%) of younger residents consistently have two devices and one-quarter (25%) have three or more devices connected to the Internet. Although location remains the number one factor when selecting an apartment, our surveys also suggest that “Internet Speed” is quickly catching up in the ranks. Consider that that nearly two-thirds (64%) of respondents said they would relocate if Internet speeds were slow. –Joseph Batdorf, J Turner Research