Are You Sure You’re Ready for the Millennial Investor?
The spending, working, and lifestyle habits of Millennials are impacting every industry, including commercial real estate. Understanding what drives and motivates the Millennial investor will help you to leverage this growing but often underestimated market.
But first, a little background…
Why Millennials?
They have jobs…
Millennials are the largest generational cohort, with a population that is expected to peak in 2036 with over 81 million living members. They now also make up the largest segment of the workforce, representing 1 in 3 American workers. And their share of the workforce is expected to grow as Millennials currently enrolled in school graduate college and begin working in the industry.
What this means is that Millennials are also the largest group of income-earners in the country. The buying power of Millennials currently stands at $1 trillion annually, but it is predicted to increase to $1.4 trillion annually by 2020. As such, the influence of Millennials in the workplace, in communities, and in capital markets will continue to grow.
… and they have savings.
Millennials save at a higher rate than any other generational cohort (10% of their income versus 8% for Gen X and 5% for Baby Boomers). And over 1/3 of Millennials save at least 15% of their income. As a result, 1 in 6 Millennials have at least $100,000 in savings. And with Millennials saving more aggressively now than they have in years prior, this trend is expected to continue.
Why Commercial Real Estate?
After witnessing the tech bubble in 2000 and the global financial crisis of 2008, younger investors are pretty skeptical and have limited trust in the markets. These events have shaped the way this generation thinks about investing; they have now strayed from historic patterns and ventured into more uncharted investing territory.
There are several factors that influence Millennials’ preference for CRE over stocks. The main ones are that real estate is a hard asset, it has low volatility, and it can offer tax benefits. Technology is also lowering traditional barriers to entry for commercial real estate investing, making it easier now for Millennials than for any generation prior to invest in CRE.
Today, only 33% of Millennials own stock, but 55% invest in real estate – the highest percentage of all demographics – and an additional 30% intend to invest in real estate.
Where CRE Meets Tech
The younger generation grew up with on-demand technology at their fingertips. With the prevalence of cloud, mobile, and social, Millennials are used to and demand efficiency, accessibility, flexibility, and connectivity. These expectations roll out into every aspect of their lives, including where and how they invest their money.
Over 80% of Millennials wish the process of investing in real estate were easier, and 3 out of 5 Millennials would be more likely to invest in real estate if there were technology available to make the process easier.
For CRE owners, failing to invest in technology could mean alienating an entire group of investors. This increasingly powerful group of younger investors expects convenience and control, all while on-the-go, providing the data they need anytime and anywhere.
Download this free eBook to see if your firm is ready for the Millennial investor. Learn about other trends in Millennial investing, what Millennials look for in investment opportunities, and how your CRE firm can attract these younger investors.
