Kids These Days: Real Estate 2018

January 26, 2018 Economics Comments (0) 247

I always enjoy the Urban Land Institute’s analysis of Emerging Real Estate Trends (by pwc) and this year was no exception.  What made it especially interesting was the demographic foundation of much of the analysis:  the Millennial/Generation Z groups that will define the future of space.  As usual, the punks have it all over the hippies.

1. SMALL

The next generation is not interested in your 6,000 square foot McMansion or even your 3,200 square foot suburban gem.  I recall Doug Farr about seven years ago describing a potential tenant for a retrofitted Lathrop Homes unit:  Has a $5,000 bicycle and an iPad.  Probably only wants 700 square feet.  Will not be collecting furniture.

Let them eat cupcakes.

They are here and they are happy with small space.  People collect information and experiences now, and while vinyl and books and even mid-century modern furniture are all hipster now, most of what we collect fits on a device smaller than your thumb.

There will be a lot of obsolete McMansions soon.

2. NO AUTO MOTIVE

All the talk of driverless cars plays right into the next generation.  They are getting their driving licenses later or not at all.  They Uber everywhere.  The autonomous vehicle already exists for them as a choice consumer product.  The countryside the hippies wanted to escape to in the 1970s became the suburbia these kids grew up in in the 1990s.  There is nowhere to drive to anymore.  The car no longer symbolizes freedom.

As it turns out there are more comfortable places to have sex.  Who knew?

For real estate, the more radical transformation is not the autonomous car but the autonomous truck.  Self-driving trucks will have a much bigger impact on the real estate landscape than cars.  This was also true with the advent of the truck and car a century ago.  That’s why we have zoning.

Soon all traffic will be stage managed.

The evolution of the internet of things has also meant that technology is now shifting away from the cloud and onto the edge – where cars and trucks and houses have enough computing power to learn and manage data.  I read in the Economist that one theory about why Amazon bought Whole Foods was to have enough physical footprint to implement edge computing nationwide.

And Canada, I assume

3. PRIVATE COLLABORATION

Back to those Millennials/Generation Z.  About five years ago I toured Bloomberg headquarters in New York City and it was the ultimate open office.  Fish tanks and food kiosks everywhere, ridiculously bright colors, and desks sprawled across an open floor plan.  The CEO occupied just another desk.   No corner offices.  Open space encourages collaboration, so offices followed the open plan.  Hippie Paradise.

Architects love this stuff..(Wikimedia Commons Miller Thomson Vancouver)

Millennials LOVE to collaborate.  They collaborate more than any other generation ever.

By smart phone.  Alone.  Behind a closed door.  ULI explained that the old office door is making a big comeback.  The Millennials and Generation Z demand amenities like rooftop gardens, food options and gyms, but they also really, really want to be able to close the door.

Turns out the physical and mental world aren’t perfect analogues.  Who knew?

According to ULI “Over half (of employees) reported that ambient noise reduces their satisfaction at work.”  The open space plan is still there, but the pushback is growing.  Coworking spaces, which are like multiplayer live-work lofts, are also a thing now – one such company in New York now leases more space than Goldman Sachs.

4. RETAIL IN THE AMAZON AGE

The death of retail is painfully obvious in America, because even though online retailing has ONLY taken 10% of the market, the U.S. retail market was grossly overbuilt, with 10 times the capacity per capita of Germany.  So it is REALLY visible and we will have plenty of malls to go with those McMansions in the 2030 fire sale.

Ahh…fulfillment

Perhaps some will be converted into fulfillment centers, where massive physical space is needed to keep the online retail world humming as they send and receive and repair in million-square-foot tilt-up panel behemoths.  Buildings are getting bigger and smaller at the same time.

5. OLD FOR NEW

What does all this mean for historic buildings?  My own Millennial offspring seem to love the Jane Jacobs idea that new ideas need old buildings.  They have doors.   They have character and patina and a story or two.  They are often smaller.  They are greener than new buildings because they are already there, and as the last 70 years have shown us, they are endlessly adaptable.

 

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