Here's What Gen Z Actually Wants In Multifamily
A generation of renters raised through the Great Recession, dwindling affordability and the advent of social media is leading to new and competing approaches to marketing housing.
Generation Z, defined by Pew Research Center as people born after 1996, is now entering traditional multifamily properties, bringing tastes for smaller apartments, more practical amenities and even influencers with them. And don't mistake them for millennials, the cohort right before them, Streetsense Director of Trends and Consumer Forecasting Jamie Sabat said.
“We see so many developers talking just about millennials," Sabat said. "But millennials are more in the age bracket where they're having children and starting to move into the suburbs."
As a result, Streetsense, a Washington, D.C.-based real estate design and branding company in a 50/50 joint venture with CBRE Group, advises a mostly new approach for the distinct demographic, Sabat said.
The U.S. has somewhere over 60 million people in the Gen Z age range, CNBC reports. Even though only the oldest few million have reached working age, the group as a whole already sports a buying power of over $140B, according to a recent estimate by advertising agency Barkley.
Multifamily owners are starting to adjust, including in their amenity offerings, which have changed student housing because of more academic-minded, fiscally conservative students, The Scion Group Senior Vice President of Advisory Services Jay Pearlman said. At least for student housing, gone is some of the appeal of luxury amenities like lazy rivers, which have been replaced by a desire for study and collaborative spaces.
“[Gen Z] is typically a lot more risk-averse when it comes to finances and is less likely to spend the money on the luxury properties, to borrow money and to exit school with a lot of debt," Pearlman said.
"Therefore, they will trade off larger floor plans or luxury amenities in exchange for a more affordable residential experience," Pearlman said.
Traditional multifamily properties readying for a Gen Z influx have done something similar, trading basketball courts and saunas for coworking, Sabat said.
An embrace of remote work by younger Americans and their employers has made branded coworking space an increasingly enticing amenity, and one that gives developers an additional revenue stream from renting the space out to an operator.
Common areas for community-building events like yoga and happy hours have become more popular and are effective retention tools, according to Sabat. She says that a resident with one friend in the building is 75% more likely to renew their lease, and one with two friends is 90% more likely to renew.
“We’ve found that community is the new amenity,” Sabat said.
Mostly raised by Gen X parents, who Pearlman said are traditionally skeptical and hard to market to, Gen Z is also “less inclined to believe the marketing that you put out and more inclined to believe the word of their peers,” according to a white paper on the subject co-authored by Pearlman.
A research study by Atlantic Re:think, Comscore and Harvard College Consulting Group recorded the same bias, and found Gen Z more swayed by influencers and celebrities in brand selection than are millennials.
Noticing that a few years ago, Streetsense invited influencers to an event promoting the official opening of The Tower Cos. D.C.-area development The Pearl, Sabat said. The all-white-clothing summer event ended up reaching over 100,000 people on social media, according to Streetsense.
“Once you tap into an influencer, you have all of those followers,” Sabat said. “Gen Z is looking to the real person when they’re buying a product, so having an influencer support the property is a really interesting tactic, and we found it to be successful.”
Others, like Starcity CEO Jon Dishotsky, are decidedly more skeptical of the influencer approach based on some of its recent history and subsequent tarnished reputation.
“The influencer market is interesting,” Dishotsky said. “But we saw places like the Fyre Festival like burn to the ground based on influencers being bait and switched by what was really not a good product at the end of the day.”
Ready-made with some qualities sought by Gen Z like community and price, co-living developers like Starcity and Quarters have taken off among younger millennials and Gen Z in recent years, with successful social media advertising and a clear product-market fit.
“When you think about the new people entering the workforce, the primary goal they have is to get an affordable place and enjoy the city they want to live in, as they make their way to the next income class,” Dishotsky said.
Offering affordability by design through smaller and pre-furnished apartments, and using search engine optimization to get the word out on those features, have proven to be successful with younger millennials and Gen Z for both Quarters and Bay Area-based developer Panoramic Interests.
“Gen Z is so transient, and the barrier to entry is pretty high to move to a new city,” Quarters Director of Real Estate Kevin Rifkin said. “Having that fully furnished unit is essentially a soft landing for a lot of the people who are moving.”
Panoramic Interests owner Patrick Kennedy, whose company is ramping up the social media marketing of its apartments through property management software Entrata, said that will definitely add Gen Z interest, but not as much as price can.
“Price is the best amenity,” he said.
CORRECTION, Feb. 20, 8:30 A.M. PT: A previous version of this story misattributed a quote from Quarters Director of Real Estate Kevin Rifkin about Gen Z's appreciation for furnished apartments. The story has been updated.