Suburban Developers Preparing For A Wave Of Millennial Demand Outside NYC
As baby boomers become senior citizens and older millennials look for homes to accommodate families, developers are banking on a swell of demand for affordable homes outside of densely populated cities like New York.
In Westchester County, development is already reshaping the area for its next chapter. Since the beginning of the year, the Westchester Industrial Development Agency has supported five major projects in the county, adding up to a total of $1.76B in private investment.
The majority of the projects are rental housing offerings that will add some 2,000 units to the area, according to the IDA, an agency that approves incentives and tax breaks for projects. These developments represent a significant jump: In 2018, $880M worth of projects were approved throughout the entire year, per the IDA.
The activity, real estate players say, speaks to the growing demand for housing beyond the typical suburban family homes that have defined the Tri-State suburbs for generations.
“The numbers are staggering. There's a residential real estate boom,” said Bridget Gibbons, the director of the Westchester County Office of Economic Development. She is speaking at Bisnow’s Westchester and Fairfield State of the Market event next month. “The market is demanding it. After the market crashed, residential real estate was quiet. There is pent-up demand, and that’s now being fulfilled.”
Nationally, monumental demographic shifts over the next decade, along with a widespread affordable housing crisis, will play a major role in the kind of housing that the country needs.
By 2030, all baby boomers will be over the age of 65 and the U.S. population will be made up of more older people than children for the first time in history.
Meanwhile, millennials (the oldest of whom are around 38 years old this year) have in the past two years become the largest generation in the American workforce and appear to be buying homes in greater numbers, reversing a yearslong downward trend in national homeownership.
Some builders are already banking on the demand from buyers in places close to, but not within, urban areas. The National Association of Home Builders is releasing analysis later this year indicating single-family construction jumped 7% between 2017 and 2018 in exurban areas, The Wall Street Journal reported last month.
Westchester County, sources said, is already being reshaped to cater to older millennials, who are looking beyond the pricey five boroughs, and seniors who want a more simple way of living.
“Maybe they are getting ready to think about a family, and renting here kind of gives them flexibility," Gibbons said. "They will eventually make that [homebuying] leap.”
The Cappelli Organization Executive Vice President Bruce Berg said developers have been looking beyond the five boroughs for some time now, and the bulk of development is rental over condominiums, as developers still think rental is a safer bet in these areas.
His firm's developments include the 112-unit rental building known as the Standard in New Rochelle and the mixed-use project Atlantic Station in Stamford, Connecticut, which it built with RXR Realty. Atlantic Station is populated by people over 30 years old, he said, while the Standard — with slightly smaller-than-average units — is targeted at a younger audience.
There is already some indication that people are leaving New York City. The Census Bureau says New York City lost 40,000 people last year, though Mayor Bill de Blasio questions the validity of those figures, arguing there is still “steady growth.”
Regardless, places like New Rochelle are readying themselves for a wave of demand. There, a $4B development plan run by RXR Realty is underway. Other groups are also betting the city — where a zoning incentive allows developers to build higher if they provide a community benefit — is worthwhile, with some 15 buildings now under development.
“When we look back in 15 years, the real estate landscape in the suburbs is going to be very different,” RPW Group President Robert Weisz said.
His company has developed around 10M SF of office space. Now, Weisz wants to embark on his first residential development: a three-building complex in White Plains known as The Flats at 1133.
The $95M project, for which the IDA gave its support this year, would feature 303 units and will be at the site of RPW’s office complex at 1133 Westchester Ave. on Westchester's I-287 office corridor.
“We find millennials are absolute enemies of commuting, they’d rather live in a small place … but not waste time commuting," he said. “If they work in our building, they will be able to walk to work even though they live in the suburbs, and we will offer shuttles to the train station.”
Weisz said the office market has been expanding in Westchester, but companies have been put off by the shortage of affordable housing.
The idea of his new residential development would be to provide a place for people who work in the office building to live, but the target is both millennials and empty nesters.
“The reshaping of Westchester County is already happening,” Weisz said.
Hear Weisz, Gibbons and more at Bisnow's Westchester and Fairfield State of the Market event May 7.