For the first time in about one hundred years, the rate of urban population growth has outpaced the suburbs. Jobs in the city entice recent graduates to settle there and maintain an urban lifestyle. This does not mean that the suburban real estate market will be suffering as a result; it means that commercial real estate investors have more opportunities within an additional market.
With more and more people flocking to the city, the housing crisis in cities such as Boston becomes increasingly acute. Luxury high rise apartment buildings are popping up across Boston in up-and-coming places such as East Boston and the South End. However, this does not address the lack of housing for students, recent graduates, and young professionals still struggling to save money and pay off student loans.
Real estate investors should be considering the needs of the millennial generation. This demographic consists of 80 million people in the U.S. who favor the convenience of city living. Millennials tend to prefer renting a newer apartment with easy access to public transportation. In a city like Boston, new and budget-friendly apartments are seemingly non-existent even though the promise of more workforce housing in a focus of Mayor Walsh’s. This millennial generation, favoring renting over purchasing, would offer a great demand for owners that are able to meet their needs.
Real estate developers can create keep rents affordable by creating new middle-income buildings designed specifically for the needs of the millennial generation. Boston millennials are currently faced with high rents for decrepit apartments that fail to meet regulations. While labor and land costs in the heart of the city are often too high to build middle-income developments, areas such as the Seaport District, East Boston, Allston, and Brighton offer great opportunity for real estate investors to attempt housing development for the younger population. Specifically, the many office buildings in the Seaport District would lure the millennial generation into these prospective buildings, boosting the area’s economy, job growth, and overall vivacity.
A creative solution for a housing crisis in a small city like Boston, often described as a “big town”, would be middle-income microunits. Stemming back to college housing, young professionals and students are used to making the most out of small living quarters. The younger population is willing to sacrifice space for a good price, quality, and convenience. Microunits are usually about the size of a hotel room, containing a small kitchen area, bed space, and seating area. All a young person needs is the essentials: a place to sleep, bathe, cook, lounge, and work. An open layout that allows these essentials to gracefully coincide with each other is the answer to the housing woes of millennials. This microunit trend is starting to kick off in cities throughout the nation, such as San Francisco. Boston should take a note from San Francisco because similar to Boston, San Francisco has a rising millennial population and high rents. In many microunit buildings, developers create common areas for residents to socialize with others in the building. The floor level often offers a lovely lobby and lounge area, similar to a hotel. Microunits would offer a great solution to young professionals who are ready to move on from roommates and have their own place without breaking the bank.