Downsizing Baby Boomers Means Big Boom for Multifamily
The Baby Boomers are about to boom again. The free-spirited Post World War II class that rocked to Bob Dylan, claimed a transistor radio as a personal identity long before smart phones, and chased sushi with shots of designer vodka is now older and getting charged to make a comeback.
And it’s coming quick.
Baby Boomers Downsizing into Apartments
With many of them now empty nesters, Baby Boomers are primed to downsize from their sprawling suburban homes and seek apartments, beginning this year. And the multifamily housing industry had better be ready and have plenty of room available, say some apartment industry insiders.
At a time when developers are drawing blueprints with the younger generation in mind, meeting the demands of Baby Boomers who have a lot of stuff may be a bit of conundrum. And how will communal gathering areas designed for Internet chats measure up to more traditional living spaces?
The once tried and true strategy of offering a cookie-cutter balance of two-bedrooms, one-bedrooms and studio apartments will have to come under close scrutiny.
“It’s an interesting dilemma isn’t it?” says National Multifamily Housing Council (NMHC) President Doug Bibby. “I think what it talks to is that there is no one-size-fits-all solution, and that you have to have different housing options available to the different populations. What I’ve been saying consistently along the line is we’re going to have to have a greater diversity of products types and more creativity into the configurations of units depending on the populations that you’re trying to attract.”
That could mean that the face of the properties could change along with the shift in apartment demand that points to those born between 1946 and 1964.
Boomers Responsible for 60% of Renter Increase by 2023
In a report issued by the Federal Reserve Bank of Kansas City by economist Jordan Rappaport, “the longer term outlook is especially positive for multifamily construction, reflecting the aging of the baby boomers and an associated shift in demand from single-family to multifamily housing.”
He says that movement from single-family to multifamily housing could create a geographic shift from suburban living to city living, and that suburbs may need to consider rezoning alternatives to encourage multifamily reconstruction.
In a study last year, NMHC projected an increase in the number of older apartment renters. While most renters won’t fall into the Boomer category, those 65 and older will account for almost 60 percent of the increase in apartment renters by 2023. In the past 10 years, just more than half the increase came in the 45-54 and 55-64 age groups, the report says.
The younger demographic will continue to fuel demand for apartments, but don’t forget the Baby Boomers.
“[Developers] also need to remember the need for one-story buildings, elevators in place of stairs, even to second and third floors,” says veteran Fair Housing trainer/consultant Anne Sadovsky. “And it’s not just Boomers, it’s pre-Boomers in their 70s like me who are still active, working and will likely be renters.”
Storage Units Could by Key Amenity for Boomers
Bibby said that Boomers have already made an impact on the multifamily market. He related a story about a national builder that put up a couple of apartment communities in Greater Phoenix anticipating that Millennials and Gen Xers would be the primary renters. However, Baby Boomers who were downsizing and flocking to more temperate climates came calling.
The challenge, Bibby says, is marketing a product that invites people who are sacrificing larger spaces and amenities for location while at the same time demonstrating that it is a fit for those who can only afford less.
“Then, how do you cater to the downsizing boomers who have a lot more possessions?” Bibby said. “You got to think about storage units, maybe even a combination of a centralized storage in the community but also storage within the units themselves and different configurations there. My point to the architects, designers, and builders is get ready for a lot more choices that people are going to be demanding.”
While Bibby couldn’t put a finger on how big a Boomer apartment should be, he did say that architects should consider floor plans that have lots of storage space. A two-bedroom with larger closets and maybe a unique storage space within in the unit could be a big seller.
So, do developers consider a model where space once used for tennis courts and swimming pools is now occupied by mini-storage units at an additional price point?
“I think that would be brilliant,” he said. “If you know anything about the self-storage business, it’s a cash cow. It could be a very significant revenue stream. But if you’re building less density in parking for example, you might want to build into that storage into that footprint if you can’t get the zoning for the self-storage nearby.”
A Booming Opportunity Awaits the Apartment Industry
The bottom line, says Bibby, is that the multifamily developers may not want aim all of their marketing efforts toward one generation over the next. By focusing solely on Millennials, the industry will miss out on a huge demand segment that has already re-entered the market.
The U.S. Census Bureau projects that the nation’s older population will double to 71.5 million by 2030 as Baby Boomers start to turn 65 in two years. If one percent of that population turns from home ownership to rental, that’s nearly 720,000 new renters coming into the market, Bibby says.
Even at a conversion of less than 1 percent at 500,000 − the same amount the industry lost annually from 2002-06 to the home ownership boom − that’s a huge potential uptick.
“Now, [developers] have got to be thinking through the demographics of what’s happening to the community, where [Boomers] are located, the surrounding neighborhoods and what they need to do in terms of product mix to cater to the demand,” he said. “It’s just a different ballgame we’re entering.”
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