While Bill Donges allows that the preferences of a small group of Lane Company interns can hardly be considered the standard for the entire cohort of more than 80 million children of the baby boomers, he believes the results of the survey are a good reflection of the residential cravings of the generation born between 1977 and 1996.
Because that population demographic is expected to have a tremendous impact on residential industry, Donges asked the 20- to 26-year-old interns to take their cameras to Class A apartments and condos in Atlanta and capture images of amenities they would consider essential in their choice of dwellings.
Donges and his design team were already familiar with the well- publicized traits of the group that makes up one-third of the population of this country. “We thought that to appeal to this generation, we would want something angular, avant-garde, a little bit edgy. What they came back with was just the opposite,” Donges explained. Instead of the funky, metallic designs he expected would attract them, the entire group favored apartment and condo communities that said, “welcome home,” in brick or stonework.
“The places they would rent or buy had a homey feeling and that surprised us because there were several places we asked them to go that were what we would call ‘edgy.’ In fact, we were designing to be somewhat edgy in a couple areas and we’ve since changed that to more of a traditional look,” he said. “And, when you consider the amenities they absolutely desired, they really liked little garden or pool areas.”
Clicking through the slide presentation created from the photos the Lane interns took of their preferred communities, Donges discovered that his group of echo boomers favored properties with comfortable, intimate outdoor spaces where they could gather with their friends. “I’m looking at one here with a pool area, but by the pool there’s a trestle and a canopy with a fire pit and chairs around it. They absolutely crave that. They just thought that was awesome because they could imagine people sitting around the fire pit,” he said.
“It was about being inviting and warm and social. That came out in spades and we’ve taken it to heart. We’ve changed a few of our designs to reflect that,” said Donges, who became CEO of the 30-year-old multifamily owner, developer and manager in the spring of 2005, when founder and current Chairman George Lane retired from the top spot. Environmental concerns were another recurring theme in the Lane interns’ presentations, Donges continued. The team was excited about green spaces and recycled building materials, he said.
Residential industry consultant Christopher Lee, president and CEO of Los Angeles-based CEL & Associates, agrees that the demographic he refers to as the Y Generation, is very conservative, but also socially aware. “This is the generation that was raised on Big Bird and Barney and hug the tree and save the environment,” said Lee, who helped create a new strategy for the company that brought all of Lane’s divisions under the same Lane-branded umbrella three years ago.
The Lane interns were also security conscious. Every one of the women in the group favored gated communities with elaborate access-control processes, including elevators from the garage programmed to permit entrance to specific floors or the lobby. “Safety was clearly on their minds, so one of the things we came away with was we absolutely need to invest in good access control and gates,” Donges said.
If a community lacked the basics in technology, Lane’s interns wouldn’t even look at it. But communities got high marks if they were equipped with the latest in technological advances, like iPod docking stations at The Gallery Condominiums that allow residents to play their iPod-stored music throughout the condo. Wine coolers also were a popular item.
“The other thing that came out was their overall desire for service,” Donges continued. “All the places that they crave have concierge services. All the places they pointed out have dog services, dry cleaning services, things that would give them extra time because they’re in a time crunch.”
“Everything for their generation revolves around meaning — meaningful time, meaningful relationships, meaningful work,” Donges said, adding that driving a car was not included in the meaningful category. He wasn’t at all surprised to find, over and over, that his interns preferred communities that are near restaurants and grocery stores, where they could walk out and be part of a community without getting in the car, a preference they share with their baby boomer parents.
A good example of the kind of live, work, play environment the echo boomers look for is Atlantic Station in Midtown Atlanta, where Lane Company is one of several developers building residential in the huge lifestyle center. Lane has built more than 1,500 condos and apartments in six communities there.
The group particularly liked Lane’s recently completed $31 million, 242-unit ICON City apartment homes within walking distance of offices and Atlantic Station’s dining, shopping and entertainment. Lane designed the project partly with echo boomers in mind, but Donges believes the leading edge of the 18-to-29-year-old demographic that has a 60 to 70 percent propensity to rent is just beginning to make an impact on the residential industry.
Christopher Lee says surveys like Lane’s are one of the key elements in the critical process of “hard-wiring the voice of the Y Generation” into multifamily development, design, management and operational decisions. “I think it’s great,” he said of the Lane survey. “It’s what we call ‘hard-wiring’ and I compliment them for that. But I’d also encourage them to make surveys a standard practice. This is not a one-time thing. As the Y Generation matures, their needs may change so we must update research and knowledge; get out and talk to folks. Hard-wiring is the key to success.”
One of the problems apartment owners face today is the absence of behavioral data and other information on gen Y preferences and decision-making processes, so it’s difficult to effectively market and lease to that group, he said.
Although 80 million gen Ys, the oldest of which turn 30 next year, are probably the most studied population ever, Lee warns against lumping them all into one group. “There’s still a lot of diversity of preferences and opinions that can be geographic,” said Lee, who figures gen Y is actually closer to 83 million when including immigrants of the same age demographic that are not counted in the National Center for Health Statistics’ live birth data.
Lee, whose client list reads like the Who’s Who of real estate, believes the companies that focus on student housing are most attuned to this generation. “They deal with them every day, whereas those in conventional multifamily might be dealing with a 40-year-old divorcee or a 50-year-old retired couple. They’re not thinking that way. Whereas the folks in student housing deal with Gen Y every day, their designs and methods must appeal to that group and are often different from conventional.”
A look at student housing can provide clues as to what the coming deluge of Generation Y renters and entry-level condo buyers will be looking for in their first independent living experience, said Lee, using unit design as an example. “Many Gen Yers who are in college today are used to small units with common space where they share kitchens and a common living room. This is a group that is very much into sharing. So, to appeal to them once they get out of college, they don’t necessarily need a traditional unit,” he said, speculating that Generation Y college graduates may be attracted to more of a workforce housing option that looks similar to a student housing community.
“They’re considered the next great generation. They have absolutely wonderful values and ethics and they’re very educated, highly coached and tutored for most of their lives. We need to convert that profile into opportunities for us as we design, manage and lease our buildings,” said Lee.
Equity Residential CEO David Neithercut told a gathering at Bank of America’s 36th Annual Investment Conference in September that more than four million echo boomers will turn 18 every year for the next half-dozen years or so. The phenomenal impact that demographic will have on the housing industry has prompted the REIT to take a close look at the population. “We’re trying to get our capital squarely in front of the growth of that cohort,” he said, predicting that growth
will be along both coasts and throughout the Southeast and the Southwest.
Speaking even more extensively about the echo boomers during a presentation at the Wachovia Securities 9th Annual REIT Conference, Neithercut told his audience the number of people turning 18 years old in this country over the next 10 years will peak in 2007 or 2008.
“The question that we ask ourselves is where are those people going to want to live, work, play. We believe the jobs that are being created in this country and the places where these people are going to want to live are the markets where we are placing our capital. We think New York City, D.C., Florida, Atlanta, Denver, Phoenix, Southern California, the Bay Area and Seattle. He predicts that’s where the jobs are going to be. He also believes the echo boomers will want to live in the urban cores within those markets, where the huge apartment REIT has been investing much of its acquisition budget in mid-rise and high-rise properties.
Equity Residential has been converting apartments at some of its communities into for-sale units for several years. The company that plans to sell a total of 13,000 units this year already has sold a number of condos to echo boomers. “We feel this age cohort, this very powerful segment, will have a strong impact on condos going forward. We believe that for a significant percentage of these people, their first home purchase will likely be a condo in these urban core markets and the kind of units we sell, that we’ve been converting in D.C., in Scottsdale, Ariz., in Seattle, have been what we consider to be very attractive starter-home price product,” said Neithercut.
Although he reminded the group that Equity Residential execs knew from the beginning that the condo business was potentially lumpy and might ebb and flow, he expects echo boomer buyers to help the business flourish. “We believe this very powerful segment will have a significant impact on the condo business going forward. I do believe condo conversion is a business that will run for a while and this very powerful segment of the population is the reason why.”