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For at least the past decade, Millennials have been the target audience for multifamily owners and investors. But today, Millennials are aging and their younger peers – Gen Z –As the generational shift occurs, it’s Gen Z next in line to be the key target market for multifamily owners and investors.
In this article, we explore what motivates Gen Z and how multifamily owners can prepare their properties in response.
A Look at Gen Z Demographics
Gen Z is generally defined as those who were born between 1997 and 2012. Making these individuals ranging 10 to 25 today. Those who are on the older end of the Gen Z spectrum are moving away from home, graduating college, and beginning to rent their first apartments.
An analysis done by the Brookings Institute finds that Gen Z is one of the most diverse generations. Only 50% of Gen Z identify as white. While the remaining half is Hispanic (25%), black (14%), Asian (5%), or some combination thereof.
Gen Z is the most likely group to be multi-racial or to be born to foreign-born parents. As a result, some experts have gone so far as to call this generation “color blind”.
Gen Z is generally defined as those who were
born between 1997 and 2012.
Why is this important to note? The diversity of Gen Z will have a major impact on where they ultimately choose to live. Many will be willing to live in traditionally ethnic neighborhoods, particularly if those neighborhoods are well-located and more affordable than other urban areas.
Gen Z Lifestyle Priorities
Value Career Mobility
Gen Z has the benefit of entering the workforce at a time when there are widespread labor shortages. This has given them more control over where, when, and who they will work for. Essentially Gen Z has had the upper hand when it comes to negotiating for positions, and now, they want upward mobility. A recent survey of 5,000 Gen Z employees found that 40% would be willing to take a pay cut of up to 5% if it meant more room for career growth.
Gen Z is also faced with what looks to be one of the largest income gaps of all time. With the Middle Class shrinking, many Gen Zers’ look at entrepreneurship as the only way to get ahead.
A survey of current high school students finds that almost 75% want to own their own businesses. Technology has made this easier than ever before. Business startup costs are lower and therefore, the cost of failure is lower too.
Additionally, Many Gen Z renters are finding their financial freedom through freelance work, mostly through the use of widely popular social media platforms. (the rise of the “influencer” is now well documented). By pursuing unconventional business opportunities like fulfilling Amazon orders. This will allow Gen Z to control their financial destiny more than they could if working in Corporate America.
Willingness to Relocate
Whether in search of better career opportunities or lower costs of living, Gen Z appears to be the most willing to relocate. Unlike the older generations, Gen Z tends to be less attached to specific locations. Some of this may be a result of their youth: Gen Z is less likely to have children or own homes—two factors that can make relocating more difficult. The growing acceptance of telecommunicating will only exacerbate this trend.
Attracted to Amenity-Rich Suburbs
Compared to Millennials and Gen X who were immensely attracted to denser Urban areas. Gen Z prefers more amenity-rich suburbs. Without a doubt, the shift from Urban to Suburbs will have significant effects on the housing market.
Two recent studies provide evidence. One study found that 32.9% of Gen Z prefer living in the suburbs, while 32.7% prefer living in areas classified as “urban light”. Only 13.1% of those polled expressed interest in living in “urban dense” locales. Supporting this, another study concluded that 60% of Gen Z prefer to live in the suburbs.
Due to the pandemic and the recent shift from in-office to remote work. It is clear that those individuals would find a strong desire to relocate to the suburbs where they can live in a more affordable area, an area that may be less appealing to those who still have to commute into the office each day.
However, in the eyes of Gen Z, not all suburbs are created equally. Gen Z reportedly wants to live in amenity-dense suburbs. Ideally, these are areas that provide walkable downtowns, restaurants, retail, and entertainment options.
Financially Risk Adverse
Gen Zers’ today tend to err on the cautionary side when it comes to opening credit cards, taking on significant college debt, or signing outrageous car leases. Due to many Gen Zers’ having come of age during 2008-2010 Great Recession, several of them may have witnessed firsthand their parents lose their jobs or worse yet, their homes. After they saw the distress caused, they will have chosen to adopt a much more conservative approach in all financial aspects of their life.
How to Prepare Multifamily Apartments for Gen Z Renters
Be Software Savvy
Gen Z is perhaps the first truly “digital native” generation. Many of them don’t know a world without their smartphones and technology. Of course, being accustomed to having information conveniently at their fingertips. This is the opportune time for property owners to respond accordingly.
Meaning, marketing efforts should be designed for mobile viewing. Ads should be strategically targeted and placed on relevant social media platforms. Lease applications and renewals should all be made available online (and allow for digital signatures).
Multifamily owners should also become accustomed to using software for rent collections, tenant communication, and all repair and maintenance requests. Gen Z is heavily reliant on their mobile devices and prefers mobile app/text communication over email and phone.
Gen Z is expected to treat shared amenities,
as well as surrounding neighborhood amenities (like parks),
as part of their broader home.
Provide Shared Spaces and Amenities
Gen Z came of age just as the sharing economy was taking hold. Some of which will have even taken Uber or Lyft to get to their sports practices. The idea of sharing spaces and amenities is not at all unusual to this generation, and it’s something multifamily owners should embrace.
Given Gen Z’s financial constraints, many are willing to lease smaller apartments at higher rents (per square foot) if those properties have robust amenity spaces. For example, the couple who would have rented a two-bedroom may now be open to considering renting a one-bedroom if the property has a dedicated co-work space for them to use in lieu of a home office.
Gen Z is expected to treat shared amenities, as well as surrounding neighborhood amenities (like parks), as part of their broader home. In fact, Gen Z often prefers sharing spaces with their peers. Shared amenities are not only more cost-effective, but they provide venues to interact with their friends and neighbors.
Integrate Smart Home Technology
Gen Z is the most tech-savvy of any generation, and It goes beyond just a constant connection to their iPhones. This generation has embraced the Internet to the fullest, and today, want to rent apartments that are as tech-savvy as them. Meaning, buildings, and their units that are fully equipped with supporting devices. This includes Wi-Fi-enabled heating controls (e.g., Nest thermostats), Alexa devices, embedded Bluetooth speakers, touchless light controls, charging stations, and more.
A huge step for Multifamily owners in preparing for Gen Z renters is by integrating smart home technology. Doing so can also boost investment returns.
Also to note: when investing in smart home technology, it’s important to not forget about the basic technology as well. High-speed broadband is a must for Gen Z renters, especially with so many working from home now. Gen Z also tends to stream content more than any other generation (YouTube, etc.) so having fast, reliable internet is critical.
Go Green or Go Home
Gen Z takes climate change seriously. Given one of the leading issues amongst the Gen Z is sustainability, they tend to show their loyalty to companies and businesses that utilize environmentally friendly practices. Multifamily owners engaging in substantial renovations and/or new development will want to consider building to LEED or Passive House standards. This puts properties on the path to net zero energy emissions.
On a much smaller scale, owners can use energy-efficient appliances and HVAC systems. They must ensure that their properties are throughly insulated to save on energy costs. Energy-efficient lighting and solar panels are also worthy investments. Gen Z renters will also view favorably any features that improve air quality and reduce water waste.
All multifamily owners, regardless of property size, should consider installing an EV charging station. Electric vehicles are becoming more and more popular. Even state and federal mandates will begin to increase their prevalence.
However, given people with EV cars cannot rent to units that do not have charging stations, it’s not only a practical investment but also a necessity in keeping ahead of the curve for the progressive Gen Z. As an added bonus it helps highlight your commitment to sustainability.
Multifamily owners should consider what type of lifestyle their property supports (or wants to support).
Believe in Branded Properties
Gen Z is quick to post on social media, especially if they have a lifestyle worth showing off! This puts a renewed emphasis on branded properties, Gen Z wants to live in buildings that promote a certain kind of lifestyle.
There are many examples of this. This could be a property that’s supremely environmentally conscious (see above) or one that integrates local art, it could be a property with luxurious amenities (think rooftop pools with surrounding cabanas), or it may be a property with state-of-the-art fitness facilities and a healthy café.
In any event, multifamily owners should consider what type of lifestyle their property supports (or wants to support). Then of course invest in marketing and property upgrades to reinforce it. Lastly, after making the property improvements, ensure that you are branding the property accordingly. Making sure that the brand of the property is clear will help Gen Z feel that much more connected to it and with those who are already active tenants it will increase the probability of renewing their leases year after year.
3 Tips for Keeping Gen Z Renters
Now that you’ve attracted Gen Z renters to your property, it’s important to keep them! Here are a few quick tips that will go a long way in helping with lease renewals.
Gen Z wants their voices to be heard. Make it a point to ask residents for their feedback on at least a quarterly basis. Such as, what property improvements could be made? What amenity spaces need to be refreshed? Would they enjoy a community-wide event to get to know their neighbors? Tenants who feel that their opinions have been heard are more likely to renew.
- Provide supporting services
We know that Gen Z is an entrepreneurial generation. They also spend more money on experiences than they do other commodities. Use this to your advantage.
Host guest speakers or quarterly business topics tailored to budding entrepreneurs. Offer a cooking class or sunrise yoga. Partner with local retailers, like an independent market, to offer unique discounts to your residents. These are relatively low-cost efforts that help to differentiate the property from others.
- Ensure rent increases are reasonable
Landlords who increase the rent by 20-30% year-over-year, often are surprised when tenants leave. While rent increases are inevitable, be sure to increase rent at a reasonable rate each year. Of course, striking a balance can be challenging, especially amid rising inflation. However, Gen Z is fiscally conservative and will gladly (or reluctantly) relocate when faced with huge increases.
Although most Gen Zers say they want to own a home someday, the reality is that is becoming harder than ever to do. The median sales price for a home topped $440,000 earlier this year.
With interest rates on the rise, the cost of owning a home will only increase further. This puts homeownership out of reach for a large share of Gen Z (at least, for now). In turn, they will rent for longer than they might otherwise have wanted. Multifamily owners who tailor their properties to Gen Z will be in a good position for the foreseeable future.