The youngest generation—the one that has come to be labelled Generation Z—is fast becoming an enormous factor in all aspects of American life, including real estate.
Usually defined as those born in 1996 or later, this demographic encompassed 24.3 percent of the U.S. population as of 2016, more than Baby Boomers (22.9 percent), Millennials (22.1) or Generation Xers (19 percent). By 2020, the Washington Post predicts, Gen-Zers will have some $3 trillion in purchasing power.
And while they have some things in common with Millennials (those born between 1981 and 1996), they are in many ways unique from their oft-discussed predecessors. First, those in Generation Z are viewed as being more serious-minded and wary of the world. They are also more tech-savvy—naturally, since Gen-Zers are “digital natives,” having never known a web-free world—and more inclusive toward different races and those of various sexual orientations.
There are obvious caveats about drawing premature conclusions about Gen-Zers, as so many of them are still so young. That would account for a disparity in data gathered in two separate surveys of their real estate desires—one conducted in 2017, the other in 2018. But both ascertained that those in this demographic are drawn more toward suburbs than might be expected.
The earlier of the two studies found that 32.9 percent of those in Generation Z prefer living in the suburbs, more than any other classification, while 32.7 percent prefer living in areas classified as “urban light.” Just 13.1 percent prefer to live in “urban dense” locales.
The more recent study concluded that 60 percent of Gen-Zers would like to live in the suburbs—and that 83 percent plan to buy a home within the next five years.
Either way, this flies in the face of conventional wisdom indicating that once young people get out on their own and have a little cash, they are more inclined to live in urban areas, and only later flee to the suburbs, when they wish to start a family and buy a home.
The latter trend holds up among Millennials, who grew up in a relatively placid time. Gen-Zers, not so much. The eldest among them were in elementary school when 9/11 occurred. School shootings, gun violence, war and terrorism have been, sadly, an everyday reality in their lives. They have also seen their parents struggle through recessions in 2000 and 2008.
Small wonder, then, that they might want the security of the suburbs. In that way, Gen-Zers have been compared to their great grandparents—i.e., the Silent Generation, which came of age between 1920 and 1940, amid war and The Great Depression.
According to the latter survey, this latest age cohort would most like to live in or near Los Angeles, New York City and Denver, and listed San Francisco, Atlanta, Washington D.C., Miami, San Diego, Seattle and Tampa as other desirable urban areas. This contrasted sharply with Forbes’ 2016 ranking of cities most coveted by Millennials and Gen-Zers in 2016. The top five were San Francisco, Austin, Texas, Boston, Provo, Utah and Cambridge, Mass. (Chicago came in 19th.)
But again, there are still some details to nail down about Generation Z, details that will only show themselves with the passage of time. Consider that 93 percent of those in this cohort have been saving toward a down payment fewer than five years and that 20 percent of them haven’t saved so much as a penny—no surprise, given their age.
But consider also that they want to save for a place that will offer them 2,081 square feet, when in reality they will likely be able to afford a little over 800.
This would seemingly open up suburban multifamily properties as an alternative for these wannabe home buyers, especially given the sad reality of student debt—one of the major obstacles they list to saving toward a home.
One more note about location, this one on the micro level: it is, as always, the biggest determinant as to where anyone might want to live. There is a twist in this case, however. While Millennials want to live closer to friends and green spaces, Gen-Zers most desire proximity to entertainment options. And as with their older brethren, they very much want their technological bells and whistles.
That gets back to their digital nativism, for not only have they only known an online world, most of them have never known a world without smart phones. They eschew television, movies and live programming in favor of streaming, and only 49 percent of them believe social media is important (as compared to 61 percent of Millennials). An equal number of respondents from both cohorts—60 percent—believe social media posts have become too public, leading to a preference for temporary sharing outlets like Snapchat.
It is a chicken-or-egg question as to whether that has led to an age group with an average attention span of eight seconds, or vice versa. But this much seems clear: if a property owner is to appeal to Gen-Zers about a place in the ‘burbs—be it a sale or rental—it is imperative that he or she does it fast. And that it has the features this newest generation is seeking.
Michael H. Zaransky is the founder and managing principal of MZ Capital Partners. He has a wide range of real estate, banking and financial experience and has been a licensed Illinois real estate broker since 1979. Zaransky is a member of the Young Presidents’ Organization (YPO-Gold), the National Apartment Association, the National Multifamily Housing Council (for which he is a board member) and the Urban Land Institute.