Economic impact data found recently that apartments and their residents contribute more than $1 trillion dollars to the national economy and have helped in the creation or retention of more than 12 million jobs from construction, to management and operations. The economic prosperity even stretches to the local businesses that thrive because of the apartment communities that support them with a larger customer base. In Phoenix alone, the apartment industry contributes about $53 billion to the economy. Apartment construction was expected to peak around 2016, but there continues to be a demand for multi-family commercial properties 3 years later. And it’s not like the prices are going down either. In fact there is speculation that apartment rents will continue to climb past the national inflation rate. With that in mind, one has to wonder why the apartment industry is still growing. The LCI Realty team has compiled a list of reasons why the apartment industry continues to grow.
Millennials Avoid Mortgages
While millennials have been picked on for their preferences by journalists and the media, it’s apparent that millennials have very different consumer practices and markers for economic prosperity than older generations. Millennials also came of age and joined the job market during one of the most tumultuous markets in U.S. history. The housing bubble burst that wrecked the economy was so significant to millennials that many still do not trust the security of owning a single-family, choosing instead to rent. Millennials are also less likely to marry early, so they tend to rent longer. However the pundits want to speculate is one thing, but it’s likely that millennials and Gen Z after them will continue to ensure the buoyancy of apartment industry.
The environment is another important factor to the apartment industry growth, especially to millennial renters. Multi-family residences are built with efficiency in mind, which means that they are often more environmentally friendly than a suburb of single family homes. Particularly in this age where apartments are often required to meet a city’s green standards. Not only that, but apartments take up less square footage and, because of the aforementioned efficiency, the square footage is usually all usable space. Many homes waste more energy with underutilized space or empty rooms. There is also the entire construction to consider, since apartments use less material to create a home, which leads to less carbon emissions during manufacturing and final completion. Mindful citizens often choose to rent in order to reduce their carbon footprint.
Downsizing In Retirement
It’s not just millennials that are renting to save money. A recent Harvard University analysis of Census Bureau data found that the number of renters in their early 60’s increased 84% between 2006 and 2016. People entering retirement are looking at their aging home and realizing that it’s going to be a pain in the butt to upkeep during retirement. While rents have risen dramatically over the last ten years, the upkeep costs and rise in taxation on housing has also risen. Retirees are looking at the time spent doing that and deciding to allow that pain-in-the-neck to get taken care of by a landlord.
The interconnectivity that technology has created is moving faster than people can keep up with. All across the commercial real estate industry, the discussion always seems to come back to smart cities and the implications those have for the future. The apartment industry is not immune to this discussion. The truth is that smart cities are coming and people are anxious for their arrival. Much like tech has changed our careers and how we communicate, the change won’t happen overnight, but slowly and then we will all suddenly realize that they arrived without much announcement. Smart apartments are already very much in place, but they are limited to larger population centers. However, these cities are models for advancement in the future.
Will The Apartment Industry Continue To Grow?
This trend seems like it’s going to continue, especially with a changing economic mindset and a focus on technology. The good news is that smart commercial investors can catch the wave as it goes by and ride it to new highs as this trend continues. The best thing you can do is partner with quality property management professionals as you crest the wave.
Give the team at LCI Realty a call today to see what our team can do for you. Call 480-565-8981 now.