Millennials vs. Boomers: Real Estate Trends

By Percy Nikora, Owner, Co-Founder

Millennials vs. Boomers Real Estate Trends - COMPRESSED

Savvy real estate investors must be keenly aware of demographic patterns in the areas in which they’re looking to invest – particularly as it pertains to potential demographic shifts. For example, is the population growing or expanding? Who is moving to an area, and why? What is the area’s median household income? These statistics are important as they shed light into who might be creating demand for the product type you’re seeking to invest in, and how that asset will perform over time.


In today’s article, we look at four different demographics: Baby Boomers, Gen X, Millennials and “Zoomers” and how each is having an impact on commercial real estate. Specifically, we note how each is creating waxing or waning demand for multifamily housing and why.


Related: Why Is Real Estate a Good Investment?



What’s a Boomer?


A Baby Boomer is the generation of people born between 1945 and 1964, a time that experienced a spike in births that is largely attributed to the ending of World War II. There are approximately 76 million Baby Boomers in the U.S.


Baby Boomers have a few notable characteristics. First, they are considered the largest consumers of traditional media such as TV, radio, magazines and newspapers. Baby Boomers were late to join social media, though roughly 90% now have at least a Facebook account. This generation has begun to adopt more technology to stay in touch with friends and family, but few are truly comfortable with social media to the same degree as the generations to follow.

Baby Boomers also tend to be keenly aware of their finances. Most benefitted from low-cost college degrees and/or jobs with pensions. They went on to buy homes at prices that were still considered affordable and have since built tremendous equity in these properties as a result. Baby Boomers are particularly cognizant of saving for retirement as life expectancies continue to rise.


Real Estate Facts


Baby Boomers are already having big impacts on the office and multifamily real estate segments. As it pertains to office, Boomers are delaying retirement or finding second careers, which continues to drive demand for office space.

Multifamily is another area where Boomers are having an impact. Boomers account for more than half of US rental growth over the past decade, and the number of renters over the age of 65 is expected to double by 2030. This is because Baby Boomers are finally looking to downsize. Although they’re selling their homes, Boomers still want to stay in the communities in which they currently live and have raised their families (or close by). In a recent survey conducted by Freddie Mac, roughly 8 in 10 Boomers said they’d prefer to be in an urban area throughout retirement, as long as that area is close to family and amenities. 


Real Estate Trends in 2020


There are a few key real estate trends to watch in 2020, as related to Baby Boomers. The first is what’s being called the “silver tsunami” of multifamily. As Boomers retire and downsize, many are going to be looking for apartments in high-end apartment complexes. This will drive demand for amenity-rich apartment communities with upscale interiors and luxury finishes. Baby Boomers, like their Millennial counterparts, are also expected to pay a premium for concierge services such as dog walking and package delivery. On-site social activities will also appeal to this demographic. What’s more, real estate investors will appreciate that Boomers are less likely to seek rent concessions and tend to rent for longer periods of time. 


Related to this downsizing, there will be an uptick in demand for self-storage in 2020 driven by Boomers moving into smaller apartments and condos. Many Boomers have accumulated lots of furniture, heirlooms and other belongings to pass down to their children who do not yet own their own homes and therefore, self-storage is an interim solution. 


Let Penn Capital guide you through the real estate market, so you can invest wisely.

Sign up to receive our educational newsletter and to gain exclusive access to our next investment opportunity.

Our latest investment opportunity is rapidly gaining subscribers. Learn about it here.

Gen X


What’s Gen X?


Generation X, otherwise dubbed “Gen X,” is the group to come after the Baby Boomers. They were born between 1965 and 1976. The “Gen X” label reflected the counterculture of a rebellious generation, one that was distrustful and interested in finding their own voice.


Gen X is one of the first to attend college en masse, and now carry some of the highest debt loads as a result. Gen X carries this burden while simultaneously paying their mortgages, raising children, and trying to plan for retirement. Gen X is more digitally savvy than their predecessors, so they’ll do some research and financial planning online, but most still prefer to do their transactions in person. They believe in hiring trustworthy professionals to steer their major financial decisions, from real estate brokers to CPAs to personal relationships with their bankers. 


Real Estate Facts


Gen X has largely been ignored by the media given that it’s a smaller segment than the Boomers before them or Millennials to follow. Gen X might be falling under the radar, but their impact on the real estate market should not be overlooked. Gen X was dealt a blow during the 2009 housing crash. Many lost their homes and as a result, had to move into rentals while they repaired their credit and found their financial footing once again. With a stronger U.S. economy, many are now looking to enter (or re-enter) homeownership. Gen X is particularly well positioned to do so, as they are now in their prime money-making years and more households have dual incomes than in generations past. 


Real Estate Trends in 2020


In 2020, expect Gen X to be in search of homes, whether to rent or buy, in areas with low crime and high performing school districts as their children begin to enter their school-age years. Given work and family demands, Gen X will also be looking for homes located within close proximity to their workplace as a way to reduce commuting times – even if it comes at a premium.


Even if a majority of Gen X’ers want to buy their own homes, there will still be some who cannot. Gen X’ers carry the most substantial amount of loan debt, with a median amount of $30,000. More than 50% of Gen X’ers have one ore more children under the age of 18 living at home, so family-sized rentals with multiple bedrooms and family-friendly amenities will appeal most to this demographic.  


Related: How To Analyze a Commercial Real Estate Deal



What’s a Millennial?


Experts have struggled to pin down an exact date range to represent Millennials, but generally, a Millennial is thought to be someone who was born between the early 1980s and early 2000s. Millennials, initially called “Generation Y,” have been dogged as an entitled generation whose “helicopter” parents handed them everything on a silver platter. To be fair, that’s an over-generalization that does not apply to many (perhaps, even most) Millennials—but the “entitled” label has managed to stick, nonetheless.

In truth, there are actually widespread differences between Millennials. Older Millennials, for example, did not grow up with technology to the same degree as younger Millennials. Some Millennials graduated college in the economic boom years of 2005-2007 or 2015-2019, whereas there’s a big group of Millennials who graduated college during the Great Recession and struggled to find work for years. Depending on where a Millennial fits within this spectrum, their attitude toward homeownership and investing in real estate, more broadly, may vary drastically. 


Real Estate Facts


Millennials have dramatically altered the commercial real estate landscape. They’ve influenced real estate in many ways, from how they prefer to find investment opportunities (online) to their willingness to invest through crowdfunding platforms (also online).

Consumer spending amongst Millennials also impacted commercial real estate. Take retail, for example. It was anticipated that in 2020, Millennials would have a collective spending power of $1.4 trillion. Yet Millennials are driven more by experiences than “things,” which has sparked the movement away from traditional, indoor shopping malls to outdoor, “lifestyle” centers that are heavily anchored by experiential retail, restaurants and activities. 


Millennials are also driving demand for multi-family properties, mixed-use facilities, and eco-friendly properties. 


Real Estate Trends in 2020


Millennials, many of whom have lived through the trough of the Great Recession and many of whom still have crushing levels of student debt, are not buying homes to the same degree their parents did in the past. Many are opting to live in apartments instead, particularly in their 20s and early 30s, prior to getting married, settling down and having children. Roughly 50% of Millennials who rent are spending 30% or more of their paycheck on rent each month, which has made it particularly hard for this generation to save for a down payment on a house (or investment property), particularly in recent years as property values have soared. For the foreseeable future, Millennials will continue to drive demand for multifamily housing.


That said, as Millennials continue to age and meet these important life milestones, experts have suggested Millennials with begin to invest in real estate – most likely residential before investing in commercial properties. As noted above, Millennials will place a great emphasis on sustainable design principles.

Generation Z


What’s a Zoomer?


Generation Z, sometimes referred to as “Zoomers” or “post-Millennials,” is the current name for the cohort born between the mid-1990s through the early 2010s. This is a demographic who grew up with technology at their fingertips and who are most comfortable utilizing various forms of social media. Generation Z are often the children of Generation X. They have been dubbed the “snowflake” generation in reference to their perception that each is highly unique, delicate and prone to being less resilient than generations prior.


Generation Z has been particularly influenced by the Great Recession. Many were coming of age during this time and witnesses the financial hardships faced by their parents. This includes job losses, foreclosures, and prolonged economic uncertainty. Generation Z is most likely to observe and feel the growing divide between America’s have’s and have-not’s. 


Real Estate Facts


All eyes have shifted from Millennials to Gen Z, at least in the real estate world. Gen Z is starting to graduate from college, with highly educated young professionals finding well paying jobs given a tight labor market. Some of Gen Z will skip renting altogether, opting to move right into homeownership when possible. More often, however, Gen Z will rent for the years to come. Yet unlike Boomers and Millennials who are willing to pay exorbitant prices for downtown urban living and the amenities that offers, Gen Z appears to be more price sensitive. Gen Z seems the most likely to move to outer-urban and suburban neighborhoods where they can stretch their dollars further. 


Related: How to Manage Risk in Real Estate Investing


Real Estate Trends in 2020


In 2020, the real estate market will be influenced by Gen Z in many ways. Most notably is building design and construction. Across all product types, but especially as it pertains to multifamily, Gen Z will be paying close attention to the sustainability of buildings. Millennials may have pushed developers to be more environmentally and ethnically conscious, but Gen Z will actually hold developers accountable and will “vote” with their feet when choosing where to live as a result.


Moreover, as alluded to above, Gen Z seems more willing to sacrifice location for space, amenities, value, and community. This will make outer-urban and suburban multifamily properties highly attractive to the increasingly financially conservative Gen Z demographic. That said, although Gen Z is willing to move further from the urban core, they still require access to public transit. Properties located within walking distance to public transit will therefore be in high demand.



It is helpful for investors to understand how each of these four demographic “buckets” is having an impact on the commercial real estate industry as a whole. That said, each of the demographic profiles featured here today encompasses a wide range of individuals. It would be a fool’s errand to make blanket statements about people who are often in the same demographic classification but who are otherwise 20 years apart in age. Each cohort has its own nuances that investors must understand.


The same is true about the demographic patterns within a specific locale. Any prospective investor will want to carefully investigate the hyper-local demographics – trends, patterns, market shifts and more – that could potentially impact the success of an investment. Those who understand the data behind these trends will be well positioned to identify opportunities well ahead of their peers. 


Learn more about real estate investment with Penn Capital today

Liquidity Risks


Determining how liquid a market is, and how quickly you can get in and out is another critical component of the risk assessment process. A property in a low-cap rate, highly desirable urban area, will likely be easier to sell than a niche agricultural property a few hundred miles outside of Helena. The higher the number of market participants, the more opportunities investors will have to get out of investments. Conversely, those high barriers of entry markets like Manhattan or San Francisco will be harder to get into compared to the low participant/low liquidity markets with fewer buyers.  


How to Avoid


Real property is an illiquid asset by nature, but you can take some steps to mitigate these issues. Avoiding liquidity risk can be achieved with proper planning, and going into a situation well-capitalized enough to hold for your desired horizon, 5 years, 10 years, etc. You can often trade liquidity for stability, and vice versa- though the two are not necessarily mutually exclusive. 


Related: Why Is Real Estate a Good Investment?

Credit Risks


Credit risks are a part of every business, including commercial and residential tenancies. Tenant creditworthiness is used by lenders and investors to determine the value, stability, and earning potential of a property. If your tenants are unable to pay their bills regularly, you will have cash flow and related problems with your operations.

How to Avoid


During stormy economic weather, even the best, highly sought after tenants can have trouble making rent, as evidenced by the Cheesecake Factory’s recent announcement that they were unable to meet their rent obligations. Still, working with long-term net lease tenants, who often sign multi decade leases, should always be a way to lower your risk in this space. Additionally, proper vetting of tenants is a must- skimping a penny here may cost you big down the road in damages, legal fees, sweat equity, and more.

Replacement Cost Risks


When you own a commercial property, there is always the risk that competition can spring up nearby, threatening your valuation and your bottom line. This phenomenon is particularly active in high-demand areas with ever-increasing lease rates. At some point, the higher leases will create a space for new construction, which can detract significantly from the value of older, less relevant properties nearby. It may constrain you from charging the rent you need, or from filling up your property with tenants.


How to Avoid


Before acquiring a property, you can determine the property’s replacement cost to figure out if it is likely for new construction to go up in the surrounding area. To come up with the replacement cost, you need to look at a few property attributes, including the location, market, sub-market, asset class- like multifamily, self-storage, etc. See if a new construction project in the area is feasible, and at what numbers. This will show you what the property’s names are concerning the market that needs to remain profitable.

Structural Risks


Structural risks relate to those risks involved with the financial structure or capital stack of the deal, and how those risks relate to the individual participants within a deal. Different levels within the capital stack hold various positions in terms of when people get paid, and who gets paid in foreclosure or insolvency. Senior secured loans give lenders preference over subordinated or mezzanine debt. Senior debt gets paid first in the event of property or portfolio liquidation as well. Equity holders hold the highest risk in most deals in the capital stack since they are the last to get paid after senior and mezzanine participants. 


How to Avoid


First and foremost, investors need to understand the capital structure going into a deal. It is essential to realize that the structure determines the compensation paid to the manager of the effort when a property is sold. Gross profits will be diluted by the compensation paid to the manager, so make sure you know how much of a deal’s profits they’re entitled to upon completion of a successful deal. Also, look at how much equity is being invested by limited partners and the manager. You want to make sure that their interests are in harmony, and that they have financial incentives for success.

Leverage Risks


Leverage risks must also be accounted for before acquiring a commercial real estate asset. Remember that debt=riskthe more debt attached to an investment, the more risk for investors. Consequently, investors should demand more returns for the additional risk. Leverage has tremendous power when wielded effectively- it can keep a project going and amplify returns under reasonable circumstances, but when loans are under stress, or return on assets will not cover interest payments, leverage can lead to quick and tremendous losses.


How to Avoid


In the vast majority of cases, the leverage on a deal should not be more than 75%, including both preferred equity and mezzanine debt, since they retain a privileged place over common equity. Returns should ideally be generated by the individual performance of the assets in question rather than the debt related to the deal. Before investing a deal, take a close look at how much leverage is being used to capitalize the asset, and to make sure that your risk and reward is balanced as much in your favor as possible.

Different Ways to Invest in Real Estate


While each deal or investment is unique, different real estate investment avenues come with their own risks and rewards.


Rental Property: The Risks


Rental properties are often the first step new investors take into the real estate markets. However, many underestimate the skill it takes to run a single rental property successfully, let alone a portfolio of multifamily properties. Many of the risks listed above, including general market risk, idiosyncratic risk, and even leverage risk, are present when acquiring a rental property. You never know which way the market will go, and unless you are highly capitalized or willing to sacrifice portfolio diversification, you will likely need to take on debt to acquire the property.


Real Estate Investment Group: The Risks


To potentially avoid many of the risks and headaches that come with direct ownership of rental properties, you may consider working with a real estate investment group. These professionally managed real estate funds leverage their professional experience in finance and commercial real estate to acquire, manage, and develop properties across real estate property types, from medical centers to multifamily towers, to fast-food restaurants. 


Risks involved with real estate investment groups are heavily dependent on the firm you decide to work with, so choose wisely. Furthermore, different real estate investment groups work in different spaces in the real estate sector, with different risk/reward options depending on your personal tolerances.


Interested in investing in real estate? Contact Penn Capital today

Real Estate Investment Trust: The Risks


Real estate investment trusts, or REITs, are real estate investment vehicles that own and operate properties and return 90% of the generated income to their shareholders. Publicly traded REITs have a wealth of data online, as they are legally required to publish documentation about their operations. One risk for REITs that do not exist with most other forms of real estate is its risk of losing value due to rising interest rates, which may cause capital flight from equities into the bond market.



Risk is inevitable. How you manage that risk makes the difference between a well-performing portfolio and one that lags behind the rest. Each individual investment vehicle and asset class in the commercial real estate space offers pros and cons in terms of risk and reward. The first step to mitigating risk and defending or growing your capital is to have an understanding of the risks that are out there, and you’re well on your way. 


Related: How To Analyze a Commercial Real Estate Deal


5 Keys to Investing in Distressed Real Estate

5 Keys to Investing in Distressed Real Estate By Ed Rogan, Owner, Co-Founder Buying distressed real estate certainly isn’t for the faint of heart. An inexperienced investor can easily be swayed by the promise of a project sponsor who doesn’t actually have a plan for turning the property around. But that doesn’t mean you shouldn’t…

Gaining an Edge Through Cold Calling

Gaining an Edge through Cold Calling

Gaining an Edge through Cold Calling By Ed Rogan, Owner, Co-Founder In many ways, commercial real estate is an “eat what you can kill” industry. The most successful investors, developers, brokers and other CRE professionals earn their living by scouring the market to uncover the next big deal. Ask the industry’s best and they’ll often…

Trial by Fire_ How We Got Started

Trial by Fire: How We Got Started

Trial by Fire: How We Got Started By Ed Rogan, Owner, Co-Founder People often use the term “trial by fire” to explain how they learned something. In our case, the term is all too appropriate.   Looking back on it, the story of how Percy and I got started almost seems unbelievable. We were just…