Millennials – that ubiquitous 18- to 34-year-old age group that makes up most of the United States’ apartment renters – might
be willing to pay a little more in rent to gain the lifestyle experience they desire.
So says Michael Ablon, Principal at PegasusAblon, a commercial real estate development, investment and management firm that works in apartments, office, retail and land. Ablon recently appeared in arecent AxioPod podcast. His comments are excerpted here.
“I really think millennial, to us, is just a vanguard, for the front unit, for a bigger constituency that’s coming along,” Ablon said. “Instead of a Gen X or Gen Y, I think what the generation we’re really talking about is Gen C or Generation Connected. And it transcends the conventional age-based demographics to a group that’s really looking for lifestyle. Now you’re getting to an experience economy and you’re getting into experiential people.”
He defined experience by using a cup of espresso at a European café as an example.
“It’s like when I was living and studying in Europe and you walked up to the café,” he said. “Inside the café to get an espresso at the counter and it’s equivalent of $1. And when you sat down at a table inside, it was equivalent of a $2. But when you sat on that great seat out on the side walk, it was $3 — the same espresso. You’re really paying for the experience more than the product. The experience was the product.
“So when we’re building multifamily and we say we’re building to the experience economy, what we’re really doing is trying to say ‘the product is the experience.’ The product is more than shag carpet. It’s how you feel, how it actually integrates into your life, and that is how we look at the experience economy, the experience constituent and our Gen C.”
Ablon provided two scenarios and asked which people would prefer:
“You say, ‘Hey, guys, I’ve got some great shag carpet. I’ve got 1- inch blinds. And I’ve got pickled cabinetry.’ And then you go, ‘Over here, you got a flat-screen TV built in, with built in Wi-Fi and surround sound speakers. And when you walk you through the unit, why don’t you airplay onto them and crank it up.’ Who are they going to pick? Are you kidding me? But it really resonates… these people understand who I am, how I live, what I value. So it’s really trying to figure out what’s the value structure of the constituent.”
In other words, instead of the conventional method of earmarking a certain percentage of income toward rent, Ablon’s “Generation Connected” may see their apartment as part of their entertainment, so the dollars spent on rent also replace some of the entertainment budget.
“There’s always a cost sensitivity, but you kind of get back to the value,” Ablon said. “It’s like when you go on a cruise. Do you care which room you have? Or do you look at what’s on the cruise ship?”
Being ecologically friendly also is a part of young adults’ social fabric – something ingrained.
“They can’t imagine not doing it,” Ablon said. “So there’s another trend line in there, an overriding notion, that resources are finite. There’s an ecological value structure just like there is the experience as part of the experience structure. And so I think you are going to see more density building up and you’re going to see more density next to mass transit. And I think you’re going to see less washeterias. I’m going to tell my kids about a washeteria and they’re going to look at me and say, ‘What was that?’
Ablon sees the “experience as value” paradigm continuing for the next several years, though financial concerns will play a big role.
“I think that the biggest piece of that for the next ten years is, how does one balance the lifestyle component with a financial capacity?” he said. “Again, we know that a lot of this Generation Connected is going to be coming out of school in the next 10 years or have gotten out of school in the last five, and you put it together. And I think student debt now is over a trillion dollars, which matches the highest of any subset of debt other than the American homestead.”
But young adults are going to want to stay mobile, Ablon said.
“I think the biggest trend line you’re going to see is that people are going to stay mobile longer. They are going to probably stay single longer. They’re going to move in groups longer. They are going to wait to have kids longer. They’re going to try to both have experience economy and deal with this debt piece and get beyond the debt. So I think the big trend line is you’re going to see people staying as renters – by choice – longer. They’ve transcended the moment where they have to live in multifamily. They can be in single-family, but they want to be in multifamily by choice. And they want that lifestyle.”
