Reaching Millennials vs. Gen Z: New Housing Strategies Required

A new decade brings new questions requiring new answers. For me, as an investor in European real estate businesses, I have been studying with housing experts and partners on how markets should rethink approaches for the changing needs of Millennials (born early 1980s to mid-1990s) and Gen Z (born post mid-1990s). As a Millennial myself (just!), I am intrigued about exploring new solutions and spotting zeitgeists of how we want to live in the future.

The US is experiencing a ‘youth boom’ according to Morgan Stanley. This year around 73 million Millennials will overtake the Baby Boomers in terms of numbers and become the largest group of people (27%) in the US. The next generation, Gen Z, will overtake them in 2034 peaking at 78 million.

But it is a different story in Europe where there are fewer Millennials and Gen Z than Baby Boomers still in the workforce. Millennials account for 24% of the adult population in the European Union. In the seven major European countries Millennials account for a minority of the adult population. In all EU countries people over 50 accounted for a far higher proportion of population, on average 47%. In the EU people aged 80+ will more than double by 2100 from 5.6% of the population today to 14.6% in 2100. 

Baby Boomers want different housing options as they move from ‘Yolds’ (young old people) who date online, do triathlons, study new languages and travel the world into proper ‘elderly’ folk needing different functionality in their living arrangements when inevitable frailty and illness set in.

Whilst I monitor the changing needs of the retired, ageing cohort, examining the future needs of Millennials and Gen Z is clearly a more exciting exercise.  You just need friends or family members in these two different generations to know that they are like chalk and cheese. So too are their housing requirements, interests and buying power.

The youngest Millennials and Gen Zs are often referred to as ‘generation rent’ with the boom in housing costs and shortages converging in most European countries. But the clock is ticking, and these currently cash lean people are predicted to be the richest generations in history as they inherit almost $70 billion in the US alone from their Baby Boomer parents over the next 20 years.

What do these generations mean for the real estate industry? Or rather: what does real estate mean to them? Who buys where, what and when? How will students, singles couples and young families live in the future?  

Millennials don’t want their parents’ homes

In 2020, Millennials are aged between 24 and 39. Most prefer smaller properties in multicultural and diversified neighbourhoods that offer everything you need in everyday life within walking distance…the gym, the artisan coffee shop and local market to name a few essentials. In properties, clean lines, open floor plans, low maintenance concepts are just a few of their demands on building and construction. In the US, Scandinavia, the UK and Germany there is little interest in Baby Boomer houses or homes configured that suited their parents.  The houses are in the wrong locations (suburbia or in semi-retirement villages), too large and simply not to their liking in terms of layout, construction, let alone style.

Many, out of necessity, are opting for Micro-Living in smaller spaces that don’t conform to minimum standards especially in cities with the desirable jobs but limited housing stock. Co-Living in purpose-built managed developments or Shared Living in converted or sub-divided houses are also endemic attractions for urban Millennials.

In Germany, the prefabricated construction or modular housing sector is growing by 10% each year. Prefab is a growing phenomenon in the US but mainstream in European countries such as Sweden where 84% of houses are built using prefab elements; in Germany it is about 20%. The attractions are many with construction in factory helping to create more energy efficient housing.

Gen Z – Youngest potential home buyers

Known as ‘early starters’ with many Gen Z entering the labour market at the age of 16, they are a more entrepreneurial and optimistic generation open to taking chances than their counterparts and predecessors. One consequence: “They are making the money they need quicker” for among other things to buy real estate. According to a survey by Homes.com (US) 86% of those surveyed between 18 and 24 said they plan to buy a house in their lifetime. The top motivators being two: to have a place to call home and for investment value.

This year, Gen Z will be the largest group of consumers globally. Companies that don’t engage with them will suffer, according to research by Barclays Bank (Gen Z: Step Aside Millennial). Whilst Millennials are more focused on ‘now’ and consider themselves to be Optimists, Idealistic, Dependent and Entitled, Gen Z are focused on the future. They are best described as Realists, Pragmatic, Independent and Persistent. As I said earlier: chalk and cheese.

So, what works for them?

Can the real estate industry learn from other industries in targeting generations more effectively? It makes sense to take a closer look at their consumer behaviour. Gen Z appreciates quality and authenticity (no photoshop!) even more than Millennials (who are still enamoured with filtering their selfies). Whilst the latter prefer experience and love brands, Gen Z is more frugal and shuns branding. Frighteningly both have the attention spans of gnats: 12 seconds for Millennials and 8 seconds for Gen Z. So how do you communicate and engage with these challenging, differing and fascinating cohorts?

What’s needed surely is more diversity, engagement and flexibility. Companies I invest in do their research and they also align their organisation to their target markets. If you want to sell to Millennials, you’d better not have a board comprised of Baby Boomers or technophobes. If you want credibility with Gen Z who are so bent on sustainability and community, you need solid ‘Green’ credentials with a compelling CSR strategy integral to your business.

But most of all companies need to engage in new ways. They must listen to their consumers and reach them imaginatively via social media, using virtual reality and employing AI innovation.

So, as we embark on a new decade I look forward to meeting with purpose-driven businesses that are passionate about making a difference to Millennials and Gen Z generations and what they want for living as students, when they travel and for how they want to live when they pursue their careers.   Old models need rethinking and the conversation has to be fresh and grab them quickly…in under 10 seconds. If you have a good strategy with innovation and the customer at the heart of your business led by a tuned-in, diverse team you could be a winning business going ahead.   That’s the kind of business I am looking for to scale for even greater success.