Generation Y is the new consumer, and targeting their wants and needs requires the ability to change.
A panel of real estate, education and marketing professionals discussed Gen Y and baby boomers at a session Wednesday during Urban Land Institute’s Spring Meeting.
“Change is the new normal. The pace of change is what’s driving us all crazy. We want to have an idea of what’s coming next,” said Jamie Gutfreund, chief strategy officer at The Intelligence Group.
The bar is set higher for companies to anticipate opportunities and understand the consumer — who they are and what they want, she added.
“In the real estate business, it’s vital to know the audience of tomorrow and 10 to 15 years from now,” Gutfreund said.
Gen Y —born in the 1980s and early 1990s — represents $200 billion in spending, which will increase to $400 billion by 2020, Gutfreund said. Some 35 percent of Gen Y already owns a house and 75 percent have a car, said Maureen McAvey, senior resident fellow and Bucksbaum family chair for retail at ULI.
Gen Y is demographically diverse in terms of race, income and education, which are predictors of consumer behavior, consumption of housing and location preference, said Robert E. Lang, University of Nevada, Las Vegas director, Brookings Mountain West. He said there’s “legitimacy, but [he] is also sober to the fact that demographics in and of itself is not destiny.”
Gen Y is 40 percent African-American, Asian or other mixed race, said John Gates, president of real estate services at JLL Americas. Gates said they are highly educated, comfortable with technology, idealistic and will move where they want to live, and then pursue careers.
Baby boomers were born between 1946 and 1964 and there are about 78 million in the United States, Gates said. Despite the larger population, Gen Y’s number of births per year is smaller than the boomers, which from 1956 to 1961 had more than 4.2 million births per year.
Immigration has accounted for some of Gen Y’s large population, Lang said. Baby boomers are mostly native born and mostly white, while Gen Y is substantially foreign born and approaching foreign majority.
This gives the boomers more of a cohort effect because the other explanatory variables are weaker, Lang said. But the one thing common among Gen Y is tolerance, which grows with each generation.
“They’re tolerant of gay marriage, diversity and thus Gen Y is not fearing the big city,” Lang said.
Gen Y has experienced relatively safe cities and enjoys the convenience of big cities and diversity, he added.
Gutfreund said Gen Y people are starting to move out of their parents’ houses and, being group-oriented, cities allow them a place to be part of a group.
“Gen Y is a generation of use, not ownership,” Gutfreund said, mentioning their shift to car sharing and co-working spaces.
Gutfreund explained that Gen Y people are the children of baby boomers, who instilled optimism and self-esteem in them.
“Gen Y was taught by their boomer parents to get good grades, go to college and they will be able to get a job, buy a car, buy a big TV, buy a house and save for retirement. It’s not happening that way and they’re adjusting,” Gutfreund said.
Gen Y saw their parents get laid off and have debt. Their reaction is to not incur any debt, which is problematic for making big purchases. They also have student loan debt hindering their ability to make large purchases. And if there’s no debt, there’s no credit history, Gutfreund said.
When trying to sway the opinion of Gen Y, it’s important to remember that they rely on the opinions of friends and family to make decisions. Alan Mark, CEO of The Mark Company, said one out of two have parents touring with them, one-third have parents help with a down payment and one-fifth have parents cosigning.
They want to be collaborated with and have their opinions valued, Gutfreund said.
Gen Y may be buying commodities online, but they’re still going to demand experiences and in different ways, said Jeff Kreshek, vice president of West Coast leasing at Federal Realty.
“They want the experience, they want to be challenged, but in a very different way,” Kreshek said. “How do we start to develop a retail program, a project, around this consumer that changes their mind in 32 seconds and is not necessarily brand loyal?
“Everyone is trying to establish that brand loyalty,” Kreshek said, “but they move to that next cool thing almost instantaneously. [You’re] planning a project for a generation and right in front of your eyes they slip through your fingers and go to something else.”
Kreshek said to focus on experience, which can’t be bought online. Gen Y still wants to leave the house in groups and be social. Retail developments should have experiential opportunities, he said. He mentioned that it’s also important to aim down the middle and not only target Gen Y, but also their parents and grandparents.
Mark said in San Francisco he’s seeing Gen Y as second-home buyers.
“They’re making so much money, especially in the tech field,” Mark said. “It used to be that second-home buyers were 40 and over.”
Developing in “edgier” areas attracts Gen Y, he said. Boomers and Gen Y like homeowners associations, and brand names are important to both groups. To design a project for both groups, Mark said, Gen Y is fine with small spaces and likes amenities.
The social aspect for Gen Y is important, as is the ability to own a dog. Boomers prefer large units, with a view, on a single level. They also like having a guest suite for visitors and outdoor space, even if it’s not private.