I recently watched a video from one of my favorite real estate analysts, John Burns, who suggests that we should stop using the word millennial to group individuals that essentially spans three decades.
This intrigued me because as a real estate developer we look at demographics closely in every project that we underwrite.
As pioneer’s in the build-to-rent sector we have been essentially building for millennials, or so we thought. Instead of using “Millennial’s” John Burns categorizes previous generations in decades. In doing so, they have grouped them but what they have accomplished. I find this fascinating.
Here is the list they compiled:
- 1940’s – Achievers (all about getting ahead financially)
- 1950’s – Innovators (hard working, workaholics – will redefine retirement)
- 1960’s – Equlalers (led big shift toward equal education)
- 1970’s – Redefined Success (balance between work + home)
- 1980’s – Sharers (hard working + fascinated by technology)
- 1990’s – Connectors (most college education ever + far more debt adverse than 1930’s)
- 2000’s – Globals (aware of everything going on in the world)
So was John Burns right?
Yes, he was.
Understanding demographics is a key component of real estate investing. Knowing who your customer is and what their needs are will make or break many real estate decisions. Before a new community can be developed housing demand must exist. This is the gap between the existing inventory plus permitted inventory minus projected household formation (demand) for that area. If a gap exists, who is the customer? What product are they most interested in and can afford? When this component of analysis is overlooked, such as in a real estate boom, the market is affected with oversupply.
Financial analysis is an important part of underwriting an investment opportunity, but it is only half of the equation. Market analysis is the other half. Only together can you get a complete picture. Ultimately it is the demographics that make the difference. And that is key to building new homes.
Every community in our Arabella Real Estate Fund is located in a market with high population and job growth. Where affordable housing is in short supply.