The cohort, which is also known as the Post-Millennial Generation, might induce a market shift that will place renewed emphasis on the development and occupation of multi-family units, according to the March 2016 edition of Fannie Mae’s “Multifamily Market Commentary”.
“Despite all the new multifamily construction going on today, there might not be enough of the right rental housing, in the right locations, to meet the demands of this generation,” the report stated.
“We believe it is likely that the rental pattern will continue to be the same for Generation Z as for previous generations. So it is not unreasonable to expect that a similar percentage of Generation Z – at least 35 percent of them at the low end – will become multifamily renters. Over the long term, that should help produce enough demand to absorb most of the vacant units lingering in some oversupplied submarkets,” the report added.
The generation, considered by various quarters to be the most “wired” ever, might also accompany a rise in new powerhouse locations away from current market leaders—in Canada’s case, Toronto and Vancouver.
“They may feel less constrained about where they can live, if social media and technology allow them to live anywhere. And they might not choose to live in urban centers, but in the suburbs, exurbs, or even more rural areas. If that happens, there could be a dramatic shift in the location of future multifamily demand – to very different metros and submarkets than today,” the report predicted.
And while job prospects for the next few decades might be shaped by modest numbers characterized by post-recession conditions, the multi-family real estate market is expected to see continued stability.
“Despite a more subdued job growth forecast, there will be a healthy overall number of people in the Generation Z cohort. And that should provide ongoing, steady demand for multifamily rental housing over the coming decade, although the location of the bulk of that demand is not clear,” the report concluded.
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While baby boomers and millennials are driving most of the demand in the real estate industry today, a recent report looked at the potential purchasing habits of Generation Z and what these mean for the industry.