HOW COMMERCIAL REAL ESTATE IS GOING TO BE TRANSFORMED BY GENERATION Z
There’s a storm brewing in the near distance. It threatens to force innovation and transformation among many industries, especially real estate. Meet Generation Z.
As young whippersnappers and up-and-comers, Generation Z is beginning to take the reins from the Millennials of Generation Y. This transition from the Millennial generation to Gen-Z is bringing about a new culture shift that has the potential to shake up the commercial real estate market.
What exactly is driving Gen-Z’s newfound ability to influence the future of the commercial real estate industry?
With recent events shaping their world paradigm — i.e. introduction of the iPhone, the Great Recession, the first African American president — Gen Z has developed a pragmatic perspective regarding society.
Real estate professionals and real estate investors should take notice. Driven by technology and and a sense of community, Gen-Z’s behavior is paving the new future in commercial real estate.
WHO IS GENERATION Z?
Generation Z is a group of young people about to take over the world. That sounds lofty, I know, but Gen-Z is just entering the workforce, and they’re bringing new ideas and behavior to the table, which can drastically change the needs of new office buildings and commercial real estate property.
Generation Z is commonly defined by those born in the mid 1990’s and early 2000’s, following right behind the Millennial generation. They are quickly growing and are projected to become one of the largest generations in American history. In fact, if you lump Gen-Z together with the Millennials, their 87 million people have already surpassed the population of the Baby Boomers.
Gen-Z is commonly characterized by their attachment to technology and their diverse ethnic makeup. Having used the Internet from an early age, Gen-Z’ers are generally comfortable with technology and often interact with social media. On top of that, only 56% of Gen Z is white (compared to the Baby Boomers being 72% white).
With a heavy focus on technology and high value for cultural diversity and acceptance, Gen-Z has the potential to shake up the work force. Their large size and unique behavior is expected to play a crucial and influential role in the future development of office buildings and the commercial real estate properties as a whole.
GEN Z TRENDS AND HOW THEY’RE SHAPING THE FUTURE OF COMMERCIAL REAL ESTATE
Generation Z is immersed in a world of connectivity and new technology around every corner. With the world at their fingertips, Gen-Z is a primary driving force for new trends and behavior throughout society.
Commercial real estate is not immune to the impact of Gen-Z. The commercial real estate industry is being challenged to innovate and keep pace with Gen-Z’s wants and desires when it comes to a work space. Growing up with iPhones and tablets in their hands has led Gen-Z to value speed, efficiency, creativity and cutting edge technology.
So how does Gen-Z’s diversity and technological behavior relate to the commercial real estate markets? The industry can take advantage of unique opportunities realigning their values and appealing to those of Gen-Z. Businesses that keep those of Gen-Z in mind can find the perfect commercial real estate property that aligns to their unique needs as part of the workforce.
AN ENTREPRENEURIAL MINDSET
The rise of technology during the lives of Gen-Z has seen the explosion of Silicon Valley and the overall startup / entrepreneur scene. Seeing their contemporaries succeed has spawned an entire generation to think and act more entrepreneurially.
Referred to some as the ‘entrepreneurial generation,’ Gen-Z have high aspirations and are determined to achieve them. This entrepreneurial spirit denotes an key shift the culture of consumerism among younger people: they value experience above everything else.
One of the primary factors in their purchasing decisions will be the experience. When it comes to real estate decisions, both commercial and residential real estate, they will ask:
- How does my living community make me feel?
- What kind of experience is this situation providing?
- Am I experiencing a personalized standard of living/working?
Commercial real estate brokers are challenged with finding developments that are tailored and suited for Gen-Z. Developers, architects, and designers are working hard to incorporate connectivity and community into their buildings to attract more Gen-Z’ers to a space. Some are innovating with ‘hackable buildings’ that can be modified technologically to adapt to the user’s preferences.
The major paradigm shift to note is the idea that buildings are no longer objects for Gen-Z. instead, they represent an entire experience for them to be involved with.
CONNECTIVITY & COMMUNITY
This whole notion of connectivity and community leading to more holistic experiences for the younger generations is fueling the urbanization trend in places like Vancouver and San Diego. Gen-Z connects with each other through social media platforms and naturally are starting to base their living situations and communities with a similar mindset. This includes, but is not limited to, their living quarters and also encompasses the workplace experience.
The workplace is already attempting to capitalize on this trend with co-working spaces that are much more liberal, modern, and open in design and atmosphere. The idea is to build that notion of connectivity and community with others directly into the physical properties.
Commercial real estate is not far behind. With cities experiencing a new influx of younger generations, buildings are being constructed with their future occupants in mind. Trends in how the workplace is designed and constructed should continue to evolve.
One metric where this is evident is with ‘walkability.’ Gen-Z is showing less and less interest in owning cars and driving, and more and more interest in walkable and pedestrian-friendly communities. Young workers aged 16-24 that fall in the Gen-Z demographic have the highest rate of walking to work at 6.8%.
Walk Score is trying to capture this trend by ranking cities based on how friendly they are for pedestrians, bikers, and public transit. Younger generations are using these metrics to decide which city, and further which neighborhood, to live and work. The goal is to be able to conveniently do all activities and chores by foot, shifting demand towards more densely concentrated areas and regions.
Part of those high aspirations for Generation Z is owning a residential property in the future. One survey found an overwhelming 97% of Gen-Z’ers plan to be homeowners in the future. Moreover, they expect much of the home-buying process to take place online: searching for home listings, taking virtual tours, and purchasing online.
This desire to own a home, paired with the digital presence and community-driven nature of Gen-Z, calls for a transformation in the commercial real estate industry. While the urbanization trend remains strong, we might see aspects of urban living creep into the suburban lifestyle.
Ultimately, we’re just on the cusp of this Generation Z wave hitting the real estate markets. The younger generations are just starting to enter the workforce and begin their journey in life.
But with the entrepreneurial mindset and high aspirations driving their behavior, Gen-Z is expected to start making an impact quick and early. With an innovative culture built around those aspects of connectivity and community, Generation Z will bring new business models and create disruptions in the real estate industry.