Gen Z is surpassing millennials as the largest renter cohort dominating the multifamily market, which has comprised 42% of all CRE sales since the start of the pandemic, according to new Cushman & Wakefield data.
The sector has been favored by strong supply-demand fundamentals, as US household formation hit 1.3 million in 2021 and is projected to hit a peak of 1.5 million in 2023. Cushman & Wakefield analysts note that the rental sector could absorb a “higher than usual share” of that new demand due to low inventory and home affordability challenges. Low vacancy and solid rent growth are predicted in the near term, especially in the Sun Belt.
And “as the multifamily market undergoes a demographic transition, Generation Z (those born between 1997 and 2012) will quickly supplant millennials as the largest renter cohort,” Cushman experts note in a new report. And “this is just the beginning. By 2025, Millennials and Generation Z will represent the same percentage of renters and by 2030, Generation Z will be kings of the ‘renterverse.’”
Gen Z renters are also fueling growth in the build-to-rent space: according to Noam Franklin, a member of Berkadia’s JV Equity & Structured Capital team, 43% Gen Z respondents prefer single-family living to apartment living.
“According to survey data from the National Apartment Association, 43% of Generation Z wants to rent single-family homes following the completion of their university education. With the current age range of Generation Z spanning six to 24 years old, the first wave of this cohort is just now starting to make an impact on rental housing demand,” Franklin told GlobeSt.com.
Demographics suggest the renter population will grow more slowly over the next decade, and “it follows that multifamily owners and operators need to be increasingly focused on attracting and competing for this new generation of renters.” A Freddie Mac survey of Gen Z respondents shows that while 82% of respondents want to eventually own a home, 92% believe that home prices are “significant hurdles” to homeownership. And 68% of respondents believe renting is more flexible than owning, while 63% say it’s less stressful.
Cushman experts also say sustainability is likely to become more important to multifamily as Gen Z gains ground among the overall renter cohort.
“While location, price and building quality will still largely determine Generation Z’s rental decisions, sustainability at the building and unit-level will offer ways of differentiating rental offerings,” the report notes. “As Generation Z grows older and wealthier, they will have more budget to allocate towards their environmental values, so sustainability will remain key.”