Conventional wisdom holds that today’s most sought after employee demographic – the 80 million strong millennials – are city dwellers, most at home in a high paced, amenity-rich downtown urban setting.
A 2016 study of the highest concentrations of 25-34-year-olds does show high numbers of this upper half of the millennial generation in downtown areas of major cities like Washington, DC, San Francisco and Boston.
But it shows something else too: higher concentrations of millennials in DC suburbs such as Arlington and Alexandria and close-in Boston suburbs Somerville and Cambridge. Millennials represented 23.5 percent of Boston’s total population. In contrast, they accounted for 26 percent and 32.4 percent of Cambridge and Somerville’s populations.
Affordability, walkability, transit, schools
The reason for this is simple: the path of new residential development, while still quite strong in the urban core of most American cities, is pushing out to the suburbs as millennials look for greater affordability and competitive amenity packages in areas where they can access transit, walkable neighborhoods and good schools.
This ‘shift to the suburbs’ is even more noticeable among older millennials, those in the 30-34 age range and typically much further along in family formation. Their desire for quality housing, says JLL Managing Director Travis D’Amato, is driving up rents and values, especially for new multifamily communities in suburban settings. “Transit-oriented properties like the recently completed Hanover Cambridge Park and true suburban properties like the on-the-market, 200-unit, Currents on the Charles in Waltham have proved highly popular with investors due to the ability to project rent growth,” D’Amato says.
Office investors take note
The real estate impact of this millennial shift to the suburb is not limited just to the residential sector, either. According to JLL Managing Director Frank Petz, office investors are also taking note. “We’ve seen heightened interest in the suburbs among office investors, especially those suburbs that are densified and provide a wide range of amenities,” says Petz. Recent deals arranged by JLL for properties in the suburbs include last year’s $46 million sale and financing of Lexington Corporate Center and this year’s sale of 45-55 Hayden Avenue. Both are in the suburb of Lexington.
Matt Daniels, JLL’s brokerage lead in suburban Boston, says more employers are building a presence in the suburbs in order to recruit and retain millennial workers who want to live near where they work. “We’ve seen tremendous absorption in some suburban markets over the last few years as employers plant their flags,” he says. Companies like Millipore Sigma and Endurance International Group have made recent big plays in the suburb of Burlington.
The urban-suburban decision
None of this is to suggest that employers or investors are fleeing downtowns. High percentages of millennials – particularly those in their early 20s — still want to be in the thick of the excitement as city dwellers. This is leading more companies to adopt blended urban-suburban strategies combining downtown locations with suburban campuses and transit-served outposts to create appeal for the broader workforce as well as room for the company to grow. Investors are cottoning on to the trend but haven’t given up on downtown assets.
“Investors are seeing suburban markets around Boston as an untapped opportunity,” says Petz. “When the right asset comes on the block more investors line up to bid, but the appeal of downtown office properties is still just as strong,” he adds.