Manny Gonzalez – Why boomers, not millennials, are fueling the urban apartment surge
November 12, 2019
Wealthy empty nesters looking to downsize are flocking to high-rises; in an aging nation, it’s only the start
When Chicagoland developer Michael McLean was building Centrum, a 12-story apartment building in Evanston, a lakefront suburb and university town on the doorstep of Chicago, the target occupant might have seemed obvious. Set amid a walkable downtown of shops, restaurants, and easy transit access to Chicago, the 101-unit high-rise, like so many that have gone up in cities and commuter suburbs across the country, would appear custom-made for millennials.
But McLean was actually betting on an older crowd. When Centrum opened in 2017, a third of the building was set to be occupied by empty nesters, 50- to 65-year-old renters, most of whom had downsized from homes they owned in nearby suburbs.
“It just made sense to us,” says McLean, whose company has a number of projects for older renters in the works in Evanston and elsewhere. “A lot of people want to get out of those huge homes in the North Shore, wanted less maintenance hassles, and an easier trip downtown, yet didn’t want to buy. To rent in a convenient place like Evanston just made a lot of sense.”
While the real estate preferences of millennials and young adults get the bulk of media attention, older renters actually have as much or even more to do with the last decade’s upswing in downtown urban living. According to the Urban Land Institute’s latest Emerging Trends Report, urban growth has come from two distinct age groups. Over the last decade, the urban population of 20- to 29-year-olds grew by 4.7 million. But during the same time, the number of 55- to 64-year-olds living downtown grew by 10.3 million.
“It’s so frustrating to me because from, say, 1996 to 2008, all everyone talked about was the baby boomers,” says McLean. “They were the big wave, the new housing paradigm, the new expendable wealth. And coming out of the recession, everyone forgot they existed.”
While the new glass high-rises sprouting up in emerging downtown neighborhoods may be marketed to millennials, many of the units may actually end up being occupied by their parents.
“Developers have always focused on consumers with money,” says real estate consultant John Burns. “Even though some of these new developments are in areas people think are cool for millennials, those who can afford them are often in their late ’50s and early ’60s.”
Empty nesters and millennial renters look for the same things in apartments
The idea of empty nesters moving downtown once their kids are out of the house isn’t a new one. But the number of these older renters entering the market has grown tremendously over the last decade. According to U.S. Census Bureau figures, the 55-and-older demographic represented the largest jump in the renter population in the U.S., growing 38 percent between 2007 and 2017 (the number of renters over age 65 grew by 65 percent). For the 54-and-under age range, the percentage of renters only rose 10 percent.
A number of intersecting trends have led to this boost in older renters. Older Americans are working longer and living longer, says Burns, and are less likely to want to retire and head down to Florida. A downtown apartment represents a more active take on senior living. McLean and others have observed that renting can make more financial sense than holding on to a large suburban home. And, if it’s in the budget, apartment living can be so much easier. Many of the qualities and amenities considered attractive to millennials—transit access and proximity to retail and restaurants—are the exact same things drawing in older renters (who, thinking about the potential for decreased mobility, also like the ease of building staff, easier maintenance, and elevators).
“Wherever you have naturally occurring main streets, you’re going to attract millennials and baby boomers,” says McLean. “Especially urbanized suburbs; they’re going to be a major point of discussion among the older age groups.”
How builders are courting older renters
Those older renters are also a major focus for developers. A number of large national firms have product lines dedicated to older adults and seniors, including luxury options. Greystar has a series of projects under the Overture banner, meant for residents 55 and older. Carlyle Group is investing billions of dollars in the market. And Related, the developer behind Hudson Yards, announced a $3 billion urban senior living project with Atria.
At its most basic level, catering to older renters means designing buildings with more two- and three-bedroom units to attract older residents looking for homes somewhere between starter-home and suburban-house size. But then it gets a bit more complicated, according to Manny Gonzalez, a principal at KTGY Architecture + Planning who focuses on senior living. Older adults may be looking for fitness centers, bike repair shops, walkability, pretty much the same things that millennials want.
“The number of people in this demographic is staggering,” he says. “There is a lot of wealth here, and potential for second homes, and the market just hasn’t been tapped.”
According to Harvard’s Joint Housing Center, one out of three U.S. households will be headed by someone over 65 by 2035, and by 2038, the number of heads of households aged 70 to 79 will hit 10.7 million, with the number of 80-and-over households projected to reach 17.5 million.
The real estate industry understands the demand, and is focused on taking advantage of the opportunity, according to Christopher Ptomey, executive director of the Terwilliger Center for Housing at the Urban Land Institute. But the public at large doesn’t see how aging boomers will continue to shift the housing market. In addition to more and more seniors hoping to age in place in homes that need upgrades—only 3.5 percent of U.S. homes currently have these kinds of safety and mobility features important for aging in place, according to Harvard Joint Center for Housing Studies research—the shortage of affordable housing for the expanding elderly population is itself a crisis in the making.
“There’s obviously enormous growth potential as the boomers continue to enter retirement,” says Ptomey. “We already have shortages, and you’re seeing production of senior and market-rate housing lag behind. There may be even more latent demand for this type of housing, but some seniors aren’t considering it, since there just isn’t enough available.”
A stepladder of housing options for aging adults
To add to the complexity and potential of the senior housing market, most developers envision older residents moving through a series of options as they age, from standard apartment to active adult to assisted care facilities, all with increasing amenities, support staff, and cost. This is a market that demands segmentation. As Burns says, “55 is not the same as 65, which isn’t the same as 75.”
To that end, many developers have designed a stepladder of care to cater to members of the demographic at every stage of their lives, including when they may need help living with disabilities or dementia.
McLean’s firm, Condor, is in the process of building and opening another Evanston project, Trulee, that includes three styles of living geared toward different segments of the 55-and-older crowd: independent living, assisted living, and a memory care floor, running at roughly $3,500, $6,000, and $10,000 a month, respectively. This luxury community will include a farm-to-table kitchen that can serve upward of 600 meals a day and a bar serving wine and craft beer.
McLean says that having such a diverse group of ages living downtown is healthier for everyone; it’s important to overcome the stigma of aging, he says, and make sure seniors aren’t segregated among themselves.
“The idea is that you can come live here and define your last hurrah,” he says. “You were young, raised a family, retired, but you still have one more piece of your story left. Let’s get after it.”
As many baby boomers enter their golden years, they want more control over their lives than previous generations. Increasingly, more and more of them see this stage of life playing out in an urban setting.
“People just want to be around community,” says Ptomey. “These kinds of new planned communities don’t look different than what you’re seeing in so-called hipsturbia.”