Generation Z is reshaping the rental market
Friday, May 18, 2018
Believed to be the largest birth cohort in U.S. history, Generation Z, also referred to as post-millennials, has now breached the boundaries of young adulthood and are starting to strike out on their own.
For the oldest, that includes renting their first apartment. And while they currently make up only a small portion of the rental market, Gen Z renters have already gained the attention of property owners eager to attract them as tenants.
Definitions and estimates vary, but the label Gen Z usually applies to residents of the U.S. born more or less between 1994 and 2010. They currently comprise around 26 percent of the total U.S. population, a slice larger than either the baby boomer or millennial generations.
As with those other mammoth cohorts, their preferences, tastes and values will have an enormous impact on all sorts of businesses and institutions in the years to come, including the rental market.
Nat Kunes, vice president of product at AppFolio, a property management software company, has noticed certain trends developing in the types of rental properties Gen Z tenants prefer.
These are not casual observations. With clients in all 50 states and major metro centers, representing 3.2 million units, AppFolio has accumulated a trove of data to help them understand what’s happening in the market.
One of the most important things to note about Gen Z renters, says Kunes, is that their priorities are different from those of millennials. "Millennials are very cost conscious," he says. When they can, they prefer not to have to share their living space.
"A millennial will choose an older property with fewer amenities rather than have to pay more or to split the rent with someone else," observes Kunes.
Gen Z tenants, on the other hand, place a premium on amenities. They have no problem taking an apartment with a roommate if that means they can have more of the things they want.
"For Gen Z renters, our data show that cost is third on their list of priorities when it comes to selecting a property," states Kunes.
Number one on that list is tech. Sometimes referred to as "iGen" because they are the first generation to grow up with mobile technology from early childhood, GenZers are tech savvy and tech dependent.
When searching for properties, they turn to the internet and mobile apps to assist them, and expect the same level of instant customer service, facilitated by chat or text messaging, as when they make a purchase or book a reservation at a restaurant or Airbnb. They also want to be able to pay their rent and deposit fees, as well as to report maintenance problems, by mobile device, and get an immediate response.
Close behind tech come those amenities mentioned earlier. Tech amenities, such as smart appliances, universal Wi-Fi, and smart technologies like voice-activated lighting controls, energy and water conserving fixtures, and voice-respondent devices (e.g., Amazon’s Echo or Google’s Home) rank high on the list.
Lifestyle amenities also make a big difference. Gen Z renters prefer properties located so that they can walk, ride a bike, or take public transportation to work and other places they frequent.
They favor properties that offer services such as bike repair and tire inflation stations, dog walking, and communal spaces where they can hang out with others in the building and watch television together.
Kunes says he has noticed more newer properties offering these kinds of services, even including on-site massage services, as a way to entice Gen Z renters. Another trend is that builders are now including fewer parking spaces, since this is a generation of ride sharers and bike riders, freeing up more valuable land for additional units.
AppFolio’s data show the majority of first-wave Gen Z renters are migrating to secondary urban markets, like Portland, Seattle, Austin and Sacramento, where the cost of living is cheaper than in major urban areas like San Francisco, Los Angeles and New York.
Plus, there is a lot of development and renovation happening in these cities, which means more units to choose from, and better job opportunities as companies relocate or open up satellite offices in more livable areas.
For property managers seeking to attract this cohort, Kunes has some advice.
"Advertise the best amenities you have, and place those ads in places where Gen Z prospects are going to see them, like Instagram," he says.
It’s important to keep up with the latest apps and social media platforms. GenZers, for the most part, are not using Facebook, notes Kunes. Another strategy is to advertise on college campuses, since students often will stay in their college town a year or two after graduation.
Those new graduates are mainly members of Gen Z, and unlike the millennials who moved back in with their parents in the wake of the Great Recession, they are looking for a place of their own.
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