Generation Y grew up with their parents always telling them they needed to go to college so they could get a good job. But what the previous generation couldn’t have foreseen was that many of their children would be coming out of college only to find themselves thrust into a recession where there aren’t enough jobs to go around, even for the highly educated.
As a result, many Gen Yers have had to embrace the idea that they need to stay mobile and go where the jobs are. In many cases, that translates to urban migration. Indeed, a recent Apartments.com survey reveals that relocating for employment opportunities is the No. 1 reason respondents were planning to move in 2012.
But with all these 20-somethings flocking to major metros in search of work, rental supply has been struggling to keep up with demand. That’s why developers have been scrambling to break ground on new projects to capitalize on the mass-migration trend. The target is almost always in a transitional or emerging neighborhood, where a less-expensive land basis allows developers to price units at a more affordable level upon completion.
Washington, D.C., has been at the top of many developers’ lists, and according to New York–based research firm Real Capital Analytics (RCA), land prices in the nation’s capital are trending close to the peak levels seen in 2005 to 2007. In 2007, multifamily land sales reached $6 billion, a figure that fell to $500 million in 2009. But RCA projects land sales to reach at least $4 billion by the end of this year.
A total of 24 new developments have popped up in D.C. since 2011 alone. Among them is Camden South Capitol, a 276-unit apartment complex being built by Houston-based Camden Property Trust in the development-starved Southwest quadrant of the city. While development action is buzzing in other parts of the District, Camden South Capitol will have very little competition once it comes to market in 2013.
Marc Coletta, vice president of real estate investments for Camden, is excited about the site, which is located across from the Washington Nationals baseball stadium. “The entire neighborhood is what you’d call an emerging neighborhood ... now, [you hope you] can get the retail to come and fill in some of the gaps; then, [you start] to complete the neighborhood,” he says. “It will be a pretty cool feel on game day.”
The area also has another important community feature Gen Y renters crave: walkability and access to public transportation. The community is in close proximity to the city’s subway system. The San Francisco Bay Area is another hot rental market where land has been scarce and developers have had to get creative to attract Gen Y renters. Since 2011, 48 new multifamily projects have sprung up in San Francisco.
One company that’s ensuring it has a presence in the area is Englewood, Colo.–based Archstone. The company recently announced construction of the 94-unit Archstone Berkeley on Addison, which is strategically located in Berkeley, an area expected to attract a large number of young renters with employment opportunities and economic growth in the very near future. Berkeley is home to the University of California at Berkeley and Bayer Pharmaceuticals. Adding to the job base will be 300,000 square feet of new biotech offices and lab spaces currently under development by local construction companies, in addition to the expansion of film-studio giant Pixar’s campus in nearby Emeryville.
“It’s a highly desirable place to live, has limited land on which to build new housing, and has a strong, diversified economy,” says Amir Massih, Archstone’s group vice president of development in the Bay Area. And like Camden’s project in D.C., the community will be close to public transportation and provide easy commutes for the band of renters set to flood the area’s bustling job market.