With their growing influence on evolving trends across all industries, millennials have been the focus of several discussions on the future of real estate. The Millennial Generation, aged between 19 and 38, is considered the product of the shifting lifestyles of Gen X and Baby Boomers.
Currently the largest demographic in the world, millennials are technologically savvy individuals who spend towards the latest gadgets, yet prefer to shop at small businesses, support the new sharing economy (Uber, Airbnb, etc.), and are more concerned regarding environmental issues and social responsibility. This changing attitude has brought about dramatic changes in traditional business practices, driving companies to adapt and cater to the next generation of high spenders.
Millennials and the Demographic Window
This illustration shows that the Philippines is on a demographic sweet spot in the next 5 years, where 55% of the population is between 15 to 65 years old and are participating in the labor force.
In the Philippines alone, there are approximately 28 million millennials (based on Comelec's voters data in 2015), with a median age of 23. Many economists believe that this puts the country at an advantage. The entrance of the millennials into the local workforce has already started boosting the country's productivity and the sustainability of the current economic growth will be highly affected by this.
Given this, it won't be long before the millennials become among the highest spenders in the country, thus it is necessary to take this into consideration in planning your future investment strategies. Here is our prediction on how millennials can impact real estate in the next few years:
Office spaces will become more flexible and open, allowing room for collaboration and socialization. This can make the office footprint smaller; in the baby boomer days, the average footprint is at 32.5 sq m/employee; today it is at 13.9 sq m/employee.
The increased traffic due to the improvements in infrastructure will drive alternative workplace set-ups, such as remote work or telecommuting. This can increase demand for co-working and shared office spaces, as people who do not have access to high-speed internet at home look for affordable office spaces that are closer to home.
Because millennials value social responsibility and environmental sustainability, demand for high-grade green buildings will increase as more and more companies start to include these in their considerations when leasing new office spaces.
Townships will be the preferred location for many working professionals, especially for millennials who want to be at the center of everything, who live in the outskirts of Metro Manila, and who want to live closer to where they work. Most millennials still live with their parents, so they would prefer to rent than buy homes as these apartment and condo units would only serve as their home during the weekdays for convenience and accessibility.
The rise of Airbnb and the concept of shared economy will make rental prices more competitive for bedspace and room sharing in condos located in central business districts. This may also drive enterprising millennials or retiring baby boomers to buy condos and invest, sustaining demand for mid-range and high-end condos. They may apply the rent-to-own setup or sub-lease the condos so they can pay the property's monthly dues and amortization.
Online platforms are seen to become an asset for properties and landlords, as millennials prefer searching for homes online. Integration of other services such as online payment and electronic receipts may also be something that landlords should look into.
Demand for retail space is expected to continue rising in the next few years, given the increasing disposable income and quality of lifestyle of the millennials. At the same time, this generation's enterprising attitude combined with the Filipino's love for food would also help sustain the demand for retail space, especially for mall kiosks, restaurants, and coffee shops. Millennials' preference for local businesses and organic products would provide greater opportunity for SMEs as well as landlords of retail spaces in hip, suburban locations that are not within the typical city centers.
While online shopping is booming among this generation, there is still a need for the development of smaller scale stores that truly create a unique shopping experience and most effectively engage millennials. It is still important to complement the online store with a physical store. Your branding and storefront need to be consistent with the online brand.
The rise in townships will also accommodate rise in retail demand, extending to locations outside Metro Manila. Because townships provide convenience, their retail options would also include more convenience stores and community malls that have the complete set of retailers ranging from supermarket, technology, and fashion brands to restaurants and entertainment options.