By Carole Hawkins, [email protected]
Millennials aren’t buying a lot of homes yet, but at some point they will.
Baby Boomers are retiring — or putting it off. How they retire will influence the types of homes that are built.
A panel of five real estate leaders from across Florida talked about how their companies are planning to profit from shifts in the residential market.
The group — an analyst, an architect, a developer, a designer and a builder — spoke at the Urban Land Institute’s 2015 Florida Summit, held in June at Ponte Vedra Beach.
Trends favor rentals, look to millennials for home ownership
Rentals are still surging, said Ryan McCullough, an economist with CoStar Group Inc., a real estate research firm. His company is tracking a 60 percent increase in multifamily development this decade as compared to the 2000s.
One reason is demographics.
Millennials, the second-largest generation after Baby Boomers, are still young. And young-adult is the age group most likely to rent. But, that’s not the whole story.
Many people still live under a cloud of economic ambiguity. Young workers need jobs and older workers are not retiring. The ambiguity spurs renting, as more people look to keep their options open.
The good news for single-family homebuilders coming out of the recession is, there’s a lot of upside potential for home ownership, McCullough said.
Among young adults, household formation did not keep up with population growth from 2007 to 2012. People took in roommates or lived with their parents. The persons-per-household ratio among millennials stands at 2.6 — an all-time high.
Once they get good jobs and pay down student debt, residential should take off, McCullough said.
If household rates were to return to historical trends, it would add 1.4 million apartment renters and 500,000 homeowners to the U.S. market.
Find market’s ‘missing middle’ with micro homes
Brian Canin of Orlando-based Canin Associates isn’t waiting for millennials to save enough for single-family homes. He’s designed a more affordable product.
They are high-density, small-footprint homes. He calls the smallest ones “micro homes.” Averaging 1,100 square feet, as many as 20-24 can fit on a single acre. The courtyard designs afford privacy in an urban environment.
Why micro homes? Research shows people still overwhelmingly prefer that detached single-family product, Canin said.
But it works best in a very specific context — near a walkable town/neighborhood center. There, it fills the market’s “missing middle,” between apartments and large single family homes.
“It’s an unexplored idea that is a wonderful niche,” he said. “If you own the niche market, you don’t have any competition.”
Canin’s high-density designs are in the pre-construction phase for several communities in the Southeast.
Multifamily amenities will get even fancier
Related Group, a Miami-based multifamily developer, is also going for smaller units.
Floorplans that averaged 1,200 square feet before the recession have shrunk to 900-950 square feet, said company Vice President Jessica Suarez.
That makes more space for amenities, which are getting larger and ever more creative.
Pools, barbecues, games, TVs, WiFi and charging stations are a given.
To keep its market edge, Related Group has been adding theaters, massage rooms and outdoor cabanas, wooing millennials who want more places to congregate. A spinning room in one complex has a virtual instructor.
Millennials are the largest group of renters, but Baby Boomers are the fastest growing.
In a nod to the older generation, Related Group includes concierge services resembling luxury hotels, like dry cleaning and a TV screen in the lobby with the ability to search for nearby restaurants and to make reservations.
Inside the units, apartments are becoming more like condos, Suarez said.
At her complexes, 30-inch upper cabinets have grown to 36-inch cabinets, with tile backsplashes and under-mount lighting. Carpeted floors and 12x12-inch tile have been replaced by 12x24-inch tile or faux wood throughout. Granite countertops and stainless appliances are now standard.
The units’ smaller footprint has created decorating challenges, said Sonya Haffey, design director for V*STARR Interiors of Jupiter.
So, permanent kitchen islands have been replaced by moveable islands with backless stools. Smaller scale furniture fills the rooms. Walls are painted in light colors and decorated with mirrors and art.
There’s still room for luxury, though. In one complex, Haffey included a chroma-therapy Zen shower with colored lights and audio.
Coastal style replaces Mediterranean
Like its peers in the apartment industry, Minto Communities Florida is looking to differentiate its product in the single-family arena.
Before planning its Isles of Collier Preserve community in Naples, Minto polled consumers and Realtors and realized the traditional Mediterranean style, with stucco walls and tile roofs, had become outdated, company president Mike Belmont said. So, they opted instead for a new line of coastal inspired-architecture.
The 1,600-unit community opened in February 2014 and has already sold 220 homes, averaging $800,000 each.
Buyers want lifestyle, Belmont said, and The Isles of Collier Preserve captured that in its land plan. Minto had to accommodate 900 acres of wetlands at the community’s 2,400-acre site.
Instead of cordoning it off and leaving it undeveloped, the developer built walking paths, nature trails and observation look-outs.
“People really responded to that,” Belmont said. “There’s a lot of wildlife in there and native plants.”
He predicted more communities would turn preserved areas into community amenities as wetland regulations become more restrictive.