Demographic Shifts Shaping DC's Rental Market

Real estate is often considered a “high-risk, high-reward” marketplace.

However, that concept generally applies to short-term investments made without performing a thorough analysis of the marketplace, startup costs, and, most importantly, industry trends. While "house flipping" and other "get rich quick" plans present a variety of glaring financial risks, knowledgeable property investors can make extremely profitable long-term portfolio decisions without inheriting worrisome, immediate fiscal hazards. By keeping the following five long-term trends in mind and understanding the Washington DC apartment rental market, savvy investors can make better decisions.

1. Baby Boomers Have A Different Vision of Retirement Than Their Predecessors

Baby Boomers no longer envision their ideal retirement as a relaxing, “cookie-cutter” life in the suburbs. Instead, more and more individuals born between 1946 and 1964 are deciding to continue residing in the city, either in single-family homes or more luxurious downtown condo units. These Boomers have found that the many walkable amenities urban areas have to offer, including parks, theaters, restaurants, and musical performances, provide a heavy incentive to forego the quiet, secluded retirement experience of rural life.

Take-away: As Baby Boomers increasingly choose urban living, the rental housing market will experience a growing demand for suitable housing options catering to their needs. Investors should consider properties that offer accessibility, convenience, and amenities that appeal to this demographic.

2. Millennials Are Poised To Become The Most Educated Generation in History, And Their Jobs Are Increasing Likely To Be Located in Urban Areas

Millennials are on pace to become the most educated generation ever, and that’s primarily due to the shifting U.S. economy. Many of the manufacturing jobs available to millennials’ parents simply aren’t around today. According to an article published in the Washington Post, “over the last two decades, employment in the manufacturing sector has plummeted, from nearly 18 million jobs in 1990 to just over 12 million jobs today.” These jobs have either been outsourced to foreign countries or pushed outside major cities to more rural suburbs, with downtown areas primarily dominated by large, service sector companies.

Take-away: With millennials seeking employment in urban areas, there will be a continuous demand for rental properties located near job centers. Investors should focus on acquiring properties in areas with strong job markets and convenient access to public transportation.

3. Millennials Are The Most Diverse, Accepting, and Inclusive Generation in History

The millennial generation has become particularly concerned with issues of tolerance, diversity, and inclusion. This is most evident from protests on college campuses, debates on social media, and political voting patterns. As more of them graduate from predominantly liberal undergraduate institutions, it’s likely that they’ll continue to value living in diverse environments.

Cities provide the ideal communal blend of cultures that no suburb can. That’s why neighborhoods such as Adams Morgan, Capitol Hill, and the U Street Corridor are and will continue to be hotspots for liberal youth looking for a similarly fun, culturally diverse living environment that they experienced in college.

Take-away: As the millennial generation seeks diverse and inclusive communities, investors should look for properties in neighborhoods with a vibrant mix of cultures, lifestyles, and amenities that cater to a wide range of tastes and preferences.

4. Millennials Are Marrying Later Than Their Predecessors

According to a report published by the Council of Economic Advisors to the Executive Office of the President of the United States, millennials are significantly less likely to be married between their mid-20s and 30s than their predecessors. Since buying a home is the largest investment most people will ever make, couples usually wait until they are married to make the mutual financial decision. Since fewer young people are making the life-long commitment to marry, it makes sense that more would forego the biggest financial decision that often goes along with it.

Take-away: As millennials delay marriage, the rental market will continue to experience sustained demand. Investors should focus on properties that cater to the needs of single professionals and couples without children, such as smaller units or those with shared amenities.

5. Many Millennials Continue To Live With Their Parents, Are Likely To Have Long-Term Student Debt, And Grew Up During The Great Recession

Although at first glance, these three statements might not seem interrelated, they all will have profound impacts on the housing and rental markets for the coming decades. When the housing crisis triggered the Great Recession in 2008, families across the country took huge hits. As a result, many millennials' parents had to substantial dip into or completely deplete portions of their children’s college funds to cover immediate debts, and some were forced to sell their houses. The personal effects of these financial circumstances are not easily forgotten.

According to the Bureau of Labor Statistics, a greater percentage of young people between the ages of 18 and 34 are living with their parents than in the past three decades. At some point, these young people will move out (one would hope) and presumably become tenants in the rental market. As millennials enter the workforce and accumulate some wealth for themselves, they will be hesitant to enter the housing market that forced many of them to take on huge student loans (which they very likely might still be paying off). As an alternative, many will prefer to maintain the flexibility inherent in renting. Thus, the market will continue to experience heavy demand for affordable, conveniently located rental homes for the foreseeable future.

Take-away: With millennials facing financial challenges and prioritizing flexibility, the demand for rental properties is expected to remain strong. Investors should consider properties with competitive pricing and flexible lease terms to attract and retain this growing demographic.

Conclusion:

Real estate is a marketplace that investors should enter with a thorough understanding of the marketplace and industry trends. At Gordon James, we use the most up-to-date research databases and market analysis software to provide the best property management expertise in the industry. By selectively taking on clients, emphatically prioritizing the quality of personal, attentive customer service, and aligning our goals with our partners, we help investors make the best possible decisions.

If you’re considering adding a property to your investment portfolio, schedule a consultation with us today! Discover our property management services and fees for community associations, residential properties, and commercial properties by getting in touch with one of our experienced agents. Visit Gordon James' services to learn more.