John Sorkvist

John Sorkvist

Your opportunity is here for a more positive and successful life. The one you have always held in your thoughts.

NYC Is Losing Millennials At A Rapid Pace, It Threatens It's Stability

NYC Is Losing Millennials At A Rapid Pace, It Threatens It's Stability

Millennials have been the major driving force for the change in the real estate landscape and a push towards urbanization. With millennials being the generation that is the most college educated with a high of 70% going to college in 2009, they have been engrained with the urban experience and the convenience of walkability. With the mix of college and technology this has created a generation that loves the accessibility and ease of use. This has translated over to apartment living and being able to walk out your door for entertainment and food & beverage. As millennials are just now starting to approach their prime earning years this trend will exemplify and expand. Cities have capitalized extensively on this trend and when combined with global macro situations of stability and safety real estate pricing in major US cities has spiraled out of control to the upside. With millennials now seeking more value in their prime earning years areas on the outskirts of New York City are becoming more urbanized. Suburbs are attracting more of this millennial generation with cheaper apartments, quality entertainment and competitive food and beverage.

Statistics have shown nearly twice as many people aged 20-34 moved from cities then into them. Pricing is a major influence in this and it threatens the entrepreneurial spirit that has been in the city for generations. The pricing model in both residential and retail has driven this generation to begin looking elsewhere and Brooklyn is a prime example of capitalizing on this trend. This area however has even seen such a sharp rise in prices it is expanding outwards. As this pricing model continues these outside areas will continue to benefit long term from attracting millennials. It will benefit when attracting artists to their cheap warehouses and entrepreneurs to their affordable living allowing consumers to spend more on their local economy than rent.

Its all about economics the city is so highly priced that it will hurt LONG term growth until a major correction is had. New York City will ultimately survive on the other end. The issue remains though that what created a lot these neighborhoods in the first place were the young searching for cheaper living. This same formula is occurring in neighborhoods all AROUND the city with new apartments, offices and retail catering to them. As millennials get older and have children and demand more space this will only hurt the cities chances of recovery further. Real estate is not a financial product its people and when their lives move its hard to get them back without offering INCENTIVES (not one or two months free rent on a two year lease). Incentives that allow entrepreneurs to create new experiences and live in the neighborhoods. This destroys the pricing model that has been in New York City for five years. It ultimately needs an adjustment somewhere in the 50% range for retail and residential rents. 

When I see entrepreneurs that created great experiences in places like Tribeca and SoHo say they are looking at Sunset Park, Jersey City or Staten Island or simply say they will sit on their hands until prices go down 50% in the city it's alarming. These were the business owners on the cutting edge and willing to take risks in the city starting right after 9/11 downtown. Some of them EXPANDED further in 2009 and 2010 when people called them crazy! Then doubled down when Sandy hit and further helped revitalize the areas.

The major contributor that keeps the pricing going for New York City is money. There is thinking that after this cycle ends more money will come in and prop up the pricing. After this cycle that is over as people continue migrating out of the city it will be harder and harder to hold on with more vacancies. More capital to prop up pricing will only help create enclaves outside the city that will provide better one of a kind experiences for millennial consumers. Then when the money dries up the pricing in New York City will adjust and bring those entrepreneurs back. That is when people will call me and our Family Office CRAZY for buying in New York City like they did in 2009-2010 and after Sandy. Then I will be a buyer in New York City. 

Crushing It has excellent insight from Brian that shows how creative you can get in real estate from first hand experience. Real estate has always been a creative game so create ways for yourself.

 

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