Despite Urban Myth, Millennials do Like Living in U.S. Suburbs

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Based on a new report by CBRE Group, for the past several years conventional wisdom has held that city-loving millennials are flocking to urban cores and will remain there in such numbers that the American suburbs, already well past their prime, can only experience further steady decline. However, the suburbs are not dead; in fact, they are alive and well.
 
"The death of the suburbs is greatly exaggerated," said Darin Mellott, director of research & analysis, CBRE. "Despite what we often hear, more people across all age cohorts--including millennials--are still migrating out of cities and to the suburbs. Looking ahead, the evolution of commercial real estate markets will transcend the traditional lines of downtown vs. suburban, or millennial vs. boomer. The story is more nuanced and evolving in ways that create hybrid environments.  For example, in many markets, suburban areas with urban characteristics are thriving."  

According to census data, approximately 30 percent of millennials live within urban areas. The other 70 percent do not appear to be rushing to move downtown: In 2014, 529,000 people between the ages of 25 and 29 moved from cities to the suburbs, while only 426,000 moved in the opposite direction. For younger millennials 20 to 24 years old, the flow's direction was even more pronounced, with 721,000 moving out of cities for the suburbs and 554,000 leaving the suburbs to pursue life in the city. Among the oldest millennials and the tail end of Gen X, negative net migration was even greater: 1.2 million people aged 30 to 44 moved from cities to suburbs, while 540,000 did the reverse.

Looking at office market data--where employment in tech, financial services and other professional services (office-using employment) drives demand--the story appears to be mixed at best. Downtown office markets nationwide have captured a significantly greater share of office space absorption--relative to their size--less than one-third of the time since the year 2000.

During the first half of 2016, almost two-thirds of suburban office markets outperformed their local downtown counterparts when looking at share of net absorption relative to market size. There are downtown markets across the country that have outperformed--and will continue to outperform, in some cases--suburban markets, but, in essence, CBRE office market data describe patterns similar to the story told by census data: generally speaking, suburbs are outperforming urban cores.

It is true that some of the younger millennials moving to the suburbs were returning to their parents' homes, but the migration trend still holds: not every millennial can or wants to live downtown.

It is also true that certain high-profile cities--like San Francisco and Washington, D.C.--have attracted large numbers of millennials to their urban environments in recent years. But this is not true of the U.S. as a whole In fact, in 2014; the U.S. was less urban than it had been in 2000, according to U.S. Census data. Even in the post-recession years--when many asserted that millennials were flocking to cities for employment opportunities--more people were leaving cities for the suburbs than the reverse.

Millennials have a reputation for appreciating the perks of urban life, such as easy access to public transportation, shops, restaurants and offices. This does not necessarily translate into demand for downtown real estate, however. Suburbs too, can develop in ways that appeal to younger demographics, by incorporating elements of urban life in suburban settings, which is occurring in metros across the country. New terms have even been coined to describe quasi-urban areas in the suburbs--among them, ''hipsturbia'' and ''urban burbs.''

"Driven by family formation and the desire for affordability and urban amenities, the urbanization of the suburbs will be worth watching and will certainly have implications for the future of property markets," said Mr. Mellott.