The millennial generation has a different attitude about where they’d like to work and live, and that’s having a significant impact on corporate America and subsequently commercial real estate.
“I think millennials are having a big impact, particularly for big companies, companies in general, as they think about where they locate and what kind of space they create,” said Jon Gray, Blackstone’s (BX) head of real estate.
Millennials don’t find the suburban corporate campus appealing anymore, and that’s forcing companies to relocate to attract talent.
“Today, millennials are saying, ‘No, I want to be in an urban environment. I want to be able to get a latte. I want to be able to ride my bike. I want to be able to work in a place that is much more open floor plan and sort of cooler feel.’ And so you’re seeing the companies react because they’re fighting for talent.”
GE (GE) moved its global headquarters from Fairfield, Connecticut to Boston’s Seaport district, while McDonald’s (MCD) is going from Oak Brook to downtown Chicago. Aetna (AET) also announced plans to relocate its headquarters from Hartford, Connecticut to New York’s trendy Chelsea neighborhood.
“They’re saying I need to go where the talent is, and that impact is really changing things. So, I think the millennial for having a big impact.”
This trend is creating some challenges for suburban America.
“If you look, for instance, here in New York, if you went out to northern New Jersey the office market’s 25% vacant. Now, if you went to Brooklyn, on the other hand, the office market’s less than 5% vacant. And so it’s creating some impact in those areas.”
It’s also affecting home prices a bit.
“Now a lot of people cannot afford to live in urban areas, so there’s still be plenty of people in suburban areas, but at the margin, urban America is definitely having a good run here.”
It might also mean that suburban America is going to have to change to become more attractive to millennials.
“I think you’ll see zoning for taller buildings in those areas. People want to have a more walkable environment, a place they can ride a bike. So yes, I think, as always, there’s a yin and yang here. And I think now right now urban America is doing quite well. I think you’ll see more densification in the suburbs over time, but it does feel like this is a long-term trend. We’re not just seeing in the U.S. We’re seeing it around the world.”
Listen to the full interview below.
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Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.