According to a report recently published by a new think tank, City Laboratory, more young professionals are opting for the cities over the suburbs. This has historically been the trend, but new data shows that this desire for urban real estate has skyrocketed in America’s major cities, and the migration is largely being driven by younger people with at least a four-year college degree. According to the study, all major metropolitan areas—with the exception of Detroit—have seen a dramatic increase in people who meet this coveted criteria, and they are fueling a ton of real estate activity in these markets.
“Young professionals are looking for an urban environment with transit options, and those are most available close to downtown,” says Sam DeBord, managing broker of Seattle Homes Group and Coldwell Banker Danforth director. “Many of our technology workers are relocating to our area with Amazon and other tech companies. They come from big cities domestic and international, and when they move to Seattle, they’re often looking for a connection to their old home.”
In Seattle, a city with notoriously low inventory, 5.7 percent of the metropolitan area’s adults were ages 25 – 34 with a four-year degree in 2000, and that number rose to 6.1 in 2012, according to City Laboratory. That statistic grew even more when you look at the whole age group: Seattle’s 25 – 34 demographic increased from 35.6 to 39.4, giving it the 10th highest concentration of that key demographic in the nation.
The top three markets for that concentration were Washington D.C., San Francisco and Boston, respectively, the study found. As the nation’s two biggest population centers, New York City and Los Angeles, respectively, had the two highest amounts of residents in that age range, though not as a percentage of the cities’ overall populations.
In Philadelphia, where 4.6 percent of adults were 25 – 34 with a four-year degree in 2000, that percentage increased to 5.4 in 2012, and the demographic as a whole increased from 34.4 to 40.2, giving Philadelphia the 18th highest concentration of the demographic.
John Benson, broker for RE/MAX of New Jersey, says that there continues to be a heavy demand for properties in Philadelphia, especially in the city center where young professionals are looking to live close to their jobs.
“Buyers are mainly looking to be in a neighborhood as close to Center City as they can afford, considering the size and amenities of the property,” Benson explains. “Basically, people want to live near their peers and close to work and have all of their social needs within walking distance.”
In addition to being close to their jobs, young professionals are attracted to the host of walkable amenities that cities offer, including a lively nightlife, shopping destinations and cultural opportunities.
“The city offers amenities that the suburbs simply cannot match, such as an abundance of local renowned restaurants, pubs, lounges, coffee shops and patisseries, gelato and ice cream shops, novelty shops, mainstream shops and, of course, museums and theaters,” Benson says.
The changing demographics and surge in real estate demand have fueled economic development in many cities.
In sprawling Los Angeles, for instance, the city’s once-sleepy downtown has been undergoing a renaissance, driven by an influx of young professionals with extra spending money. According to a recent survey by the Los Angeles Downtown Center Business Improvement District, median household income among downtown residents has risen to $98,700; their median age is 33; 80 percent of them have a degree from a four-year college; and 33 percent earned a graduate degree.
These conditions are ripe for economic development, residential construction and, of course, real estate brokers. The downtown area has an inventory shortage, but thousands of units are due to come onto the market in the coming months.
Hal Bastian, president and CEO of Hal Bastian Inc., a downtown Los Angeles economic development consultancy, has worked with many brokers and developers throughout the transformation, and now he says it’s rewarding to see it all coming together.
“Finally, people understand that they can get their life back by working and living in the same neighborhood, instead of spending two to three hours a day on a freeway,” says Bastian.
The excitement is echoed throughout the nation, including Philadelphia and Seattle.
“As development has grown and continues to grow, so does the urban revitalization of parks and outdoor public gathering places,” says Philadephia’s Benson. “Urban areas are even more pet friendly than many of their suburban counterparts, as many establishments offer dog friendly areas equipped with water bowls and shade.”
“More and more of the city’s afterthought spaces are being revitalized into neighborhoods designed for walkability and living spaces near work locations,” adds DeBord, referring to the revitalization in Seattle. “The businesses and amenities that flourish in these areas are focused on that urban lifestyle.”
Over in the “City of Brotherly Love,” Philadelphia’s resurgence is transforming entire neighborhoods and their underlying real estate markets.
“Expansion projects for Drexel and UPenn, along with the growing medical industry, are some of the major contributors to the urban living demand,” Benson says. “Neighborhoods such as Graduate Hospital, Passyunk Square, Northern Liberties and Fishtown have become as desirable as some of the time-tested neighborhoods like Old City, Washington Square and Queen Village. Access to public transportation has become more popular in recent years as decreasing commuting times and environmental consciousness continue to be a top priority.”
But the downtown craze is not solely a young person’s game, brokers warn. A decent amount of the cities’ influx is coming from baby boomers who are ready to downsize, but still want that active lifestyle, cultural amenities and raw energy that only a big city can provide.
“While a majority of buyers are young professionals, there is also an empty-nester movement as suburban communities, particularly New Jersey suburban communities, have high property taxes, and bridge/transportation costs. These expenses, coupled with property maintenance and lifestyle changes, make the city a very desirable location,” Benson says. “There was a time when the city was a place to work and go out on the weekends, but over the past 10 to 15 years, development has transformed it into a great place to live, and the trend appears to be ongoing.”
Andrew King is an award-winning journalist with 15 years of experience with the Gannett newspaper company, appearing in The Journal News (Westchester, NY), Asbury Park Press and USA Today. He also contributes to The Real Deal, TheLadders.com and TechPageOne.com.
