By Patrick J. Kiger
Urban Land – The Magazine of The Urban Land Institute
February 9, 2015 – Original Post

There was a time when New York City—the epitome of the 24-hour city and a traditional magnet for the best and brightest young professionals—seemed like the perfect place for Mike Cross and Theresa Boyd. Cross, 30, a Wyoming native and a Cornell-educated attorney, and Boyd, a 34-year-old Toronto-born finance specialist with a private equity firm, enjoyed a city of superlatives—filled with not only opportunity, but also exotic restaurants and trendy cultural happenings. “We still love all those things,” Boyd says. “New York is a city of extremes. You get whatever you want, until your id goes crazy.”

But after a few years, New York’s downsides also became apparent. Even with their substantial incomes, it was daunting to contemplate how much they would have to pay for a home with enough space to raise a family. So they started to look around. For previous generations, the first impulse might have been to move to the suburbs. But as members of the millennial generation, born in the last two decades of the 20th century, Cross and Boyd had a different set of expectations. They wanted affordable housing, but without giving up completely on the cultural amenities and walkable lifestyle they valued.

So they looked 1,600 miles (2,600 km) away, to Denver, a place that publications such as Forbes, Business Insider, and Vocativ recently ranked among the top ten cities for millennials, in terms of both employment and salary opportunities and affordable housing. In the Highlands, a neighborhood several miles north of downtown Denver, they found a semidetached 2,300-square-foot (214 sq m), three-bedroom, three-bathroom home, recently renovated with new appliances plus a backyard, for $464,000. “That might get us a studio in Manhattan,” Cross says.

And they got all of that without giving up their urban identity. “The Highlands is the big upcoming hip area,” says Cross, who quickly found a job with a Denver law firm. “It’s like the Brooklyn of Denver,” he says. “In one year, they went from 22 restaurants to 55, and there’s more stuff coming.” Boyd, who is staying behind in New York for a while to tie up professional loose-ends, is similarly sold on the area’s trendy breweries, art galleries, and ethnic cuisine that ranges from Caribbean to Japanese. “We really did get everything we wanted,” she says.

They’re not alone. According to a 2014 study conducted by City Observatory, a think tank, the portion of Denver’s population between 25 and 34 years of age with college degrees increased by 46.6 percent between 2000 and 2012—one of the highest rates in the nation, and nearly twice that of the New York City metro area.

Cross and Boyd are part of a nascent trend that could reshape America’s urban landscape. Many millennials are still following traditional migration patterns and flocking to longstanding talent magnets such as New York City, Chicago, San Francisco, and Washington, D.C. But others are opting to move to small- and medium-sized cities such as Denver, San Antonio, Pittsburgh, and Nashville, Tennessee, which not only offer employment opportunities and more-affordable housing, but also have remade themselves in recent years with walkable urban cores filled with cutting-edge cultural amenities and a social and creative milieu that once could be had only in the biggest cities.

That confluence in many ways is exemplified by Denver, where the millennial population has increased by more than half since 2007 and now amounts to a third of the total population, according to RealtyTrac. The metropolitan unemployment rate in November 2014 was just 3.9 percent, and the area created 36,000 new jobs over the previous year. And while rents have climbed recently due to demand, Apartmentlist.com, a realty site, says the $1,380 median cost of renting a two-bedroom apartment is still far below that of San Francisco ($4,350), New York ($3,260), or Washington, D.C. ($2,760). And for those looking to buy a home, they will find that the median home price of $315,000—and the $63,000 in income needed to qualify for a 30-year fixed-rate mortage to pay for it—are significantly lower than those other markets as well, according to realty-data firm HSH Associates.

For urban planners, architects, and real estate developers, the challenge is how to create structures and amenities that will not only continue to attract members of this desirable demographic group, but also entice them to stay as they grow older.

A Shifting Migration

 

The millennial generation, which author and demographer Neil Howe pegs at roughly 100 million members, is even bigger than the baby-boom generation that has been reshaping the economy, culture, and real estate since the 1950s. But the U.S./Canada version of Emerging Trends in Real Estate® 2015, a report by ULI and the global consulting firm PwC, notes that as millennials come of age and advance in their lives and careers, there is still an ambiguity about what patterns they will establish. According to the report, many industry observers see millennials as deterred from homeownership by hefty levels of student debt and traumatized by an economy that imploded during the late 2000s and which only recently has begun showing signs of a resurgence. “Renter-by-choice is still a potent force,” one institutional investor told ULI and PwC. “Apartments will retain their appeal for a while for millennials, spooked by what happened to their homeowning parents.” Some observers think that millennials eventually will revert to moving to the suburbs and commuting to work, as many of their parents did, while others envision them as inverterate urban dwellers who will retain their preference for entrepreneurship and do-it-yourself artisanal culture. It is perhaps just as likely that both trends will occur. “Painting them with too broad a brush will lead to misplaced expectations,” the report concludes. “One size will not fit all millennials.”

But the millennials’ direction may well be influenced by another phenomenon described in the Emerging Trends report. The “24-hour city” that once existed only in densely populated metropolises along the coasts is now being replicated in smaller “18-hour cities” across the nation, where walk-to-work housing is becoming increasingly common, and shops, restaurants, and entertainment venues are staying open later into the night. That, in turn, is encouraging knowledge-industry employers to keep their offices downtown. Robert Lang, an urban affairs professor at the University of Nevada, Las Vegas, and a fellow at the Brookings Institution, agrees. “The number of cities suited to millennial habits is increasing,” he says. “Some have undergone transformations that make them more like the traditional magnets. You’ve got a city like Atlanta, where they’ve had years of investment in downtown housing and neighborhoods, and added thousands and thousands of units. That puts them in a good position to attract these younger people.”

In terms of lifestyle, smaller cities are competitive in a way that they were not 20 years ago, according to urban theorist Aaron M. Renn, founder of the website Urbanophile. “It used to be that if you moved from New York to Nashville, you took a hit in terms of amenities. Now, when you go to these smaller places, you find high-quality, locally roasted coffees; a plethora of microbrews; amazing food.” And the internet is helping to fill cultural gaps. “I’m a big opera fan,” notes Renn, currently a resident of Manhattan’s Upper West Side. “But if I were to move to Nashville, they simulcast the Metropolitan Opera in theaters there, for a tenth of the price.”

While traditional magnet cities are still seeing an influx of ambitious young professionals, their rising housing costs are becoming an issue. In the Washington, D.C., area, where rents have increased consistently in recent years, young tenants “are sometimes doubling and tripling up to be able to live in the newer, better Class A buildings closer to the urban core,” says William Rich, a senior vice president at Delta Associates, an Alexandria, Virginia–based market research firm.

That’s why some experts see smaller, emerging urban cores as an alluring destination for millennials like Cross and Boyd, who want the urban lifestyle at a suburban cost. “If you’re a millennial fresh out of college, it doesn’t necessarily make sense to move to a less expensive city just to buy a home,” notes geographer Jim Russell. “You still want to go to New York to build your résumé and contact list. But what do millennials do when they get to the stage where they want to buy a house? Do they go to the suburbs despite their dislike of cars? Or do they go for something else? I see indications—not yet a full-blown trend—that they’ll move to someplace that’s more affordable for city living.”

But smaller and medium-sized cities could become attractive to younger, early-career millennials as well, especially if these cities begin to evolve from being merely consumers of talent that was refined in the big cities, to become refineries in their own right. “New York’s strength is its ability to draw people from all over the U.S. and the world,” Russell notes. “But Dallas is starting to show the characteristics of a talent refinery, too. And someone fresh out of college could go to Seattle and expect to get a big career boost as a software developer.” Others, such as Lang, think millennial talent may naturally flow to cities that do not produce a lot of college-educated workers on their own.

The New Magnets

Denver is one of those growing talent-consumers. The city is enjoying an economic boom due in part to the burgeoning shale oil and gas industry, and it is home to a growing number of internet startups such as Craftsy, an online provider of arts and crafts classes. But David Schlichter, the Denver real estate agent who helped Cross and Boyd find their home, points to the city’s other attractions as well. “You’ve got a balance of an urban and outdoor lifestyle in Denver,” he explains. “Besides their jobs, people are really into rock climbing and skiing—and it’s world-class skiing.”

 

Denver also has plenty of urban texture: the city has an ample supply of older industrial buildings that developers have been repurposing as stylish mixed-use spaces. In a formerly nondescript jumble of railyards, stockyards, and cement and flour mills now known as the River North Art District (RiNo), for example, developer Mickey Zeppelin has built an array of open-plan, flexible workspaces, dining spots, and loft apartments, all geared toward a millennial lifestyle in which work and leisure tend to blend together, and free-form collaboration and casual social interaction are key. “I just wanted to create a feeling of freedom, which I think is a characteristic that millennials want,” Zeppelin says. “They’re not like previous generations who separated their lives into segments—one part of them making money, the other playing. There’s really that breaking down of the barriers, and we developed to fit that—like combining the workspaces with a restaurant [the Fuel Café] that became one of the top 15 eating places in the city. And we set out to create an arts district, with a lot of social events around art and food.” One of Zeppelin’s recent projects is the Source, a 19th-century iron foundry that has been converted into a 25,000-square-foot (2,300 sq m) artisanal food emporium featuring restaurants, a bakery, a butcher shop, and craft breweries and distilleries.

In the city’s Golden Triangle neighborhood, Zeppelin renovated the former Rocky Mountain Bank Note Building, which since has morphed into a technology campus operated by locally based outfit called Galvanize. It provides space to more than 100 small companies as well as a training program in software writing and other digital skills.

Denver’s transportation infrastructure also appeals to millennials, whom studies have shown are less likely to drive and are more inclined to walk, bike, or use public transit. Denver built a light-rail line to downtown in the mid-1990s, and since then the city has spent billions of dollars to create a system with 48 miles (77 km) of track and a refurbished Union Station as a multimodal hub, with additional expansion on the way. A consortium of Denver business interests and cycling advocates staged a successful crowdfunding campaign to underwrite a portion of the $155,000 cost of a new protected bike lane along Arapahoe Street in downtown. Aylene McCallum, senior manager of transportation and research for the Downtown Denver Partnership, says that promoting cycling is an im­portant economic development tool because of its appeal to millennial workers, who in Denver live four miles (6 km) closer to their jobs than older commuters, according to survey data. Denver commuters are biking to work at a rate 11 times the national average, and that includes 16 percent of male millennials and 9 percent of their female peers. “It makes the city more attractive to them, and also to companies that might want to relocate here,” McCallum says.

Attraction and Retention

Another increasingly alluring destination for millennials is Pittsburgh, a once-gritty steelmaking and manufacturing center that has morphed into a health care, technology, and financial hub. The city’s combination of job opportunities and affordable apartments in walkable neighborhoods earned it a spot on Forbes’s recent list of the best cities for millennials, and moved the Atlantic to publish an article titled “What Millennials Love about Pittsburgh,” in which recent arrivals praised its surprisingly ample green spaces and striking architecture, which includes the 1980s-vintage PPG place, a glass cathedral-like corporate complex designed by Philip Johnson and John Burgee.

The city’s ambience has attracted new residents such as 28-year-old Celia Rose Perez, a lawyer originally from the Chicago area who worked for federal agencies in Washington before moving to Pittsburgh with her husband, Jeff, in 2012. The couple found a two-bedroom apartment in the Heinz Lofts, a converted century-old food processing plant on the city’s North Side, for slightly more than what Perez once paid for a studio apartment in D.C. The complex has proven so popular that its developer, Cleveland-based Ferchill Group, says it plans a $38 million expansion that will add 151 more apartments, including 55 micro units measuring 463 to 497 square feet (43 to 46 sq m) that are intended to attract entry-level millennial renters. Perez can walk along a riverside trail to her downtown law office in just 25 minutes, and she and her husband also can stroll across the nearby 16th Street Bridge to the Strip District, a warehouse and trucking area that now offers stylish bars and ethnic restaurants. Since she first visited the city in the mid-2000s, she says, “it’s really gone through a revitalization. The downtown has really changed. They’ve cleaned up and added all sorts of new businesses.”

Pittsburgh’s Strip District is the location of another major project geared toward millennials: the $122 million Three Crossings mixed-use complex. Oxford Development Company spokeswoman Megan Stearman says the 11-acre (4.4 ha) riverfront project will include 300 apartments, a building with flexible workspaces for offices and technology manufacturing, plus retail and restaurants. The first phase of the development, which includes the apartments, is scheduled for completion in 2016. The project also will be outfitted with amenities such as a bike-sharing facility, kayak storage, and electric car–charging stations. “But we see the neighborhood as the biggest amenity,” Stearman says. “There’s not a huge residential population currently there, but it’s perfect for the new renter who wants to be in an urban environment close to work. And it’s walkable to downtown.”

At the same time, part of the secret to attracting millennials to an urban core is renovating in a way that preserves its distinctive sense of place. Young people flock to cities where they can have “a more authentic experience,” says 27-year-old Justin Bibb, who lived in Washington, New York, and London before returning to his hometown of Cleveland to cofound Morris Strategy Group, which advises cities on how to attract millennials. To him, that means an inclusive revitalization strategy that not only creates amenities to lure new affluent residents, but also benefits existing urban dwellers. “I’m all for moving Whole Foods and Urban Outfitters downtown—those are great ways to add wealth and value,” he says. “But we can’t do that without looking at the historical nature of communities, and engaging them as part of the process.”

Architects in the emerging destinations for millennials say they are designing housing to fit the cultural differences that distinguish millennials from previous generations. One example of that trend is Seven27, a five-story complex in Madison, Wisconsin. While the dramatic exterior with irregular, cantilevered wings is attention-grabbing, architects David Jennerjahn and Joe Valerio of Chicago-based Valerio Dewalt Train Associates point to a host of more subtle functional features aimed at millennial renters. Just as marketing research shows that millennials prefer personalized sneakers and clothing rather than just buying a status brand, Valerio says that they are looking for individualized apartments—“they want choices so they can put together their own living experience,” Valerio says. To that end, Seven27 has 17 basic floor plans, and among them, additional variations that ensure that each unit seems different from the others. In addition, millennials, who grew up hanging out with friends at Starbucks and created social networks such as Facebook and Meetup, don’t spend as much time in their apartments as previous generations and want common spaces in which to gather, Jennerjahn and Valerio explain. That is why the architects devoted 5 percent of the building’s space to an array of social spaces, including a glass-walled lobby and community room that looks into a courtyard with barbecues and a fire pit.

Valerio says that the living spaces increasingly are evolving in the same direction as the open offices to which millennial knowledge workers are accustomed. “They’re also working all the time, so you want to have public spaces in a building where they can get together with coworkers,” he says. “That, to my mind, is the new frontier, having an apartment building that facilitates what you’re doing in your job.”

Millennials also seem more eager than other people to live in smaller spaces in return for amenities, according to Valerio and Jennerjahn. To that end, they have included features ranging from a bike room to dog-washing stations, all included in the monthly rent. When it comes to attracting millennial renters, “there’s really an arms race about amenities,” Jennerjahn says. In the case of Seven27, apparently it has paid off. Even at above-market rates, the building is continually at or near capacity, to the point where it’s difficult to find a vacant unit to show to prospective renters.

A risk exists, of course, in shaping the built space in emerging millennial magnet cities too closely to young migrants’ current needs. Buildings filled with micro units and heavy on amenities are likely to hold less appeal to millennials as they get into their child-rearing years. In Nashville, developer Michael Kenner—who, at 35, is right on the edge of the millennial generation himself—says he is already looking ahead at ways to keep millennials in the neighborhoods that he is developing on the city’s edge. He is building a new micro-unit project that uses repurposed shipping containers, not far from another development of wood-frame cottages with a wellness-oriented theme, including circadian-rhythm lighting that subtly changes color according to the time of day. To retain millennials, he notes, “it helps to have a diversity of housing stock. You want a neighborhood to be able to accommodate people who can afford $700 for a 320-square-foot micro-unit, as well as someone who can afford a house.”

Similarly, in Denver, Mickey Zeppelin is starting to build larger housing units, in which flexible space can be repurposed by millennials with children, with windows that look out onto outdoor play areas, and home office nooks that can also accommodate an infant’s crib. “That’s the next iteration,” he explains. “We’re starting to cater to [millennial] families who want to stay in the city.”

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