These Hipster Developers Figure They Know What Millennials Really Want

Everyone in the real estate business, including us, has a bit of an obsession with millennials. This week we pondered the top 10 markets where millennials are seeking homes, and we’ve noted the hardships they face in procuring them.

But we also want to know what goes on in their 21- to 34-year-old (or, more realistically in terms of real estate, 25- to 34-year-old) brains? When it comes to homes, what do they want?

One real estate firm that Bloomberg Business describes as “hipster real estate developers” has homed in on the whims and desires of the millennial market. For the past four years, the Seattle- and Los Angeles–based developer Timberlane Partners has bought run-down apartment buildings in up-and-coming neighborhoods and renovated them to draw 20-something professionals in throngs. So what’s the secret?

Well, for starters, it’s all about location—no surprise there. But unlike older renters who place a premium on convenient parking, millennials couldn’t care less about their car. This generation wants a “walkable” neighborhood with boutique coffee shops and farm-to-table restaurants nearby.

And while millennials are willing to put up with having minimal space—say, studios or one-bedrooms—their buildings had better compensate with expansive communal areas, including roof decks, entertainment rooms, and fire pits. According to Bloomberg, Timberlane once even knocked down five apartments to create a 3,000-square-foot gym with a yoga studio and climbing wall.

Millennials also prize authenticity—which explains why Timberlane will typically expose brick walls; refinish hardwood floors rather than covering them in carpet; and keep other small details, from original molding to a potbelly stove.

So how has Timberlane done with its target market? Pretty darn well. “The four-year-old firm earned a 24% return on its first five buildings. An additional seven sites, owned for at least a year, are producing annual yields—cash as a share of investment—of 11.2%,” Bloomberg wrote. “Timberlane now has a real estate portfolio of $160 million, up from less than $80 million at the end of 2013.”

The question is: How sustainable is its strategy? Someday, those millennials will grow up and want families and good schools, and much of their disposable income will go for summer camp and Ivy League college prep starting at age 3. The more hipster developments flood what had been marginal neighborhoods, the more likely the hipsters are to be, eventually, priced out of them or not served.

For now, though, these properties are full of appeal to the discerning millennial crowd. “If you’re the sort of twentysomething who needs rhubarb bitters in her cocktail,” Bloomberg wrote, “you’re not going to live just anywhere.”

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