In the early 1980’s, my father graduated from high school and almost immediately began a full-time career in auto sales under the tutelage of a seasoned dealership vet.
Within three years, he would buy his first house in a northern New Jersey suburb. Soon he’d be married and ready to support an entire family. 30 years later, my father is now the manager of the very same dealership.
While he obviously learned enough to succeed at work from his mentor, one particular lesson about his personal finances stayed with my father long enough for him to pass it onto me during my first apartment search.
“Your rent should equal one week’s pay,” he had told me as I scrolled through New York area listings. In three decades, the world had certainly changed.
A report released last month from the office of City Comptroller Scott Stringer stated what many young professionals are already painfully aware of: NYC millennials are earning about 20 percent less than their parents did at the same age.
A generation stocked with members who had been groomed for college since pre-school, millennials were taught that hard work would earn them more than a good job. As long as they hit the books and earned a degree, each and every one of them would snag a rewarding career that supported a middle class-or-better lifestyle.
While their parents hit the ground running in the 70’s and 80’s, steadily earning enough to build a life for themselves after high school or college, today’s youth are faced with a different reality.
They can be anything they want to be, but financial stability no longer comes with the package.
Interestingly, the cool-down in compensation has been met with a heated and unique work ethic. Young people are no longer looking to push paper from 9 to 5 in exchange for a reasonable paycheck and a white picket fence in the suburbs.
The incoming workforce aims to throw themselves fully and completely into their jobs, despite the fact that many of the available opportunities fail to offer salaries which can truly be deemed sufficient in New York City.
Employers have had little need to hamper their recovery from last decade’s recession with more competitive salaries. There’s no dearth of young, educated talent looking to gain employment in one of the most exciting cities on the planet. That includes meagerly compensated employment.
While this is great news for hiring managers, what does it mean for real estate players? Could the current surging demand for housing in Manhattan and the boroughs eventually seize up as wages fail to keep pace with a rapidly ascending cost of living?
Does a housing market that thrives on proximity to the financial and cultural epicenter of Manhattan need to prepare for a time when mid-level workers simply decide the financial burden outweighs the brief commute?
“Usually what happens here is they usually start with a studio or a two bedroom with a friend,” Arlinda Dine, executive director of marketing at Modern Spaces told Brokers Weekly while discussing young professionals seeking housing. After meeting a significant other, the option of splitting a one bedroom is now on the table. Dine called this a “natural progression” that millennials are following to make steep housing costs manageable.
“As the prices go up, for example in Long Island City, people start to move into Astoria,” she said. “Then they start to move into Woodside.”
The prices are certainly going up.
According to REBNY, The average sale price of a home in New York City climbed one percent from $898,000 to $911,000. in the first quarter of 2016. Manhattan clocked in at about $1.87 million on its own. Brooklyn’s middle-mark came in at just over $800,000.
According to Comptroller Stringer’s report, the average employed 23-year old in New York City in 2000 earned about $27,700, whereas the average employed 23-year old in 2014 earned about $23,500 annually.
In 2000, the average employed 29-year old in the city earned $56,000 in 2014 dollars, but their 29-year old counterparts in 2014 earned only about $50,300.
Modern Spaces is currently marketing several rentable properties in Queens including The Grove and The Baker House. Located in Astoria and LIC respectively, the buildings are in desirable locations near easily accessible transportation that brings commuters right into the heart of Manhattan.
Renting a one bedroom at the former costs $2,500 while the later charges $2,700. A two bedroom could run $1,850 each or more at The Grove and over $2,300 at its counterpart.
“If they’re working in Midtown, they’re going to care about how long it takes to get into the city,” said Dine, stressing the benefits of being close to Manhattan. She said that the target for most young professionals is to be no farther than a 35-minute train ride from their office.
Managing director at Savills Studley, Lance Leighton, agrees with the importance that Dine puts on short commutes.
“Location is undoubtedly one of the most important aspects of the office space decision besides cost,” Leighton said.
“Minimizing commute times for employees and executives, while also being situated near restaurants, nightlife and hotels, often have a major impact on maintaining and/or recruiting top talent,” he continued.
According to Leighton, if a building is situated off the beaten path, it needs to work hard to make up for it.
“Many buildings that are in less desirable locales have been offering amenities such as fitness centers, lounges, dining halls, shuttle buses, rooftop spaces and in certain scenarios even golf simulators and swimming pools, in an effort to attract big name tenants that would not typically consider these locations. Though most tenants understand that their potential hires value shorter commute times, having a trendy and amenity rich workspace experience makes the longer travel time a bit more palatable.”
Fellow Savills Studley managing director Gabe Marans agrees with Leighton’s sentiments about the power of amenities.
“If a company’s amenities are an accurate reflection of its culture and interest in its employees, then it is the primary driving force,” Marans said. “It’s what allowed Google to attract its talent when it first entered the NYC market when 111 Eighth was still in the middle of nowhere.”
Could location be marginalized by cooler buildings? Does a food hall in a Brooklyn warehouse make it more of a draw than a basic cubicle-clad office next to the Port Authority?
If so, how much longer will proximity to Manhattan — or even the boroughs — matter to a young worker who’s making significantly less than his or her parents did while rents and purchasing costs are markedly higher.
“My work ethic hasn’t changed. I’ve always been a hard worker; I got my first job as a hostess at 14 and haven’t been unemployed since,” Ashley told Brokers Weekly. She works in a Midtown office and enjoys a relatively brief commute to work. At this point in her life, living near the city is still her main housing priority.
“The importance I place on career success has definitely changed since graduating college. I had no idea how competitive the real world is; if you’re not competitive, living and working in NYC will make you become competitive. The city transforms people.”
Ashley said that access to transportation trumps an attractive or trendy office environment, but she admitted that it’s a close race. Ultimately, she wants to spend as little time commuting as possible. She plans on owning a home within the next ten years but for several reasons — including price — it might not be in the immediate area.
Barbara, who is currently working in the financial industry, agreed with Ashley’s desire to have the shortest commute possible.
She said that while she’d rather live in a more rural area, such as Summit County, NJ, she’s willing to live much closer to the city so that she can quickly get to and from work.
“I just re-signed my lease because of my job in the city,” Barbara said. “Otherwise, I would have moved.”
Jill, a millennial working in product design said that she plans on living in the area for the foreseeable future, but when it comes time to invest; she’d likely purchase something out of the locality.
“My goal at this point is to continue renting in NYC for work and buy a property on a lake for weekends/vacation and holidays,” she said.
As for keeping NYC as her main residence, Jill said location is the main driver for that decision. While she enjoys living here, it’s about getting to-and-from work.
“It is very important to be near main transportation, especially with trendy areas being newly developed. Most of my industry is established in Midtown,” she said.
Because living in the immediate area is likely difficult for her and her peers, Jill said that access to public transportation is paramount.
“The only way for me to meet both ends of the spectrum within 15 minutes would be to stay near a main transportation hub. I would not sacrifice time for trendiness.”
Jill also said that choosing to work in NYC and weather the financial hardships that can come with it will likely impact her future personal life in a significant way.
“Unfortunately, millennials have an uphill battle facing family life and work,” she said. “I find maternity leave absolutely frightening and need to guarantee some sort of stability for myself/child/family. I do find myself going above and beyond with work and actually find it difficult to find other millennials as willing.”
She continued saying that her plans for her mid-30s could hinge on her next living situation or two. “If I haven’t been paying NYC rent for 10 years, I would have a family already,” she said.
According to Comptroller Stringer, “This generation is at a crossroads. They worked hard, got an education and then faced roadblocks to getting a good-paying job. It’s time for us to pay attention to the largest generation in New York City, and start to break down those barriers. We need to foster an economy here that helps young people get ahead, not one that holds them back.”
While macroeconomic trends will continue to have the greatest effect on the financial future of the Millennial generation, Stringer said local and state governments can and should enact a series of policies that promote opportunity for young people, including: Raising the minimum wage;
Expanding overtime protection; Supporting efforts to keep public universities affordable and reduce the burden of student debt; Creating more affordable housing; Developing more effective workforce training programs and summer employment opportunities.
“Millennials are doing their part for New York City – they are politically involved, culturally engaged, and highly motivated,” said Comptroller Stringer.
“This generation is overcoming setbacks and changing the way we work, live and communicate. Now it’s time for the rest of us to do our part and put policies in place that will help this powerful group settle down in New York City, start their careers, and raise families here, so our economy can continue to grow.”