Millennials Shaping Development?
- Sep 02, 2015
A new report from JLL revealed that the Millennial generation is having a profound effect on the built environment under construction in 2015.
The report shows that in 2015, tenant improvement or the renovation of existing space, has been a bright spot in the construction industry, even as labor and construction costs continue to rise. TI allowances are also growing as landlords fight to attract tenants in increasingly tightening markets.
“There is a complex message in the data; the volume of construction is increasing but is still below historical norms,” Ethan Milley, JLL’s international director & leader for its U.S. Southeast project and development services group, told Commercial Property Executive. “What that does not take into account is the number of skilled construction employees who left the industry from 2009-2012, leaving a much smaller workforce to meet the current demands.”
While the current demand includes new large sectors like manufacturing, which often requires a higher skill level by contractors, the number of employees is starting to rebound.
Millennials are driving the HR strategy of many firms now, with the forecast that they will account for almost half of the workforce by 2020.
“To attract Millennials, companies are having to rethink not just the design of their workplaces, but also the location and flexibility of work environments,” Milley said. “Millennials want more collaborative flexible workspaces—We versus Me—and they want it where they are right now, not at some fixed location. Companies are challenged to locate in more urban locations and spread offices around. Think Zappos in Downtown Las Vegas and Twitter in Downtown San Francisco.”
According to the report, TI costs are declining in most key markets, as landlords eager to compete for tenants are more willing to pay for them. For office building owners, the average TI package nationwide is approximately $30-$50 per-square-foot in Central Business Districts as tenants look to customize office space to attract and retain employees—especially Millennials.
Some of the best ways to attract the segment are to align the workplace technology around today’s standards-anywhere, anytime, BYOD and the flexible collaborative type of workspaces they want to work in.
“A workspace can drive the culture of a company and that culture is evident in its workspace,” Milley added. “Getting Millennials to make their career decisions through a collaborative and flexible workspace has the best ROI.”
With construction starts at their highest point since the recession, the industry is still in the early stages of its recovery and will continue to grow in response to overall economic growth.
“Construction activity and TIs will continue to be important, and we can expect construction in secondary markets to grow as smaller companies get priced out of large markets,” Milley concluded.