Skip to content

This Real Estate Strategy Will Keep Millennials in San Francisco

Neveo Mosser is the chief executive of real estate firm Mosser Companies, based in San Francisco’s Bay Area, and the co-founder and chairman for the business’s investing branch, Mosser Capital

When it comes to attracting wide-eyed college grads and eager young professionals, few cities are as effective as San Francisco. With its bright lights, vibrant culture, and move-fast-and-break-things creative attitude, the city is all but a beacon for Millennials who aspire to be the next Jeff Bezos or Mark Zuckerberg.

Life in San Francisco offers these young workers the chance to study at some of the nation’s top-ranked colleges and graduate to work for tech behemoths like Uber, Facebook, or Amazon. The city opens metaphorical doors; it all but gives eager young professionals the opportunity to break into the tech world in a way that they would be hard-pressed to find in any other city.

San Francisco all but offers a golden ticket to Silicon Valley’s career factory – so why, then, are the city’s younger residents looking to leave?

According to a recent poll conducted by the Bay Area Council, millennials (i.e., those aged between 18 and 39 years) are more likely to leave the city in the next few years than any other surveyed generation. This might seem shocking; after all, those in the Millennial age group the age group are in a prime position to take advantage of the career-boosting opportunities the city offers. Since 2011, San Francisco’s job market has burgeoned by about 100,000 new jobs every year, providing young and eager workers an invaluable opportunity to secure a position in their industry.

Jobs, however, aren’t the be-all, end-all determiner of whether these young workers will remain – or even come to the city in the first place.

In San Francisco, the average tenant hands over a whopping 50% of their monthly income to a landlord, rather than the more widely-accepted 30%. Rent prices are high; in 2016, the median cost of housing for a city resident stood at around $1,700 per month.

Given that a full 65% of millennials are renters and that most in that subset will likely continue to rent in the next few years – one recent Goldman Sachs survey found that only 40% of Millennials see owning a home as a “big priority – the issue of too-high rent is a serious concern.

The cost of apartment living seems unsustainably high – what else can these young professional do, other than pack their possessions and let San Francisco’s lights and opportunities fade in the  rearview mirror?

But here’s the catch – as a veteran of the Bay Area’s real estate landscape and a believer in creative real estate solutions, I wholeheartedly believe that these reluctant leavers would stay if they had a chance to sign on for more accessible housing. Real estate investors in San Francisco need to think more strategically about how they engage with emerging neighborhoods; Millennials will stick around if given the opportunity – the trick lies in convincing them to take a chance on an area that they may not have considered before.

Consider the Tenderloin district of San Francisco.

The District isn’t one where newcomers to the city tend to gravitate towards for housing. Its buildings are older – if still retaining an echo of their 1920s-era elegance – and tend not to be as modern or upscale as those in other regions of the city. It’s easy enough to overlook its potential at first or even second glance; it’s not a place that traditional property developers would immediately recognize as an investment opportunity.

Those of us at Mosser Companies, however, have never been fans of staying within “traditional” bounds. We saw those faded, beautiful buildings and saw the chance to make an up-and-coming neighborhood to appeal to a millennial renter base that needed better housing options than the ones they had. The low cost of living made the region attractive as a Millennial-friendly investment opportunity as well; rental homes in the Tenderloin often go on the market for a fraction of the price demanded elsewhere.

Broadly speaking, our approach was – and continues to be – simple: we want to create attractive and affordable housing environments, rather than merely selling bed-and-a-bathroom units. The difference between the two lies in our scope of influence. For us, it isn’t enough to have a listing that offers little more than four walls and roof; we believe that Millennials will flock to our properties if they know they will have access to top-of-the-line housing amenities and feel at home in their up-and-coming neighborhood.

Our strategy to accomplish this is twofold: first, we would integrate cutting-edge real estate and “green” technology into older properties to make them more attractive to a younger audience, and then broaden our attention to bettering the atmosphere and health of the neighborhood and community as a whole.

The former task required us to take a closer look into the types of amenities Millennials want in their homes. Surveys show that the generation tends to prefer the convenience and accessibility of tech solutions, so we invested in IoT-powered keyless entry systems and ensured that our online portals empower tenants to access property management, maintenance, and repair teams. We also partnered with a number of third-party organizations to provide more conventional amenities such as package delivery and laundry services.

We further took note of the age group’s enthusiasm for sustainable, or “green,” living options. A recent Nielsen study found that nearly three in every four surveyed Millennials are willing to pay extra for “green” options; we took this interest to heart when renovating our properties. We now have low-flow water fixtures, energy-efficient lighting and appliances, and make a point to build bike storage facilities when we can.

All of these efforts work well to improve the appeal of our units – but they won’t necessarily breach a potential tenant’s uncertainty about the neighborhood. Thus, the second part of our strategy – community-building – comes into play.

Let’s return to the Tenderloin for a case study. In 1990, Mosser Companies acquired Central Towers – a building on one of the most rough-around-the-edges blocks in the area. At the time, the property was worth a relatively modest $9.9m and attracted few tenants – but within a few years, Mosser managed to boost both the building’s value and improve the experience it offered to renters by implementing a more efficient operating structure and providing the funds to kickstart the street-level “Adopt a Block” responsibility program. Today, the property is worth over $108m and offers a residential experience that tenants living there two decades ago could never have imagined.

Real estate investors today have a chance to give young professionals the housing options they so desperately need -and make a profit in the process. To succeed, however, these investors will need to stop thinking only about selling existing rental units and start considering what they can do to take advantage of up-and-coming neighborhoods, implement cutting-edge real estate technology, and improve the renter’s experience beyond the confines of the property itself.

If they don’t, the Millennials they attempt to attract will leave San Francisco in droves – and take their economic contributions with them when they go.

Topics

Related