The suburbs are becoming cool again — as long as they resemble inner city downtowns.
What's happening: As millennials settle down, have kids and look for cheaper houses and good schools, they're migrating out to the suburbs — and creating a different type of live-work-play district that developers are calling "hipsturbia."
"The people who are thriving in the knowledge economy want walkable, mixed-use, interesting environments. They want the village square experience. At the same time, they want affordable housing."— Andy Lusk, partner at Lionstone Investments in Houston, at the Urban Land Institute conference
The big picture: Suburban growth slowed down in the aftermath of the financial crisis. Millennials just graduating from college headed to big cities, where the jobs concentrated. Now, they're in a different stage of life, priced out of many cities and, thanks to the good economy, have more location flexibility.
- Suburbs with good jobs, relatively easy access to nearby city centers and moderate weather are growing twice as fast as the closest cities, per census data.
- These suburbs and smaller metros will see clusters of dense, mixed-use developments, where people may rely more on public or shared transportation.
- That's driven in part by the massive student loan debt that has pushed home-ownership later in life for younger generations, PwC partner Mitch Roschelle noted at last weeks' Urban Land Institute conference. "Especially with student debt, do you really want a car payment?"
"Millennials are people too. There was this idea that theirs was going to be a fundamentally different way of living that was going to last forever. Turns out it's impossible to live in New York City with three kids."— Hilary Spann, Managing Director of Real Estate Investments for CPPIB in New York
It's not just young couples and families spurring the suburbs to evolve. Baby boomers and empty nesters are opting to stay in the suburbs and also pushing to make them more hip with recreation, retail and restaurants. (Brew pubs, coffee shops and yoga studios seem to be bare minimum requirements.)
What's happening: Major cities including San Francisco, Chicago and New York serve as anchors for smaller communities that can be dubbed "hipsturbias," according to the Urban Land Institute.
- Universities are often key to bringing in a constant supply of young people and employers, who are looking for that talent pipeline often found in urban downtowns. This is true of Northwestern in Evanston, Illinois, Arizona State University in Tempe, Arizona, and Stanford in Silicon Valley.
- Near Atlanta, Decatur and Alpharetta are among those trying to fit the formula.
- Around NYC, the communities of Yonkers and New Rochelle fit the bill, as do the New Jersey towns of Hoboken and Summit.
Flashback: In early 2013, a NYT story famously coined the "hipsturbia" term when young creatives fled Brooklyn's growing affluence for communities like Dobbs Ferry or Tarrytown. It's now happening more in other cities as the younger cohort of millennials move into the next stage of life.
The bottom line: The "back to the 'burbs" trend won't happen across the board, and big cities will still attract young post-millennials. But suburbs with the right downtown-mimicking attributes can expect renewed attention from real estate developers and investors.
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