Generation Y in the Marketplace

PCBC | June 17, 2009 Terrye Underwood, Senior Principal

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GEN Y HAS THE LARGEST SHARE OF THE U.S. POPULATION, FOLLOWED BY BABY BOOMERS
How Many?

Gen Y: 80 Million (Boomers: 75 Million) Vast majority renting. Increasingly buying homes in 2012+ Intown I t areas, close l to t work, mixed-use environments

What are they y doing g in the RE market?

Where do they want to go?

SOURCE: RCLCO Consumer Research 2

GENERATION Y: AT A GLANCE
AT A GLANCE Who: Ages 13- 30 in 2009 (born in 79 through 96) Likes: Free content, telecommuting, everything social, the "right right fit fit," wireless Dislikes: Anonymous mass-marketing, beaten paths, restricted access Characteristics: The most connected generation in our history Constant flows of information Highly productive, but place critical importance on balancing work and life High Hi h value l placed l d on staying t i connected t d with ith f friends i d and family Hobbies: Googling, social networking, supporting a cause, creating global change Hangouts: Facebook, Mom and Dad's place, dive bars, all-age shows Tap that wallet!: $200 billion in annual earning power and d growing i
SOURCE: Iconoculture, RCLCO 3

GEN Y IS OUTWARD LOOKING AND CIVIC-MINDED

Gen Y is the most civic-minded generation to date: 61% of 13- to 25-year olds feel personally responsible for making a difference in the world; 81% have volunteered in the past year Gen Y will want these values to extend into the corporate structure of their builder or p developer 69% consider a company's social and environmental commitment when deciding where to shop; and 83% will ill t trust t a company more if it i is socially/environmentally responsible

These numbers reflect the can-do spirit we have been seeing in this population(theyre) volunteering at a level and intensity we havent seen since the 1940s (Howe & Strauss, 2005)
SOURCE: USA Weekend, 2005 and Cone, Inc. 2006

GEN Y REPRESENTS EARNING POWER OF $200 BILLION ANNUALLY AND GROWING

Generation Y ~80 80 Million Milli 30% 35% ~$200 Billion Baby Boom ~75 75 million illi 25% 40% ~$2 Trillion

Todays T d Population % Todays Population p % earn above $75,000 Earning power

Overall, it is estimated that Generation Y influences f as much as half f of f all spending in the U.S. economy Gen X earning power, by comparison, represents ~$125 billion
SOURCE: Harris Interactive and the U.S. Census 5

GRADUATES ELIGIBLE FOR THE RENTAL MARKET IN 2009; BUYING COULD ACCELERATE IN 2012
4,200,000 4,100,000 4 000 000 4,000,000 3,900,000 3,800,000 3 700 000 3,700,000 3,600,000 3,500,000 3,400,000
20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20
Number of 22-Year Olds

WAVE OF GEN Y

Higher purchasing should begin in 2012

41% of Generation Y plan to rent for at least three years

NOTE: Number of 22-year olds is based upon birth rate and does not factor in death rates and migration. SOURCE: U.S. Centers for Disease Control and Prevention; RCLCO Consumer Research 6

RCLCO GEN Y CONSUMER RESEARCH

~80 Million = Gen Y (and ~ 52 million Gen X) Conducted a national study Representative of census regions Received approximately 3,200 survey responses 50% of those surveyed were Gen Y and 50% were Gen X Studied Gen Y individuals who were 20-28 years old at the time of the survey Survey was made up of: Renters Owners Future Shoppers

INTEREST IN CLOSE-IN NEIGHBORHOODS IS HIGHEST

Location: Interest in close close-in in neighborhoods is followed by urban locations Those in the Northeast have the least interest in moving to urban locations and prefer more close-in suburban locations Most interest in cities is in the South region g to cities, most are Of those moving choosing to do it in the South Much of this is likely due to affordability issues

SOURCE: RCLCO Consumer Research 8

GEN Y WILL PAY FOR WALKABLE, MIXED-USE

Walkability: Driven by convenience, connectivity, and a y work-life balance to maintain healthy relationships 1/3 will pay more to walk to shops, work, and entertainment 2/3 say that living in a walkable community is important More than 1/2 of Gen Y would trade lot size for proximity to shopping or to work Even among families with children, 1/3 or more are willing to trade lot size and ideal homes for walkable, diverse communities Even in the suburbs the majority of Gen Y prefer characteristics of urban places, particularly walkable environments

SOURCE: RCLCO Consumer Research 9

FAMILY CHANGES AND NEEDS

Family Changes: 70% do not believe they have to move to the suburbs once they have kids Only half are confident they will need a single-family home once they have kids Improving schools is the highest community priority for more than half of Gen Y Needs: Diversity is key. Gen Y wants diversity in housing types, styles, groups of people, and household composition. Over half report that having a community and home designed to meet certain "green" objectives plays an important role in their purchase or renting decision.
SOURCE: RCLCO Consumer Research 10

GREATEST PREFERENCE FOR SINGLE-FAMILY HOMES ON SMALL LOTS

Product Types: 35% prefer a SFD on a small lot 31% prefer a SFD on a larger lot - However, given the choice between this type of home and the ability to walk but with a smaller lot, 71% choose the latter - Families will sacrifice yard, but not home quality/space 11% want a condominium 10% prefer townhomes While Gen Y prefers SFD, the majority do not yet have the resources to afford this type of product; we can expect attached housing to remain popular with this group

SOURCE: RCLCO Consumer Research 11

CHANGING CONSUMER PREFERENCES

INCREASING PREFERENCE FOR DENSE PRODUCTS
Housing Preferences United States

Preferred Housing Type Attached Housing Apartments Condominiums Townhomes Small-Lot Detached Housing (< 1.6 Acre) Large-Lot Detached Housing

Existing Preference 25.4%

Share of Future Demand 38% 14% 9% 15%

GEN Y DEMAND** 34% 13% 11% 10% 35% 31%

20.5% 54.2%

37% 25%

SOURCE: Arthur C. Nelson et. Al, Leadership in a New Era, 2006 ** RCLCO Consumer Research 2008

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LIFESTYLE AND LOCATION IS REQUIRED FOR WORK-LIFE BALANCE

Gen Y: S Sees work-life k lif b balance l or work-life k lif bl blend d as important. Theyll work from home, enroll their kids in their companys in-house day care, and enjoy portable careers Are multitaskers - theyll get the job done, and theyll probably do it in less time, but not at the expense of balance 50% will choose a less-than-ideal home if they can walk to work allows for shorter commutes and more me me time time

SOURCE: Franciscan Skemp Health Care and Gundersen Lutheran Medical Center

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AMENITIES REDEFINED; MORE FOCUS ON WORK/LIFE BALANCE

Amenities: Given the interest in community involvement and work/life balance, the amenities Gen Y values most are in contrast to much of what is being developed today: - Library; y; - Restaurant or caf; - Main street village; - Recycling center; and - Fitness center.

SOURCE: RCLCO Consumer Research 14

IMPLICATIONS
Intown areas and inner suburbs will remain on an upward trajectory Diversity, walkablity, and proximity to jobs will be keys to site selection and premiums Renters will represent a steady stream of demand Gen Y will shift toward homeownership in 2012 Product types will remain smaller and affordable and should have focus on design over size The suburbs will need to evolve to remain attractive to Gen Y More walkable areas, including new and existing town centers Master-planned communities with greater variety of product types and higher connectivity

SOURCE: RCLCO Consumer Research 15

IMPLICATIONS

How should you modify product offerings? What locations can you leverage or purchase for future development? g y your marketing g message? g How does this change What modifications can be made to current or planned communities to make this more appealing to Gen Y? How H d does thi this affect ff t your current t strategy? t t ? Are you prepared for the wave?

SOURCE: RCLCO Consumer Research 16

Generation Y in the Marketplace

PCBC | June 17, 2009 Terrye Underwood, Senior Principal