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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   June 2016

Courting the Hipster

This trendsetting generation is creating opportunities for urban property owners

Hipsters may be tough to define and even tougher to understand, but real estate and commercial mortgage professionals ignore this large group at their own peril. Whatever their quirkiness, this is a group that is dedicated to creating and reshaping urban living, and they represent the backbone of a new urban revival.

The hipster segment of the real estate market is large. Because many hipsters are in their 20s and 30s, they are often categorized as millennials — now the nation’s biggest demographic group. The two terms, however, are far from interchangeable. What’s more, individuals don’t always age out of being a hipster.

Although there are several economic subsets of those commonly called hipsters, the core of the group is made up of young, affluent and industrious city residents, making them a highly attractive demographic niche to capture in the real estate marketplace. That makes understanding what motivates hipsters important to originators seeking to target the commercial property market, because hipsters represent both business customers and potential business owners.

It is difficult to define this group, however, partly because hipsters themselves resist definition. To mortgage-industry marketing professionals, they can be thought of as urbanites who set the latest trends in fashion, art and music, and think of themselves as independent-thinking  members of a counterculture.

An elusive audience

More than any other demographic group, perhaps, hipsters balk at traditional advertising and marketing efforts. Because they stream entertainment offerings online, they don’t generally watch traditional TV advertisements. For them, digital music-streaming sources (as well as low-tech vinyl) have replaced the radio. Hipsters treat advertisements of nearly every form with the same aversion that most people reserve for telemarketers.

How do mortgage professionals target a market segment that refuses to be labeled and shuns any marketing efforts that appear to be marketing efforts? The answer to that question lies in looking beyond the hipster’s androgynous hairstyles, distressed jeans and fedoras, and attempting to understand the ideals they embrace, the products they value and the neighborhoods they have, to varying extents, transformed.

They lean toward creative reuse of old or discarded furniture (known as “upcycling”); brands with authentic  and compelling back stories; low-tech devices such as record players, typewriters, and rotary phones. On the other hand, Hipsters rely on technologically advanced devices to keep them connected to the world. They are environmentally friendly, cause-driven and are willing to spend on products and living spaces that are environmentally sustainable.

In terms of commercial real estate occupants, hipsters  favor small coffee shops over well-known chains; farmers markets and organic groceries over traditional supermarkets; and vintage or thrift-shop clothing over designer brands. They embrace the idea of food trucks and shun chain restaurants. Commercial real estate owners that attract such businesses, also attract hipsters, just as an influx of hipsters changes the commercial real estate mix.

Cities reshaped

One thing is for sure: Hipsters are capable of changing the urban landscape. Among the examples of the group’s economic and community-changing clout is Brooklyn, a once-neglected borough that has been reshaped into a trendy destination and one of the most sought-after areas to live in New York City.

Britain’s Daily Mail noted the transformation this past fall, when it published a story about what it called “the hipster takeover.” of Brooklyn. As for the commercial real estate mix, the newspaper trumpets Brooklyn’s transformation over the past five years into a trendy hipster magnet.

The gentrification has not eliminated the living spaces and businesses that defined the borough for decades, but it has changed  the look and feel of the place. Commercial retail spaces include retro bowling alleys or vintage clothing shops alongside long-existing ethnic restaurants. In the Greenpoint section of the borough, a produce company operates a vegetable farm on a warehouse roof, and unsightly broadcast towers have been replaced by a new park.

Spaces combining retail shops with apartment
living also are a magnet for the hipster class.

In Los Angeles, the commercial mortgage business is becoming aware of similar communities that have surfaced in the Silver Lake, Highland Park, Echo Park, Venice, Abbot Kinney, Hollywood, Los Feliz, and Chinatown areas. These communities have several noteworthy similarities. They are replete with farmers markets, one-off coffee shops, and public transit; and promote the arts and a fashion-forward lifestyle (without outwardly claiming to do so).

A great test case of hipster revivalism is taking place in Detroit, where efforts to attract new residents are showing some success. Detroit is still a city in trouble, but a fledgling hipster resurgence in Detroit’s downtown area is one of the few feel-good stories to come out of the Motor City in the last couple of years.

Among the initiatives designed to revitalize the city is a program called Live Downtown, run by a group of Detroit businesses that offer employees incentives — such as rent and downpayment assistance — to move into multifamily units or to buy homes in the city’s downtown area. To attract new residents, the program advertises hipster-friendly amenities such as Greek, Cuban and other ethnic restaurants; grocal (that’s hipster for grown local) food from farmers markets; and clothing shops featuring trendy Detroit-themed apparel.

Finding the mix

A number of disparate factors must come together to attract the residents, who attract the businesses, who attract the investors that make for a healthy commercial mortgage business. Detroit’s backers are hoping that one significant element of that mix will be Whole Foods, which caters to hipsters and others desiring organic grocery offerings. The store in Detroit  is an experimental market, designed to serve residents of distressed urban areas.

Another Detroit hipster attraction includes shipping-container condos in Corktown. This novel idea involves transforming big metal shipping containers into unique and well-equipped living spaces. Although shipping-container homes are not much cheaper for developers to build, construction time is significantly less than with more traditional dwellings. What’s more, they are new and innovative, have a sustainable upcycle element and are part of the movement to revitalize Detroit.

Elsewhere in the city, developers have had some success painting building exteriors with large polka dots, or decorating an entire building with discarded objects — as was done with the Heidelberg project, an open-air art community. As a general rule, if you own commercial property in Detroit, and you can think of something crazy, yet functional, that hasn’t been pursued previously, you might be successful in attracting trendsetting hipster tenants.

It doesn’t have to be a large development like a shipping-container apartment complex. In fact, you could even start with purchasing a Detroit home for as little as $500. It should be noted that these properties have long been vacant and, as such, are far from move-in ready, but even with rehab costs of $30,000, they are still a bargain if they can be rented when completed.

Rehabilitation, rather than the construction of new, more modern structures has been the norm in the city. As a result, multifamily buildings emphasize character and authenticity, and are likely to appeal to those who reject multifamily housing that feels too modern or sterile.

For this reason, it’s important to consider whether it’s possible to renovate space from a city’s industrial past, keeping the essential charm of the building, while modernizing the inside to provide affordable one-bedroom rentals that appeal to those seeking more modern amenities. Other hipster-friendly amenities might include rainwater buckets, day-lit rooms, chalkboard walls, upcycled décor in community spaces and any features that promote environmental sustainability.

Spaces combining retail shops with apartment living also are a magnet for the hipster class. Where zoning regulations allow it, or government incentives promote it, property owners have converted some industrial space into affordable loft apartments and mixed-use retail space. Once completed, these hipster-focused projects can require a bit of marketing finesse on the part of owners seeking to broadcast their appeal without compromising their hipness.

•  •  •

It can be difficult to identify the next real estate marketplace that is going to be hip before everyone knows it’s hip. Instead of trying to foresee the next real estate trend, it may be wise as a commercial mortgage broker to take a cue from the hipsters, and focus on assuring that the clients you serve can find and finance the unique commercial spaces that appeal to them personally.


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