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Local developer Jack Menashe believes North Portland is ripe for multifamily commercial projects.

The area has relatively low land prices and a trendy atmosphere that appeals to Generation Y – young adults in the 18-30 age range. Menashe expects an in-migration of young renters to continue and the demand for apartments to increase.

That’s why Menashe spent the last couple of years developing a mixed-use project on North Williams Avenue that will feature 72 apartment units and 4,800 square feet of retail space. The project, which is designed to receive Leadership in Energy and Environmental Design silver certification, last month went through design review. Construction of the transit-oriented development is expected to start soon.

“We looked at the demographic makeup and in-migration of the area, and Generation Y, for some reason, wants to be here in Portland, especially around North Portland, or any of the urban cores,” he said. “And that group of people wants to rent, not own.”

Menashe isn’t the only one who has recognized the trend. At the Urban Land Institute’s Emerging Trends in Real Estate roundtable last week, Clyde Holland, CEO of Vancouver, Wash.-based Holland Partners Group, said that market conditions in Portland are beginning to favor multifamily investments.

Next year, approximately 810,000 Americans – more than ever – will turn 18, Holland said. Plus, the propensity to own has declined significantly, and will continue to because of the foreclosure mess, he said.

“As negative as I’ve been through all of this, I’m bullish now, especially here in Portland,” said Holland, whose company owns and manages large multifamily communities across the entire western United States. “I mean, we saw 30,000 to 40,000 people move here last year, most of which didn’t have jobs. Those are the types of people that rent.”

These renters tend to look for smaller spaces – studios and one-bedroom units – in sustainable buildings around the urban core and near public transit, said Tim O’Brien, a partner with multifamily investment firm HFO Investment Real Estate. Portland can accommodate a flight-to-urban trend, he said.

The vacancy rate is below 4 percent in both Northwest Portland and the inner central eastside, according to the Metro Multifamily Housing Association’s fall apartment report. And even with the poorly timed delivery of large, downtown apartment complexes such as the Ladd Tower, Indigo@12W and the Cyan, the vacancy rate downtown is 4.9 percent. These buildings – all delivered during the last three years – are at least 85 percent occupied.

The urban growth boundary tends to limit new development in the region, despite low vacancy rates, but O’Brien said he’s hearing rumblings of developers wanting to start projects anyway.

“I’m getting calls from developers asking about prices per square foot, and other logistical questions,” he said. “I’ve had three of these conversations in the last week. I haven’t had that many of those conversations in the last three years.”

And the trend is evident around the U.S.

“Eighty percent of the real estate business is taking place in the top 10 Generation Y markets,” Holland said. “They are literally driving real estate.”