We talk about baby boomers and millennials a lot when exploring trends in CRE, this is due by and large to their sheer numbers and buying power. Comprising a combined 61% of the population, their preferences hold a lot of sway on the economy, market trends and commercial real estate industry.
By shifting the focus away from property types and onto the types of generations who live, work and shop in those properties, we can gain new insights and examine possible trends for the coming years.
Taking this approach to examining the market has become even more important in recent years as shifting demographics mean big changes for the commercial real estate industry.
Let’s take a moment today and look at Baby Boomers.
Born between the years 1946-1964 and representing 26% of the US population at the end of 2014, Baby Boomers (about 75 million people) are a major force in the world and US economy.
With that much buying power, wise investors are examining what boomers need, want and do.
“The boomers have the most disposable income in the system and will for a number of years. There are more millennials, but they don’t have the assets of the boomers,” said Rodney Johnson in an article by US News.
So not only does this generation have the sheer numbers to make them a powerful force in the economy, they have the money to back up their numbers as well.
Let’s take a look at a few baby boomer trends that will have the largest impact on the commercial real estate industry in the coming years.
First, boomers want walkable neighborhoods. Most baby boomers have spent half of their lives in the car commuting to work, ferrying children to dance lessons and soccer games, and now many of them are harking back to their earlier years when they lived on a block with a grocery store down the street and a restaurant on the corner.
Second, boomers love to travel, but are still very budget conscious. When they go out to eat, casual restaurants are their venue of choice. However, states Johnson in the same article by US News, “Boomers like to go out, but fast food is not where they are. They want a little cache, but still in a modest price range.”
Lastly, and this is the one that will be shaking things up across the commercial real estate industry, Baby Boomers are simply getting older. The youngest of their generation is now age 50 and over, and the oldest will begin turning 70 in 2016. According to GlobeSt.com, the senior population in the US is “projected to grow from about 40 million in 2010, to about 71 million by 2030.”
This large aging generation has many implications for the commercial real estate industry, but perhaps the biggest of which is going to be the increased need for the health care services, which in turn will drastically increase the need for commercial real estate to house those services over the next several years.
Check back next month when we explore the boomers younger, but equally as powerful counter part, the Millenials.