David Senden – A Whole New Set of Demographics
August 24, 2015
NEW YORK CITY—A funny thing happened to the demographic makeup of the US in the 15 years since GlobeSt.com was launched. It changed, and with that dramatic transformation came a whole new set of expectations, challenges and opportunities for commercial real estate.
Baby Boomers, Millennials and immigrants all were part of that demographic profile in 2000. Yet each of these groups is significant in ways that weren’t apparent 15 years ago. As GlobeSt.com continues its summer-long 15th-anniversary commemoration, this week we’re shifting from property types to the generations who live, work and shop in those properties—and whose concerns, preferences and sheer numbers drive many of the decisions taken by owners, developers and investors, and will continue driving them.
The oldest of the Baby Boom generation was 54 years old when the website launched, and million of Boomers had not yet turned 40. This generation numbered some 77 million as of 2011, when the first-born of the Boomers began turning 65. About 10,000 Boomers will reach that milestone birthday each day through the end of 2029, and the entire cohort is now age 50 and over, thus eligible for membership in AARP. Boomers will begin turning 70 on Jan. 1, 2016.
Needless to say, the real estate implications of this aging demographic are tremendous. “The trends in healthcare real estate support the overall trend in healthcare, which is that demand is dramatically increasing and, by 2020, healthcare expenditures will account for 20% of the US GDP,” Al Rabil, CEO of Kayne Anderson Real Estate Advisors, told GlobeSt.com’s Jennifer LeClaire in 2014. “Since demand for healthcare services is so high due to an aging population, so too is the demand for real estate that houses such services.”
Seniors housing, as well, has experienced “massive growth, with the surging population of aging seniors in the US,” Rabil continued. “The 65-plus population is projected to grow from about 40 million in 2010 to about 71 million by 2030, which represents a 78% increase and is a true predictor of the impact this segment of the population will have on real estate.”
Along with making a sizable impact, though, Boomers can also be counted on to do things differently than their parents. Not all will retire at 65—in part because of present-day economic realities coupled with longer life expectancies—and not all intend to take it easy during their approaching twilight years. These implications for sectors ranging from seniors housing to conventional multifamily and the lodging industry will be explored in more detail later this week.
As for the children of Boomers, the Millennial generation (most commonly defined as Americans born between 1982 and 2000), most had not graduated high school when GlobeSt.com made its debut, and none had earned a college degree. Yet just as Boomers were the first generation to grow up with a TV in pretty much every household, so few Millennials can remember a time without Web access, smartphones and social media. And although the youngest Millennials still haven’t gotten their high school diplomas, by 2030 this generation will comprise 50% of the US workforce, according to the Bureau of Labor Statistics.
These characteristics, along with their numbers—the cohort either outnumbers boomers or soon will, due in part to immigration—underscore Millennials’ potential impact on commercial real estate. In office, for example, Millennials’ preference for a live-work-play environment has influenced employers’ location decisions, along with shaping office design.
Yet whether it’s pigeonholing them as inner-city renters or assuming that all want to work in the TAMI sector, it would be a mistake to paint the Millennial generation with too broad a brush. “Millennials are having children,” David Senden, a principal with KTGY Group Inc., told GlobeSt.com’s Carrie Rossenfeld earlier this year. “The leading edge of this generation is in their mid-30s. Their careers are in full swing, and babies are here. No longer is the latest coffee shop or nightclub on their mind; rather, now it’s all about schools, parks and having the space to raise a family.”
Senden added that designing for Millennials is complicated because it’s becoming increasingly difficult to lump all Millennials into one group. “They’re a diverse lot,” he told GlobeSt.com. “Branders and marketers have been trying to throw a rope around this group for years, but there are 85 million of them, and like America, it’s a melting pot of cultures, desires and economic backgrounds—not to mention ages.”
Speaking of a melting pot, the US immigrant population had reached 28.4 million at the time of GlobeSt.com’s launch, nearly triple what it was 30 years earlier and a record number at the time. In the subsequent 15 years, it has increased by nearly half to 42.1 million as of the second quarter of 2015, according to the Center for Immigration Studies.
Immigration has come up frequently as a talking point among Republican contenders for the presidency, generally focusing on ways of keeping illegal immigrants from entering the country. However, the CIS notes that although the number of immigrants in the US is “now enormous,” representing about 13% of the population, “it must be recognized that most immigrants, including those from Latin America, are in the country legally. Absent a change in legal immigration policy, the immigrant population will continue to increase.”
Where immigrants of particular nationalities choose to settle, along with income and other demographics, will itself make a substantial impact on development in the years to come. Check back later this week for an in-depth discussion.