ULI: Future Real Estate to be Shaped by Affluent Immigrants, Affluent Women and Aging Boomers

(By Dale King) – A shifting demographic that will see more female executives, immigrants with disposable income, younger and older employees and retirees in the workforce and looking for jobs will have a significant impact on community building and real estate proclivities during the coming decade, says a new report by the Urban Land Institute.

Called “Demographic Strategies for Real Estate,” the study by John Burns Real Estate Consulting, LLC, identifies several strategic trends for population change and household formation that will shape real estate investment and development through 2025. These demographic drivers present lucrative opportunities for real estate professionals.

The report was sponsored by ULI’s Terwilliger Center for Housing, working with ULI’s Residential Neighborhood Council, whose members provided input for analyses of trends.

The projections include:

The continued rise of working women– Females now earn 58% of all college degrees in the US and make a higher wage than their spouses 38% percent of the time. By 2025, the number of women in the workforce will rise to 78 million, eight million above the 2015 level.
A rising number of affluent immigrants– Immigration will account for more than half of US population growth by 2025, assuming current trends continue. Contrary to some perceptions, many immigrants coming to the US are highly educated, middle- and upper-class families with substantial purchasing power.
The graying of America– By 2025, 66 million Americans will be over age 65 — 38 percent more than in 2015. This will create rewarding opportunities for customer segmentation, given the varied needs and lifestyles of younger retirees versus older ones. The surge in retirees will also create more opportunities for workers, driving incomes up for many occupations.
Young adults driving household formation– Forty-four million people age 18-to-27 born in the 1990s will lead the majority of new household growth, though forming households more slowly than their predecessors. Fourteen million households are anticipated by 2015.

“This research reaffirms the extraordinary impact that demographic shifts have on real estate investment and development decisions,” said Robert Bowman, chairman of the blue flight of ULI’s Residential Neighborhood Council and president of Charter Homes & Neighborhoods in Lancaster, Pa.

“Being successful in this industry means being on the front end of trends, thinking about what those trends mean for the long-term and being able to correctly anticipate how and where people will want to live and work in the years ahead. Those who understand major demographic changes will have a competitive edge.”

“By breaking the generations down into easier to understand groups, we think we have created a great tool for real estate executives,” said John Burns, chief executive officer of John Burns Real Estate Consulting. “Government policies, economic cycles, new technologies and shifts in social acceptability have driven massive shifts in real estate demand over the decades.”

The report also predicts that despite the continued revival of urban downtowns, the suburbs will draw about 79 percent of the coming wave of new households as younger families seek so-called “surban” (a termed coined by John Burns Real Estate Consulting) communities that combine the best of urban and suburban living.

Also, many will choose to rent rather than own homes, pushing up demand – particularly for single-family rentals.

The report also anticipates changes in the real estate landscape, among them:

More retail stores will be transformed into places that sell experiences rather than goods, and more development will combine housing and retail to satisfy consumer demand for places that offer convenient, car-free shopping.

Renters will comprise 58% of the net new number of households.

As those born in the 1980s move into more senior management roles and start families, many will move from urban cores to the suburbs to live in areas with good schools, but which are also near employment hubs, entertainment and recreational sites.

The economy’s de-emphasis on home ownership will be reflected in soaring demand for rental units. Well over half of the 12.5 million net new households created in the next 10 years will be rentals. Home ownership will decline, with the national rate expected to be 60.8% by 2025, the lowest point since the 1950s.

The southern parts of the US where 42 percent of Americans currently live will receive 62 percent of the household growth over the next decade. The exodus will continue to increase the need for affordable rental housing, townhomes and small-lot detached housing.

Municipal leaders will continue amending zoning regulations to encourage mixed-use, pedestrian-friendly development that accommodates the preferences and needs of new households.

The report is based on several economic assumptions: that the economy will slow in the next few years and achieve 2% average real GDP growth over the decade; the influx of immigrants will remain at about 1.2 million per year; there will be no significant changes to federal entitlements such as Social Security and Medicare; rising college tuition costs and student debt will continue to delay marriage and childbirth; life-extending technology will allow women to have children later in life and allow older adults to remain active; slightly higher mortgage rates will make homeownership more expensive and rents and home prices will rise slightly faster than incomes each year.