ULI: Demographics Present ‘Lucrative’ Real Estate Opportunities

More female executives, more affluent immigrants and other demographic changes will change communities, presenting lucrative opportunities over the next ten years, the Urban Land Institute and John Burns Real Estate Consulting said. 

The Demographic Strategies for Real Estate report identified demographic and household formation trends that will affect real estate investment and development through 2025. 

Changing gender roles represent the biggest demographic change, the report said: “Women continue to have children later and alone. Both men and women stay at home more to raise the kids, a trend that started around 9/11.” 

ULI/JBREC noted that women now earn 58 percent of all college degrees and they earn more than their spouses 38 percent of the time. By 2025, the number of women in the workforce will likely rise to 78 million-8 million above last year’s level–the report said.

By 2025, 66 million Americans will be over age 65, a 38 percent jump from 2015. This creates customer segmentation opportunities given the varying needs of younger retirees compared to older ones, the report noted. “The surge in retirees will also create more opportunities for workers, driving incomes up for many occupations,” it said. “[Real estate] companies that accurately tailor their products to 66 million Americans over the age of 65 in 2025 will profit.”

Young adults will also drive household formation, the report said. More than 44 million 18-to-27-year-olds born in the 1990s will lead most new household growth over the next decade. Despite forming households more slowly than their predecessors, this younger generation should create 14 million new households by 2025, the report said.

ULI/JBREC predicted that more retail stores will be transformed into places that sell experiences rather than goods and more development will combine housing and retail to satisfy demand for places that offer car-free shopping. The report noted that an 86-percent surge in household formation in the coming decade will drive retail activity, particularly purchases by renters, who will comprise 58 percent of net new households.

Suburban office demand will return, the report said. ULI/JBREC predicted that as people born in the 1980s move into more senior management roles and start families, many will likely move from urban cores to suburbs to live in areas with good schools near employment hubs and entertainment and recreational amenities. “They will be willing to share space and work remotely,” the report noted.

In addition, housing rental rates should “surge” over the long term, the report said: “The sharing economy’s de-emphasis on ownership will be reflected in soaring demand for rental units. Well over half of the new households created over the next decade will rent, including those who have never owned, and those making the switch from owning to renting as they age.” Homeownership will likely decline as a result, the report said; the national rate could fall to 60.8 percent by 2025, the lowest point since the 1950s. 

The southern U.S., where 42 percent of Americans currently live, should receive 62 percent of U.S. household growth in over the next decade, the report said. Demand will continue to rise for affordable rental housing, townhomes and small-lot detached housing.