What will be the implications for real estate to huge demographic change in the next decade as Baby Boomers leave the workforce and Generation Z becomes the dominant generation? Cushman & Wakefield investigates.
The following is an edited extract from Cushman & Wakefield’s ‘Demographic Shifts: The World in 2030’ report.
Over the next decade, the world will experience a series of seismic demographic shifts. More than 693 million Baby Boomers will reach retirement age, while 1.3 billion members of Generation Z will become old enough to enter the labor force. The eldest of Generation X will reach 65 years of age, while the leading edge of Millennials will be approaching 50. The prospect of a 50-year-old Millennial seems very distant, yet it will become a reality in just 11 years.
Such changes will produce profound impacts, with the real estate sector being at the leading edge. Implications are diverse – diverging trajectories of labor force growth, an increasing war for talent, geographic shifts in outsourcing, the need for new approaches to developing and changing workplace strategy, to name a few.
Investors and occupiers will be simultaneously affected, requiring them to navigate these changes and what they mean for growth strategies into the future. There is considerable fluidity in how generations are defined and named, with little formal and agreed-upon guidance.
- are still working. There are 693 million Boomers worldwide that have not yet reached the prime retirement age of 65. That figure represents 21% of the global working age population.
- but retirement is right around the corner. By 2025, two-thirds of the Boomers will have hit the 65-year-old threshold, and by 2030 all of them will have reached this milestone.
- Boomers have money. Boomers control 70% of the US’s disposable income, with similar figures for Australia and other parts of the world.
- like bricks and mortar. Four out of five Boomers prefer to shop in-store, and 67% report that if an item they want is available online and in-store, they prefer to purchase it in-store.
- What industries benefit from Boomers retiring? Leisure travel and hobbies (golf, airlines, hotels and cruises); medical, pharmaceutical, urgent care; traditional retail, home improvement concepts, multifamily and senior living communities.
- The world talks about them because there are so many. For the entire decade between 2020 and 2030, Millennials will comprise the largest share of the workforce, representing 40% of the global working age population by the end of the period.
- Millennials care about big issues. In a global study, nearly one-third of Millennials placed the environment as their top concern, with a similar proportion believing that businesses should try to improve society.
- Who benefits from the demographic shift? Corporations that have clearly defined corporate social responsibility strategies; lower cost cities and suburbs with strong civic centers and transportation services; lifestyle service providers including gyms, childcare centres and restaurants.
- Millennials want amenities. A wave of Millennials are moving out of inner-city locations in search of space, but they are not compromising on walkability and local amenities in their location choices.
- is the largest cohort alive. Generation Z is comprised of just under two billion people globally, or 26% of the world’s population.
- is digitally native. This is the first generation to have grown up with integrated, mobile technology and expect it – and everything it touches – to be seamless.
- wants to be secure. Having grown up in the shadow of global terrorism risk and ongoing economic turmoil, they have a sharper focus on security and stability than Millennials.
- Who benefits from the demographic shift? It’s still early, but corporates with strong mentoring programs and those that adopt a technology forward approach will attract and retain Generation Z talent. Other beneficiaries are expected to be experiential retail centres, multifamily portfolios, eCommerce and last-mile delivery.
- But needs help to develop soft skills. A life grown up in the digital era has made Generation Z technologically capable, but at times, it may be at the expense of emotional and social skills.
Focus on placemaking. In an increasingly competitive world, cities will need to focus on making themselves as attractive as possible to businesses and talent alike.
Productivity gains to attract investment. Many Chinese markets are forecast to have weak demographic fundamentals but strong economic growth. These high productivity markets are likely to attract greater institutional investment.
Demographic windfalls to drive outsourcing markets. Southeast Asian and Indian cities are forecast to benefit from a large influx of Millennials and Generation Z into the workforce, supporting outsourcing operations.
Lagging cities will require a transformational policy. Some cities have demographic headwinds due to population aging which will require bold policies to counter. Occupiers and investors should focus on city trajectories and weight their portfolios accordingly.
While we recognise the importance of distinguishing between the differing demographics, we believe that understanding how we can all work together is critical. These changes won’t occur overnight; there will continue to be a mix of different age groups and expectations that have particularly different influences on real estate over the coming decade.
This exciting period provides immense opportunities across all facets of commercial real estate. However, understanding how to manage these differing expectations and the impacts they will have, both inside and outside of the workplace, will be the key to success.