There’s a huge construction boom coming and baby boomers will be behind it. The big generational bulge of the 20th century hasn’t finished exerting its outsized influence yet, and commercial real estate will continue feeling its weight in the next quarter century.
“We’re an aging population, so in 25 years there’s going to be a heavy focus on medical-related facilities,” said Kenneth Riggs, president and CEO of Real Estate Research Corp. Riggs also predicts a shift back toward affordable, multi-generational households that will translate to increased multifamily residential properties, particularly in close proximity to mass transit.
In seven years boomers will turn 75, a magical number in one way, said Linneman, because that’s when people usually begin moving into senior housing. When this huge and demanding demographic is ready for the next stage of their lifestyle, rest assured: “It will explode,” he said. “Right now senior housing is a food group in real estate, but it’s like vegan or something, not that established. In 25 years it will be a major food group.”
If there’s one thing the experts are clear about, it’s that our world will be significantly more urbanized by 2039. There will be a rise in the number of mega-cities – urban areas with more than 10 million inhabitants.
Baby boomers will be part of that phenomenon. Many empty-nesters are attracted to the manageable charms of the city. But it’s the desire of Gen X, those born in 1966-1976, and Gen Y, those born in 1977-1994, cohorts to live, work and play in a compact area that’s largely fueling the trend. Multifamily residential stands to gain, but companies keen to attract young, educated talent are paying attention, too, and positioning themselves accordingly.
“Some businesses today consider location even more important than compensation in recruitment efforts,” said Rick Cleveland, a managing director at Cushman & Wakefield. “That’s driving a lot of the trend toward urban areas.”
That doesn’t mean that any old building on any city block will suffice for the worker of 2039. “The features that older-generation office spaces have, in terms of locations and amenities surrounding or in the facility, don’t work for the new-age tenant,” said Sicola, who points to companies in Manhattan that are abandoning midtown for the west edge of the island and buildings that can be retrofitted for open infrastructure.
“For baby boomers, it was ‘live to work,’ but Gen Xers are working to live. They like to take breaks, have fun. Incorporating that into the workplace is critical,” Cleveland said.