Demographic Strategies for Real Estate

44 Pages·2016·3.06 MB·English

Prepared for:
About the Urban Land Institute
The mission of the Urban Land Institute is to provide leadership in the responsible use of land and in creating and sustaining thriving
communities worldwide.
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● Bringing together leaders from across the fields of real estate and land use policy to exchange best practices and serve community needs;
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disciplines. Professionals represented include developers, builders, property owners, investors, architects, public officials, planners, real estate
brokers, appraisers, attorneys, engineers, financiers, academics, students, and librarians.
About the ULI Terwilliger Center for Housing
The ULI Terwilliger Center for Housing conducts research, performs analysis, and develops best practice and policy recommendations that reflect
the land use and development priorities of ULI members across all residential product types. The Center’s mission is to facilitate creating and
sustaining a full spectrum of housing opportunities—including workforce and affordable housing—in communities across the country. The Center
was founded in 2007 with a gift from longtime ULI member and former ULI chairman J. Ronald Terwilliger.
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Reproduction or use of the whole or any part of the contents without
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Recommended bibliographic listing:
Burns, John, Chris Porter, and Ken Perlman. Demographic Strategies for Real Estate. Washington, D.C.: Urban Land Institute, 2016.
ISBN: 978-0-87420-395-0
ii John Burns Real Estate Consulting LLC, 2016
About John Burns Real Estate Consulting
John Burns Real Estate Consulting LLC provides independent research and consulting services related to the
U.S. housing industry, helping executives make informed housing industry investment decisions.
John Burns founded the company in 2001 because he saw a need for better analysis on the housing market. The
company has grown to a highly passionate team of research analysts and consultants in offices across the country,
who work together to provide the most trusted source of U.S. housing analysis.
The company seeks to enable the profitable development of the best places to live in the world through great
research, helping its clients identify the best risk-adjusted investment opportunities through monitoring their
markets. The company's diverse experience and broad exposure to business sectors and markets means that it
can deliver valuable perspectives to help clients set goals and create a plan to achieve them.
John Burns Real Estate Consulting LLC, 2016 iii
Authors ULI Project Staff
John Burns Stockton Williams
Chief Executive Officer Executive Director
John Burns Real Estate Consulting LLC ULI Terwilliger Center for Housing
Chris Porter James A. Mulligan
Chief Demographer Senior Editor
Kenneth S. Perlman Laura Glassman, Publications Professionals LLC
Principal Manuscript Editor
Betsy Van Buskirk
Creative Director
Craig Chapman
Senior Director, Publishing Operations
iv John Burns Real Estate Consulting LLC, 2016
PREFACE
The Urban Land Institute Terwilliger Center for Housing has long produced and sponsored industry-leading
research on the demographic trends shaping real estate development and land use. From our biennial Housing in
America reports to last year’s America in 2015 survey, we believe that actionable intelligence on the ways American
society is evolving is critical for real estate decision makers in all areas of the business.
Many of those decision makers are active in ULI’s extensive and growing member networks, such as the ULI
Product Councils. We are very pleased to partner with one of those councils—the Residential Neighborhood
Development Council (RNDC) (Blue Flight, chaired by Robert Bowman, president of Charter Homes and
Neighborhoods)—to sponsor this report, Demographic Strategies for Real Estate.
John Burns Real Estate Consulting produced the report with input from RNDC members. The report brings a fresh,
contemporary perspective to the key demographic shifts playing out with increased speed in our country and
identifies what real estate companies need to understand to capitalize on them. We hope the report will spark new
insights among leaders in all product types of real estate.
Stockton Williams
Executive Director
ULI Terwilliger Center for Housing
John Burns Real Estate Consulting LLC, 2016 v

EXECUTIVE SUMMARY
The demographic research presented in this analysis has wide-ranging implications for every
discipline of the real estate community. We encourage readers to evaluate this information critically
and use it as a means to enhance their business strategies.
• Surban™ developments will replace shopping centers: Society’s shift toward enjoying experiences
more than purchasing goods will continue to move retail stores toward selling experiences rather than
selling goods. Because both consumers and cities want retail that is walkable from housing, retail and
residential developers should work closely to create cohesive developments to satisfy this evolving
consumer. An 86 percent surge in household formations to 12.5 million households over the coming
decade in comparison with the prior decade will drive purchases in all stores that cater to new households,
particularly renters, who will constitute 58 percent of the net new number of households. Stores and
services catering to older buyers will flourish too, thanks to a 38 percent surge in the country’s population
65 and older from 2015 to 2025.
• Suburban office demand designed for flexible work lives will return: The 1980s Sharers,
currently 26–35 years old, will soon move into senior management roles. They have already formed most
of their households but have delayed marriage and childbirth more than any generation before them. The
coming transition to family mode will cause many of them to move to the suburbs, a trend that is contrary to
what has been occurring during the last decade. This rise in surban™ living will cater to their desire to live in
good school districts with plenty of things to do near work and home. Female executives will play an
increasingly prominent role in office space selection, given that women earned 58 percent of this
generation’s college degrees. These inventors of the sharing economy will be far more willing to share
space and e-commute (there is no more “tele-”) too because it is financially smart and offers them the
flexibility they want. Expect fewer square feet per employee as more companies transition to a hotellike
atmosphere where people “rent” a desk for the day.
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EXECUTIVE SUMMARY
• Housing rental rates will surge over the long term: Although a few overbuilt submarkets garner
much of today’s attention, 7.3 million of the 12.5 million net new households created over the next decade
will rent. The sharing economy continues to deemphasize owning, so we expect more and more
households to rent and current homeowners to become renters sooner than usual late in life. Because
heavy retirement will create more competition for good workers, we also expect wages to rise, resulting in
better raises for many people. More income will allow for higher rents.
• Southern suburban migration will continue: The increase in population of those in their 20s over
the last decade will almost certainly result in a surge in population in their 30s over the next decade.
Affordable markets in pro-growth states will continue to attract young families. The southern regions
where 42 percent of Americans currently live will welcome 62 percent of the U.S. household growth over
the next decade. Rental housing, townhomes, and small-lot detached housing should continue to
experience increased demand as today’s young adults begin their families.
• Municipalities can assist successful growth: Governments have always strongly influenced
housing trends, and government laws and investments at the federal, state, and local levels changed
society substantially. State government policies favoring low income tax have shifted population growth
south, which is another reason we anticipate the southern states will see substantial growth in the coming
years. Local government redevelopment investments have revitalized urban areas, and the most astute
suburban municipal leaders are taking note and zoning areas of their communities for a mix of retail,
housing, and jobs to reinvigorate themselves. Suburbs of all kinds will capture more than 79 percent of the
coming wave of household creation as the 1980s Sharers and 1990s Connectors start families, shop for
homes, and seek high-quality schools.
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REDEFINE THE GENERATIONS BY DECADE BORN
Traditional generation definitions can be unwieldy and difficult for comparison. Defining generations
by decade born groups people into similar life stages, making analysis far more relevant.
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GENERATIONAL CLARITY Each decade led a significant shift in society.
2015 U.S. Population by Place of Birth
We gave the generation associated with each
decade a nickname drawn from a major
contribution it made to a societal shift.
The labels describe something that makes each
generation great and unique, and a way in which its
members led societal shifts that transformed consumer
spending.
We do not mean to imply that other generations have
not exhibited these same traits or that such labels sum
up entire generations.
The names for each generation simply provide a
convenient—and we hope catchy—shorthand that
points to a notable demographic trait and makes the
decennial generations easily identifiable.
The chart on this page should be required for all
demographic discussions.
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