Demographic Shifts Have Long-Range Implications for CRE

By Paul Bubny

The demographic shift in the workplace is as far-reaching as it is long-range, and occupiers, investors and policymakers alike need to wrap their minds and arms around the implications and opportunities.

That’s among the topline conclusions of a global report from Cushman & Wakefield, examining the different approaches to work and lifestyle by Baby Boomers, Millennials (a/k/a Generation Y) and the up-and-coming Generation Z.

“Changing demographics will drive the pace of growth in cities around the world,” said David C. Smith, head of Americas occupier research at Cushman & Wakefield. “Global gateway markets will continue to attract high-quality workers, while emerging markets will need to establish themselves as ‘places’ to attract talent and in turn create the greatest real estate opportunities for occupiers and investors alike.”

Cushman & Wakefield compared labor force growth and GDP growth of more than 137 cities worldwide. For growth overall, the world’s top-performing cities are located in Southeast Asia and India, Cushman & Wakefield says.

Leading the way for “high-productivity” cities–those where GDP growth is outpacing growth in the working-age population—is China. Most cities in Europe and North America will grow more slowly on a percentage basis and are accordingly ranked as low-productivity or lagging markets for economic and real estate growth.

However, while individual cities and countries may have their own demographic trajectories, Cushman & Wakefield says the differences are more “inter-generational than international.”

Take the Boomers, for example. The report notes that their influence in the workplace is already ebbing, even if they don’t always acknowledge the fact, and the youngest of the generation will be age 65 by 2030. Although not all Boomers are inclined or economically able to stop working on the usual timeline, eventually they’ll retire—even as there’s still a global Boomer population of nearly 700 million in the current workforce.

When they do, says Cushman & Wakefield, they’ll be more inclined to spend, and better able to do so, than Millennials are at present. However, the report notes that “Millennials are expected to have the fastest growth in net wealth over the 2020 decade—so perhaps despite a tumultuous start to adulthood, their overall economic prospects still look promising.”

Now and in the future, though, neither Boomers nor Millennials represent a lasting source of demand, Cushman & Wakefield says. That source would be Gen Z, only now coming into the workplace but currently the world’s largest population cohort at just under two billion globally.

However, the report makes clear that despite a few similarities, including tech savviness, Gen Z shouldn’t be mistaken for a continuation of Millennials. “Gen Y and Gen Z workers, to some extent, have similar workplace preferences no matter where in the world they live, but the two generations also differ in many ways,” said Kevin Thorpe, chief economist and head of global research.

For example, Thorpe said, “workplace strategy will need to account for an ever-increasing array of requirements to meet the needs of tomorrow’s professionals. Understanding these generations’ values, how and where they want to work, and their inter-personal strengths and weaknesses will lay the foundations of securing the best talent available.”

For comments, questions or concerns, please contact Paul Bubny