Last week the MIT Center for Real Estate convened the MIT 2011 Real Estate Symposium engagingleaders in real estate finance, design, development and management. JoiningAvalon Bay’s William McLaughlin, AC Nielsen’s Joe Whitley and Reach Advisors’James Chung on the opening plenary panel – The People Behind the Rents,I offered four observations on how the disruptive demographics of aging babyboomers may impact the future of the real estate industry.
(1) It’s a Small World After All – Asbaby boomer income grew so did the size of their homes. Some boomerstransformed the ‘family room’ into an even more spacious ‘great room’. The ‘McMansion’ sporting a three-car garage was born to feed the boomer’s twinappetites for both large homes and multiple vehicles.
The world is smaller. That is, the number ofpeople in a household is smaller. The proportion of households with children inthe United States has dropped from 32% to 27%. Many older adults are livingalone. 40% of women over 65 live alone. With far few children than theirparents, the baby boomers are likely to have a ‘home alone’ experience in oldage.
New construction will still need to deliver onamenity and quality, but quality of space rather than quantity of space will bethe new demand of older consumers. While physical accessibility is an obviousrequirement, living alone will require even more reliance on innovations thatwill transform the home into a services platform providing connectivity andphysical features to host third party providers (e.g., home health servicesoffered by insurers or retailers) who support independence, safety and qualityliving.
As noted in a previous article, (Growing UpTogether: Walmart, Baby Boomer Lifestyles & Future Innovations inRetail) retail property developers will have to reconcile the bigbox format with a smaller world. From the design of the retail store setting tothe size of the shopping carts used, environments that are easy to access,navigate and make sense to the older consumer is the new normal.
(2) A Woman’s Prerogative –Baby boomer women are likely to live longer than their mothers and the men intheir lives. They will also demand to live better. As a group they have moreeducation than any previous generation of women and outpace men in nearly allpurchase decisions as buyers or as primary influencers. They are likely tobe providing care to a spouse, elderly parent and in-laws while providing helpto young adult children.
The future is hers – but what might she want? Threevalues for the real estate industry to consider are – social, safe and service.
Unlike men, as women age they are more likely toremain social, and for some, may even expand their social network. Places andspaces to be social will be critical. From retail settings that encourage ameeting place as much as a buying place to homes that are comfortable spaces tohost a friend.
Safety will be an important issue. Since womenare more likely to live alone and live longer with multiple chronic conditions,physical accessibility and amenities that make aging easy as well as safe willbe important to older female buyers and to their adult children who mayinfluence purchase decisions.
Likewise, services that can be brought into thehome via utilities, retailers, insurers and others will need a place in thehome to host a wide variety of lifestyle solutions. These services may rangefrom medication compliance, telehealth to simple management of what’s fresh inthe refrigerator.
(3) Aging-in-Place & Filling-In-Places – Despitethe myths of wagon trains of older boomers moving to the sunbelt in retirement,the vast majority of older adults age-in-place that is, they choose to remainin the home that they live in today. Fewer than 10% of older people ever movedto sun and sand; and, often when one partner became ill or worse, the remainingpartner moved back to family and friends to find comfort and support. The babyboomers are not showing any indication of moving in significant numbers. Caughtbetween depleted equity and comfortable memories it appears that most babyboomers will age-in-place.
Does this crush the hopes of developers? No. Itmay mean a different type of development opportunity. Rather than a futurecharacterized by acres of ‘active retirement’ housing there are likely to benew demands for retrofitted livable communities that offer the intensity anddensity of activities that offer quality living at any age. Real estatedevelopers and investors should seek to engage suburban towns to createactivity centers ‘filling in’ neighborhoods where absence of development wasonce a point of pride but is now a symbol of lost tax revenue and isolation inolder age.(4) Zoning in Mobility – Nearly 70% of Americans over age 50years old live in suburban or rural areas. These communities offer bucolicbeauty, but depend on the car for nearly every trip. America is facing acoming mobility gap in communities where large proportions of the olderpopulation will be unwilling or unable to drive. Consequently, zoning boards mayrevisit the concept of land-use exactions. Instead of offsets to mitigatedevelopment impacts on the environment, communities and small towns may requiredevelopers of ‘senior housing’ and retail properties to invest in designs thatpromote walking and in transportation services that offer alternatives to thecar