By Michael G. McGuinness
One of my favorite data sources over the years has been the New Jersey State Data Center, administered by the Rutgers University Center for Government Services. Today, it’s called the Data Book Online and provides demographic, fiscal, geographic, school and political data on New Jersey’s counties, towns and legislative districts dating back to 1980.
A review of multiyear data shows how quickly New Jersey is becoming diverse. For example, the percentage of Asians and Hispanics has been significantly trending upwards since 1998, and the rate has accelerated in the last 10 years. Whereas the combined communities comprised 13.2 percent of the state population in 1998, it is now over 26 percent — nearly doubling over 20 years. Look no further than the proliferation of many new ethnic restaurants, grocery stores, churches and temples over that time.
Current and accurate data on population shifts and consumer spending enables the real estate industry, government officials and businesses to make informed choices on investments and resource allocation. The Pew Research Center’s Richard Fry (who will keynote CRE.Converge 2019 (Oct. 14-16 in Los Angeles), recently shared useful insights on national demographic trends in an exclusive interview with Bisnow:
- Immigration – As Americans have fewer children, the nation will become increasingly dependent on immigration for its population growth. In 2015, there were around 324 million Americans. Taking middling, reasonable assumptions about immigration — 1 million immigrants per year — the American population should grow to 441 million by 2065. “Now let’s suppose we switch off immigration,” Fry said. “By 2065, we would only have 338 million Americans. Without immigration, there’s very, very little population growth at all.”
- Increasing Household Size – Throughout the 20th century, American households shrank, as more young adults and their aging parents had the means to live on their own with each successive generation. Household size hit a new low right before the mortgage crisis, when it was easy to fund a home with two occupants, or even one. “When the foreclosure crisis hit, people started doubling up,” Fry said. “Household size started growing for the first time in a hundred years, and even as we recovered, it didn’t stop growing.” Americans are now much more likely to live in multigenerational homes, with children past college age or parents, a major reason why demand for new housing has been so sluggish, even as the wider economy has recovered. Developers and homebuilders would do well to create housing with space to accommodate multiple generations of families, Fry said.
- Racial and Ethnic Diversification – Currently, the U.S. is 60 percent non-Hispanic white, but sometime in the 2040s, Fry expects that white Americans will be in the minority. Young white Americans aren’t replacing themselves by having children, while other groups are doing so.
- Flight Toward Cities – Nationally, Americans are leaving rural areas behind in favor of cities. Young, educated millennials are moving downtown, a shift that has revitalized many of the urban centers that suffered during the latter half of the 20th century as manufacturing jobs moved abroad and white families fled to the suburbs.
- Postponing Children – Young adults aren’t settling down and having children at nearly the same rate as they used to. A third of Americans between 18 and 29 are living with their parents, whether they have children or not. “It’s not that they won’t ever have children, but they’re delaying household formation,” Fry said. “It’s changing the housing units they want.”
I suspect that larger households and postponement of children are attributed to the widening gap between median home prices and median household incomes. The August 2019 publication Emerging Trends in Real Estate, undertaken jointly by PwC and the Urban Land Institute, found nearly universal agreement among those surveyed that housing conditions are “challenging,” inhibiting employers who feel the pinch of inadequate (and affordable) workforce housing options. As one lender put it, “We are building 90 percent of our housing for 10 percent of our households.” Affordable housing is an increasingly scarce commodity these days as seen by the rise in homelessness, and loss of population to other states.
How are these demographic trends impacting the office sector? The economic downturn that hit the nation in 2008 and longer and healthier lifespans mean more employees choosing to work longer and delay retirement. By 2025, nearly 25 percent of the workforce is projected to be over age 55 with close to 75 percent being millennials. People in their 60s, 70s, and even 80s are deciding to stay in place full or part time. The result: five generations in the workplace: Traditionalists — born before 1946; baby boomers — born between 1946 and 1964; Generation X — born between 1965 and 1976; Generation Y, or millennials — born between 1977 and 1997; and Generation Z — born after 1997.
Companies now must design workplaces that foster comfort and productivity for people of all ages, and can’t make assumptions about what employees of different generations want, according to a recent Bisnow interview with Rivka Altman, a director of portfolio management at Invesco, and Shannon Woodcock, managing director of workplace strategy at Savills. Altman and Woodcock will speak about multigenerational office design at CRE.Converge 2019. Read more about Generations in the Workforce.
“It’s not as simple as ‘boomers want cubicles’ and ‘millennials want open office,’” Altman said. The oldest members of Generation Z are taking their first internships, and some members of the older generations are working into their 70s and beyond. Much ink has been spilled over the idea that companies need to accommodate both ends of the spectrum, giving older employees larger, private offices and making room for the loose chairs, couches and standing desks that have become hallmarks of a millennial-driven open office. That dichotomy may not conform to employees’ actual work preferences.
One thing that does appeal to all generations is the flexibility and improved work-life balance that remote work provides. Now that employees can exert some control over where, when and how they work, the physical attributes of the workplace are more important. In other words, the office must be a compelling place to work. “Workspaces are starting to become Instagrammable,” Woodcock said. Having a well-designed office has really become a social capital contest. And, with a global talent shortage of 85 million people projected by 2030, the competition to attract talent is fierce.
According to the aforementioned Emerging Trends report, the “emerging trend” for real estate demand in the decade ahead is not just for softer demand, it is for dramatically softer demand based on the projected 75 percent drop in job growth. That combined with the glut of capital suggests that careful asset selection will be critical. That’s where data, demographics and advanced analytics will come in handy.
Michael McGuinness is CEO of NAIOP New Jersey and has led the commercial real estate development association since 1997. NAIOP represents developers, owners, asset managers and investors of commercial, industrial and mixed-use properties, with 830 members in New Jersey and over 19,000 members throughout North America.
