Why Good Demographics Make for Good Decisions
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
This article was updated on 7/25/2023.
Demography, the science of vital and social statistics, is one of the most accurate tools we have for understanding trends. It tells us who and where the people are, and since commercial real estate success is a byproduct of knowing one's market, understanding demographic analysis is one of the most essential factors in making commercial real estate deals that pay off instead of making costly mistakes.
Sometimes it's a no-brainer: if demographics indicate, for example, that several major corporations are opening headquarters in a particular city in the Sunbelt, it stands to reason that that area will see a rise in population among working-age adults and families. All of those people will need housing, retail, and restaurants, and property values will rise accordingly.
Demographic trends impacting commercial real estate right now include the "office-pocalypse," in which the rise of remote work during the pandemic has left office building vacancies at double-digit levels in major cities. Predictions suggest that, even as the pandemic recedes, this trend is likely to continue.
Kate Lister, president of Global Workplace Analytics, said her organization's data indicated that over a quarter of workers "will be working-from-home multiple days a week by the end of 2021." Boy, was she right.
Demographics and the Pandemic
When analyzing demographics, it's essential to try to understand not just what's going on, but why. In the case of office vacancies, the pandemic is the most obvious and immediate reason. If it were the only reason, the trend might be expected to reverse itself. But Lister's data suggests that its roots are deeper.
Even before COVID-19, surveys indicated that 80% of workers wanted the freedom of working at least part-time from home so badly that many would have accepted a pay cut; now that they've tried it, Lister believes, few will want to give it up. "The genie is out of the bottle, and it's not likely to go back in," she writes.
Demographics Help You Play the Long Game
Owners of office buildingszoning officials toward a mixed-use project? But the implications of the demographic trend go further, impacting retail and service businesses in the neighborhoods where office occupancy has fallen.
And, as always in commercial real estate, one owner's problem can be a future owner's opportunity. In a neighborhood where office use is down, other demographics, from median income to occupations, median household age, and family composition, may offer clues to what might succeed in a given location.
Are lots of people living near a property single millennial renters? Their needs and preferences will differ from those of a neighborhood dominated by families with children and sprinkled with older baby boomers. In short, if the office workers aren't going to be there, who will be? That's demographics.
Be a Trend Watcher
When analyzing the demographics of a region or a neighborhood, don't just look at this year's numbers. The United States Census Bureau recently rolled out a new website, data.census.gov, that allows you to search any state, county, city, or zip code and uncover a treasure trove of information going back to 2000.
Along with the familiar count taken every ten years, the Census Bureau conducts the ongoing American Community Survey. This goes beyond basic demographics, like age and gender. It delves into questions like occupation, education, military service, kitchen and plumbing facilities, internet use, and where an individual was living a year ago. This offers a deep dive into how households are living in a given area.
By spotting existing trends in a community, you'll be able to make a much more educated guess at what its future might look like. That helps everyone involved in a transaction: Owners with a commercial property for sale or lease can target their marketing toward buyers or tenants most likely to succeed, and investors can get a feel for a property's prospects.
Know your demographics. Spectacular successes come from development that serves the community well, but first, you have to know the neighborhood you're serving.
List & Browse Commercial Property for Free on MyEListing.com
Census data can be instrumental in analyzing an entire region, but once you've set your sights on a prospective property, you want to get granular. That's where MyEListing's demographic tool comes in.
Every listing we post includes detailed demographic data, updated annually: age, education, income, housing unit values, and more within a one, three, and five-mile radius of a given property, taking a lot of the guesswork out of your calculations. There's a table showing state and county population trends over the last two decades, so you'll know whether people are coming or going.
Visit MyEListing and get started with your commercial real estate property search today!
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