Demographic Revolution: The Reshaping of U.S. Workforce and Its Impact on Commercial Real Estate
MyEListings' markets and economics editor and creates content about global macro events and their impact on US commercial real estate.
In recent years, we have witnessed substantial changes in the demographics of the U.S. workforce. Three major shifts - an aging population, the growth of the millennial generation, and the increasing diversity of the workforce - have been reshaping the workplace and the commercial real estate industry.
The Aging Workforce
The U.S. population is getting older. According to the U.S. Bureau of Labor Statistics, the number of people over the age of 65 is projected to grow by 50% between 2010 and 2030. Meanwhile, the number of people under the age of 18 is only expected to increase by 10%.
What does this mean for the workforce? Simply put, it means we`re looking at a smaller pool of younger workers to replace retiring baby boomers, arguably the most highly skilled cohort in history. This demographic shift is affecting the types of commercial real estate in demand. An aging workforce means a higher demand for senior housing and assisted living facilities. It means more healthcare facilities and fewer movie theaters. And it ultimately means a reliable skills transfer mechanism that enables millennials and Gen Zers to more easily transition into roles formerly held by boomers.
The Millennial Influence
Another significant shift is the emergence of millennials as the largest generation in the workforce. Millennials bring unique needs and preferences to the workplace, influencing the landscape of commercial real estate; we see this reflected in the adoption of remote work, coworking spaces, and the popularity of online-centered businesses.
Millennials tend to value flexibility and mobility. They prefer working in collaborative environments over traditional office spaces. They are driving the demand for flexible office spaces and mixed-use developments that offer a variety of amenities, which are aimed at providing a better work-life balance.
The rise of co-working spaces is one observable trend fueled by millennials. These spaces offer a collaborative work environment and are gaining popularity among this mobile generation of workers.
Workforce Diversity
Lastly, the U.S. workforce is becoming increasingly diverse, both in terms of race and ethnicity, and gender, which plays well with millennials, as they tend to be more socially-conscious as a cohort. This shift presents both opportunities and challenges for businesses.
Organizations are recognizing the importance of an inclusive and welcoming workplace culture. They understand that embracing diversity can bring innovative ideas, perspectives, and approaches that benefit the business through better problem-solving. This recognition, in turn, is driving demand for more diverse office space designs and amenities. Offices are transforming from permanent, fixed locations workers were forced to commute to lest they lose their employment, to semi-autonomous hubs for ad-hoc activities. As such, they are likely to shrink from their current sizes as leases are renewed in the coming years.
The Impact on Commercial Real Estate
So, what do these demographic shifts mean for commercial real estate? Essentially, they`re leading to a demand for more specific types of commercial properties.
Developments that combine residential, retail, and office spaces are becoming increasingly popular, particularly among millennials. These mixed-use developments provide a convenient, walkable lifestyle that this generation values.
Similarly, diversity in the workforce is leading to a demand for office spaces that are designed to be not just inclusive and welcoming, but tactical and effective. This could mean creating quiet spaces for focused work, communal areas for collaboration, or facilities like prayer rooms or nursing rooms for diverse employee needs.
Summation
The evolving demographics of the U.S. workforce are having significant implications for commercial real estate developers and investors, as well as for the economy as a whole. When the Boomer generation entered the workforce in the late 1960`s, it depressed wages as a function of its enormous size, prompting more women to enter the workforce, which depressed them further. Boomers have effectively forced society and the economy to be rebuilt in its image; and as they retire and ultimately expire, they will bequeath to millennials, a generation even larger than the boomers, some $80 trillion in wealth. By staying attuned to these shifts and adapting strategies accordingly, millennials can make informed decisions that yield positive results.
As the U.S. workforce continues to age, become more diverse, and millennials shape not just workplace culture, but at least as much of the economy and society as boomers have, we can expect to see further changes in commercial real estate trends, particularly versus other countries, none of which produced a millennial generation as the US did. Developers and investors who can anticipate these changes and respond proactively will be the ones who succeed in this rapidly evolving landscape.
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