How global demographics drive global real estate opportunities

What factors will drive real estate investment opportunities and where will they be? Follow the money and people! When economies and demographics shift, real estate opportunities emerge. This is the first in a series of articles on demographics and real estate. It covers the drivers of global demographics that are likely to generate several types of global real estate investment opportunities.

Here are some highlights from my paper, Follow the money — and the people.

Five demographic drivers

Five drivers of global demographic change are likely to stimulate real estate investment opportunities.

1. Population versus wealth: Real estate opportunities arise from the combination of economic growth and population growth.
2. Growth versus change: Slow global population growth in large economies means that many opportunities will be driven by shifts within those economies.
3. Migration: Net migration usually reflects seeking of opportunities and stability.
4. Aging: Real estate needs will likely shift as dependency intensifies.
5. Income: Wage and labor cost escalation has eroded China's former status as the world's leading low-cost manufacturer, which is contributing to global supply chain diversification.

Real estate investment opportunities

Here are the types of investment opportunities that we expect for global real estate based on the drivers.

• Wealth and migration together multiply opportunities
  Places with higher wealth tend to foster positive migration, which in turn drives more diverse investment opportunities.
• Seniors are driving property demand in higher income economies
  Swelling senior population means surging demand for senior housing, medical office, and life science.
• One roof, multiple generations
  Rising dependency, weakening affordability and immigration could spur multigenerational housing in wealthier countries.
• Live-work solutions
  Rising dependency of seniors requires workers to double as caregivers, reinforcing the need for work flexibility and hybrid work environments. These needs will likely reinforce the trend toward urbanization as work opportunities concentrate within cities.
• Housing market to experience less growth, more churn
  Expect home sales in advanced economies to be affected by competing trends — slower population growth rates will moderate the pace of home sales, whereas wealth transference from older seniors to younger generations may spur home sales and related purchasing.
• New math means new configuration of global supply chains 
  China's labor cost escalation and population reduction is compelling a gradual yet imperative diversification of production activity to other countries.

Where we see real estate opportunities

While each driver is impactful in isolation, it's the interaction of these drivers that produces a fuller range of potential real estate investment opportunities (see table below). This range takes on unique characteristics as the consideration of demographics narrows from the global level to the country level, and down to the local or trade area level. Future papers in this series will look more deeply into demographic trends within regional and local geographies to see how they spur the potential for real estate investment opportunities.

Read my complete analysis about how global demographics shape real estate investment opportunities in “Follow the money — and the people.”