Rising demand for senior housing, medical office, and life science buildings and things impacted by great wealth transfer.
As the primary tenants of single-family rentals, it likely means rising rentership and current renters renting longer.
Fewer school-age children means fewer schools. Fewer higher income aged 55 to 64 years old may impact investing.
Real estate demand over the long term is shaped by one factor more than any other: demographics. One demographic trend, US population growth by age, will impact US real estate demand over the next several years. (For a deep dive on other US demographic trends, such as population growth, income, affordability, and migration that may create opportunities, read US demographics and real estate demand.)
Aging trends provide the clearest insights into potential shifts in demand for different types of US real estate. The robust growth of the age 75 and older population is expected to expand the need for senior housing, medical offices, and life science buildings, making them the real estate demand winners, in our view. The aging population trend will likely spur the greatest transference of wealth in US history over the next two decades. The transfer of money, assets, and personal goods could lead to at least three real estate trends. We expect more:
The next big demand winner, in our view, is single-family rentals due to the projected growth of the sector's primary tenant age range, upper 30s and early 40s.
Age |
Population growth |
Potential impact on real estate |
|---|---|---|
25–34 |
8%
|
Apartment demand to rise marginally |
35–44 |
24% | Single-family rental demand to rise |
| 45–54 | 17% | Retail benefits from growth in this high-spending age group |
| 65–74 75+ |
34% 79% |
Medical office, life science, and senior housing demand to rise |
Sources: Invesco Real Estate, utilizing data from Moody's Analytics and the US Census Bureau, Dec. 24, 2023. (Latest data available.) This shouldn’t be construed as recommendations, but as an illustration of broader themes. Forward-looking statements aren’t guarantees of future results. They involve risks, uncertainties, and assumptions; there’s no assurance that actual results won’t differ materially from expectations. There’s no guarantee the projections will come to pass.
Declining numbers of school-age children under age 15 are already compelling several urban and rural school districts to assess school operating costs and growth of tax revenues. Real estate in impacted neighborhoods may undergo changes of use to best suit evolving local needs. Population loss is expected to be greatest in age 55–64. Because they have the highest paychecks and are substantial investors in financial markets, the flow of money into stocks could slow the funding of companies that typically occupy office buildings. Fewer people aged 55–64 doesn’t necessarily mean that office demand will decline, but it suggests that the potential growth rate is less than it would be if this population was growing.
Age |
Population growth |
Potential impact on real estate |
|---|---|---|
Under 15 |
-21% |
School buildings may close or convert due to shrinking school enrollment |
15–24 |
-14% | Shrinking student housing demand; supply could shrink too if colleges close |
| 55–64 | -27% | Office demand softens as population slips in high-investor demographic |
Sources: Invesco Real Estate, utilizing data from Moody's Analytics and the US Census Bureau, Dec. 24, 2023. (Latest data available.) This shouldn’t be construed as recommendations, but as an illustration of broader themes. Forward-looking statements aren’t guarantees of future results. They involve risks, uncertainties, and assumptions; there’s no assurance that actual results won’t differ materially from expectations. There’s no guarantee the projections will come to pass.
These demographic trends reveal that the US population is facing a transition. While net growth will undoubtedly spur real estate demand nationally, it's the granular trends related to life stage shifts, migration, income differences, wealth transference, and other factors that may drive real estate investment opportunities in the years to come. For a deep dive into other US demographic information, read US demographics and real estate demand.
The public REIT market can serve as a leading indicator for the private property market, so we believe private US real estate is poised for recovery.
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Important information
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The opinions expressed are those of the author, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.
Investments in real estate related instruments may be affected by economic, legal, or environmental factors that affect property values, rents or occupancies of real estate. Real estate companies, including REITs or similar structures, tend to be small and mid-cap companies and their shares may be more volatile and less liquid.
Investing in real estate typically involves a moderate to high degree of risk. The possibility of partial or total loss of capital will exist.
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