Small changes in economic indicators often dominate the news cycle. Whether it’s a slight increase in inflation or a rise in unemployment, these micro-trends are endlessly debated and analyzed for their impact on the economy. However, according to Marcus & Millichap’s Senior Vice President and National Director of Research and Advisory Services John Chang, focusing too much on these headlines can be dangerous when making commercial real estate investment decisions.
In a recently released video, Chang warns against relying solely on media coverage and instead emphasizes the importance of paying attention to analytics. One key metric that investors should consider is demographics – specifically how different age groups’ behaviors are changing.
Chang points out that there has been a shift from urban living to suburban areas due to changes in marriage age among millennials (those born between 1981-1996). While younger millennials preferred city living with its live-work-play lifestyle, those now entering their 30s and 40s have started families and are looking for more space outside of urban cores.
Another factor impacting real estate demand is earning power. With millennials reaching their prime earning years (ages 45-54) over the next five years, there will likely be an increase in personal earnings across generations – including Gen Z (born between 1997-2012), who will see an average jump of about $47% as they enter their mid-twenties.
This anticipated growth could lead to increased consumer consumption which makes up two-thirds of economic growth. As such, all types of commercial real estate – retail spaces , industrial properties , self-storage facilities , hotels , housing – could benefit from this demographic lift.
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