Small changes in economic indicators often dominate news headlines. Whether it’s a slight increase in inflation or a decrease in job growth, these micro-trends are constantly 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 short-term trends can be dangerous when making commercial real estate investment decisions.
In a recently released video, Chang emphasized the importance of paying attention to long-term analytics rather than headline news. He specifically highlighted demographics as one of the most reliable metrics for predicting real estate demand.
Chang pointed out that there has been a shift from urban living to suburban living among key demographic cohorts such as millennials. This change is driven by factors like an increase in marriage age (from 25 years old 20 years ago to 29 years old now) and starting families later in life. As this trend continues, there will likely be less demand for urban real estate.
Another important factor is earning power among different generations. With millennials entering their prime earning years (between ages 33-48) over the next five years and Generation Z members hitting age 25 during that same time period (resulting in an average earnings jump of 47%), there could be significant increases in personal income which would boost consumer consumption – accounting for two-thirds of economic growth – leading to increased demand across all types of commercial real estate including retail, industrial properties, self-storage facilities hotels ,and housing developments.
However ,there are still some uncertainties about where exactly these generations will choose to live or work post-pandemic . CRE investors should not base their decisions solely on current micro-trends but instead look at long-term demographic shifts that will shape future market demands .
Ultimately ,it’s important for investors not get caught up with short-lived headlines but rather focus on understanding how larger forces such as population changes or business growth will impact the economy and real estate market. By doing so, they can make more informed decisions that will lead to long-term success in the industry.
