The Future That Boomers, Millennials Have in Common

NEW YORK CITY—A quote attributed to Yogi Berra applies to the implications that changing demographics have for real estate: “The future ain't what it used to be.” In the early days of GlobeSt.com, a common understanding was that Baby Boomers would retire at age 65 or thereabouts and live out their days someplace warm. As the 2015 Emerging Trends report from the Urban Land Institute and PricewaterhouseCoopers recounted, this was supposed to make properties in resort areas and retirement communities the best bets for investors. “The Emerging Trends survey this year, however, ranked such property as the least desirable investment and development opportunities,” according to the ULI/PwC report.

Boomers and Millennials, who now outnumber them, may disagree on a number of areas, ranging from credit card debt (the older generation is more likely to carry it around) to work environments (the younger folks generally are more amenable to collaborative spaces). However, one area in which they'll increasingly find common ground is where they choose to live, work and shop: the city. That's the projection of both the ULI/PwC report and the 2015 edition of law firm Akerman's Real Estate Industry Outlook Report.

“The aging of the Baby Boomers, the arrival of the Millennials in the workforce and the increasing preference of both to combine a 'live, work, play' lifestyle in a compact city center, are reshaping the real estate market,” according to Akerman's report, which identifies the “new urbanism” as a megatrend shaping commercial real estate. “These life-stage trends, coupled with technology and new deal-making methods forced by the economy, have altered the urban landscape and blurred the lines between housing, retail, office, healthcare and hospitality real estate development.”

In fact, 34% of executives surveyed by Akerman believe this changing lifestyle preference will have the most significant impact on US real estate development in 2015 and beyond, outranking all other factors in the survey.

This naturally poses the challenge of creating cities that are both Millennial-friendly and “senior-friendly,” according to Akerman's report. There's also the bigger challenge of accommodating an increasingly prevalent trend toward urban living: it's expected that nearly half the world's inhabitants will live in cities of one million or more within the next 10 years.

Given their preference for walkable environments, as revealed in a recent National Association of Realtors survey, Millennials living in cities are in the right place, at least for the moment. However, the ULI/PwC report cites “a healthy amount of disagreement” over what they will end up doing in the long term. “One camp is convinced that the Millennials will revert to the mean and want private offices and will move to the suburbs to raise families,” the report states. “The other side feels like they will continue with the same behavior they have exhibited.”

Either way, the Emerging Trends report, cautions, “We are talking about a large generational cohort that will evolve and segment over time. Painting them with too broad a brush will lead to misplaced expectations—as it has with the Baby Boomers.”

Having already done so over the course of their lives, “Aging Baby Boomers will continue to set trends,” in the words of an investor with an international fund quoted in the ULI/PwC report. “The leading edge is now 65 to 73 years old. The move to city centers by this group may have more staying power than the Millennial generation.”

While Millennials' lifestyle and spending habits are now given the kind of scrutiny that marketers formerly lavished on their parent's generation, “let's not ignore the boomers,” the Emerging Trends report advises. “They will be influencing the market both as workers and retirees for a couple of decades to come. In fact, it is the combined impact of the millennials and the boomers—all 160 million people in the two cohorts—that is making demography such a hugely powerful driving trend right now.”