Changing demographics require a new set of rules as businesses enter the 21st Century, especially where retail and real estate players are concerned, say land-use forecasters.
“We have a population that is aging, slower in growth, relatively affluent and highly diverse,” says Leanne Lachman, managing director at Schroder Real Estate Associates in New York.
Lachman, an authority on demographics, spoke last week at Urban Land Institute’s fall conference, which attracted some 2,900 real estate developers, lenders, architects and planners.
These shifts require a restructuring on the part of many businesses, particularly those mired in a mass-market approach. Firms that master niche marketing will fare best in the future, said Lachman, adding that this should give local businesses an edge on national competitors.
On the retail front, “developments in the ’90s will be built by target shooters, not skeet shooters,” agreed David Nelson, president of the Nelson Cos., a developer in Farmington Hills, Mich., who stressed the importance of understanding diversity and catering to specific consumer groups.
For a country so used to marketing to youth, the aging population presents both problems and potential.
By 2020 the number of people over age 50 will have increased 76 percent, while the number of those under 50 will drop 1 percent, said Lachman, citing U.S. Census data.
The goods news: more gray hair typically translates into greater affluence. People in their late 40s-where front-end Baby Boomers are positioned-are in their peak earning years. And those over 50 have entered their peak discretionary income.
The bad news: greater discretionary income doesn’t automatically translate into greater spending. Older consumers make purchases that are voluntary rather than necessary, particularly for big-ticket items such as houses and cars.
Retail fortunes will ebb and flow depending on consumer confidence.
“Those are truly the indexes to watch,” said Lachman.
Businesses must contend with new consumer priorities, including value, service, time-consciousness and convenience. “BMW owners are out pumping their own gas,” Lachman said.
Nelson observed that a Brooks Brothers store in Grosse Pointe, Mich., one of Detroit’s most affluent suburbs, just converted into a Brooks Brothers factory-outlet store.
On the real estate front, the demographic changes will provide opportunity for builders of trade-up and afforable homes, those who develop or work in the nursing-home business and those who develop or sell vacation properties, Lachman said.
Another demographic revolution is the country’s increasing heterogeneity.
Although population growth may be occurring at a slower pace than in the past, the cultural portrait is rapidly becoming more diverse. Eighty percent of U.S. population growth in the next 20 years will come from Asians, Hispanics and African-Americans, according to census projections.
“Ethnic diversity has not been recognized in the real estate market,” said Lachman.
“Ethnic diversity is real retail opportunity,” she added, explaining that immigrants are creating new businesses, invigorating neighborhoods and keeping many central cities alive. And it’s another reason real estate projects must be “precisely targeted.”
Yet the increasing demographic diversity isn’t relegated to skin color. Lifestyles run the gamut with Ozzie and Harriet households being the exception rather than the rule.
Today’s consumer melting pot includes single parents, co-habitating couples, older singles, and childless married couples. “There is no single market in the U.S.anymore,” said Lachman.
