There’s no doubt we’re in a transition period. As technology and communication habits expand exponentially in our lives, changing demographics in our nation shape the future of our housing market and workforce. In the commercial real estate market, these trends will dictate which areas are growing and where the market could lead us.
As one generation ages, another younger workforce takes their place. Baby boomers and millennials are two of the largest populations right now, and each has their own desires when it comes to real estate.
- The population of the United States will grow by 11.55% over the next 15 years
- The past 40 years has seen Central Ohio communities grow by more than 675,000 people, enough to fill Ohio Stadium more than six times.
- By 2050, the Columbus region is expected to grow by more than 500,000 people while 300,000 additional jobs are added to the economy. This far exceeds that of other cities in Ohio, yets remains on pace with national growth rates
- Both baby boomers and young adults are estimated to make up almost 80 percent of the growth in Central Ohio.
- In 2013, there were more than 44 million people over 65 years of age living in the U.S. That number will more than double by 2060
- The Millennial generation - those born between 1980 and 2000 - is the biggest in U.S. history, with more than 78.6 million
As we prepare for 2020, there are changing trends that will affect not only the global market, but commercial real estate in the USA and Ohio.
- People age 55 and older control more than 75% of the country’s wealth
- Globally, those older than 60 will have the spending power of $15 trillion by 2020
- The National Institute on Aging estimates that the number of people living to 100 years might reach one million by 2050
- Currently, there are 20.2 million college students in the U.S. By 2024 this number is projected to rise to 23.1 million
- Millennials are reluctant to enter the housing market, with many choosing to rent or live with their parents. Peak home buying years are between 25 and 45
- The top 5 elements impacting CRE investments are: interest rates, consumer confidence, global economy, unemployment, and U.S. tax rates. Commercial real estate professionals remain optimistic when it comes to the state of the market.
Technology and Investment
New technology is making the world a smaller place, while investments grow.
- In the second quarter of 2016, bank loan originations increased 33.0 percent year-over-year, more than any other lender type.
- The proportion of members who closed deals in the second quarter of 2016 advanced to 66 percent, from 58 percent in the first quarter.
- The direction of commercial business opportunities during the second quarter of 2016 rose 5.6 percent from the prior quarter
- As VR Technology is introduced into the market, some are using it as a tool to show properties to remote clients. While still pricey, it will likely be more common as prices go down
- Similarly, drones can capture images and video in ways not previously able, making them a valuable tool for commercial real estate
- With the more and more people leveraging the Cloud, many professionals are collaborating on projects and managing transactions online. This allows sharing of master documents that let users red-line and comment in real-time, while collecting electronic signatures. This is more secure than traditional methods.
As communication habits between businesses and consumers has changed, social media has begun to play an important role in commercial real estate.
- Email is still the primary lead generation tool, although this number is down from 87% to 77%. The other two main lead generation tools are Search Engine Optimization and Social Media
- LinkedIn is the number one social media lead generator with 59%, followed by Twitter at 28%, Facebook at 24%, YouTube at 13%, Instagram at 2%, and Pinterest at 1%
- Companies with 40 or more landing pages get 12 times more leads than those with 5 or less.
- Pop-ups are the least effective means of conversion, with a conversion rate of just 1.06%
- But, Pop-ups used as content upgrades have been shown to have an average conversion rates as high as 70%
- Compared with traditional website sidebars, popups have been proven to convert up to 1375% better
In the next several decades, shifts in technology and demographics will shape the landscape of Columbus, leading to areas of potential growth.
- Central Ohio is projected to grow from 1.8 million people to 2.3 million by 2040, an increase of 25%
- Baby boomers and young adults are looking for small-lot, single family homes, townhomes, and multifamily apartments and condos.
- 21% of millennials live at home, but 90% expect to move out within five years.
- More than 60% of Americans favor a neighborhood with a mix of houses and stores and other businesses that are easy to walk to, instead of neighborhoods that require more driving between home, work, and recreation
- In Columbus, demand calls for an additional 140,000 smaller lot detached single family homes, and 166,000 attached units
- A market study for the City’s East Franklinton Plan forecasts a potential 2,000-plus market rate housing units; 50,000 square feet of retail; and 100,000 square feet of office, incubator and arts space over the next 10 years