By 2030, approximately 693 million Baby Boomers will have reached retirement age. Meanwhile, nearly twice as many members of Generation Z—1.3 billion—will join the workforce over that time. This dramatic shift will have huge implications for real estate stakeholders—but only in markets that can attract this young talent.
A new research report from Cushman & Wakefield, “Demographic Shifts: The World in 2030,” analyzes the effects that this generational swing, along with other demographic transformations, will have not only on the workforce of tomorrow, but real estate occupiers and investors.
“These demographic trends will drive the pace of growth in cities around the world,” said Dr. Dominic Brown, head of insight and analysis, Asia Pacific at Cushman & Wakefield. “Cities will need to establish themselves as ‘places’ to attract the highest quality workers and in turn create the greatest real estate opportunities for occupiers and investors alike.”
Cushman & Wakefield looked at the progression of GDP and labor force in more than 130 cities around the world. Unsurprisingly, those cities with high growth in both categories are positioned to experience strong real estate demand while the prospects are low for markets exhibiting slow growth in the two categories.
The report notes that Gen Z (those born in the mid- to late-1990s) came of age during the War on Terror, and with the Great Recession—the worst financial crisis since the Great Depression—occurring during their formative years. Though it is too early to know exactly what to expect as this next generation enters the workforce, they may have a lot in common with the Silent Generation, those who matured during the Great Depression and therefor exhibited more frugality and showed a greater desire for stability than the Boomers who followed.
Looking at the different approaches to work and lifestyle taken by Baby Boomers, Millennials and Gen Z around the world, the Cushman & Wakefield report tries to predict what impact this changing of the guard will have on workplace strategy, sectoral growth and the changing order of the world’s cities over the next decade. They marked those cities with faster growth in GDP than in the working-age population as “high productivity” markets that investors will find attractive. “Low productivity” markets are those with greater growth in labor than GDP that will need to find ways of attracting talent in order to boost output.
The world’s top-performing cities, according to the study’s conclusions, are located in South East Asia and India, particularly the Indian markets of Ahmedabad, Bengaluru, Chennai, Hyderabad and Pune, as well as Ho Chi Minh City in Vietnam. No North American cities made it out of the “laggard” or “low productivity” designations, with Austin, Calgary, Charlotte and Edmonton noted as the continent’s highest-rated markets.
“We were surprised that generational behaviors superseded cultural ones. Gen Y and Gen Z workers, to some extent, have similar workplace preferences no matter where in the world they live, but the two generations also differ in many ways,” said Kevin Thorpe, chief economist and head of global research. “For example, workplace strategy will need to account for an ever-increasing array of requirements to meet the needs of tomorrow’s professionals. Understanding these generations’ values, how and where they want to work, and their interpersonal strengths and weaknesses will lay the foundations of securing the best talent available.”
The common metric across low growth cities is a high degree of population aging without a corresponding increase in younger generation workers taking up the slack. As Boomers leave the workforce, these cities will struggle to make productivity gains if they are unable to attract young talent. Both investors and corporate occupiers will closely observe the pace of change in these markets, and make strategic decisions accordingly.