Then you could sit back, let the Echo Boomers converge on your properties, and watch sales pricing for core apartments go up by 40%.
The opportunity to buy multifamily well ahead of the Echo Boom has passed, but there is another massive demographic shift looming to profit from. And CRE investors haven’t completely caught on to this one yet.
In 2013, the number of Americans aged 65 and older will grow by about 1.3 million, by far the largest increase in this population in more than 50 years.
Not only that: The total increase in this population in 2013 will be 47% higher than its increase of only 900,000 in 2012, as those who were born just after the homecoming of U.S. troops from World War II begin to hit their late 60s in larger numbers. Moreover, the greying of the U.S. population is only expected to accelerate through 2025.
Of course, this is not necessarily good news. Federal and state government budgets will continue to feel the pinch as Social Security and health care costs grow. The national economy will also come under pressure as older Americans transition from higher earnings to retirement and less retail spending. But one beneficiary will be the health care sector, in which the aging of the population is clearly linked to hiring (see Exhibit 1).
While the increasing population size of people 65 and older will pose a serious challenge for the national economy, pockets of certain metros will benefit enormously. Metros with employers at the leading edge of medical care and research will be well positioned to capitalize on the trend, since there will be unprecedented demand for the services they do best.
Exhibit 2 shows metros (in bold) with a combination of a critical mass of aging residents, high-income retirees (more disposable income for medical services), and top-ranked medical schools that promote innovation in the industry.
Hospitals have already become very visible engines of economic growth in metros such as Boston, Chicago and San Francisco, driving construction of residential and medical facilities nearby. But the demographic trends that power the health care industry haven’t even started to accelerate at full speed.
Buying land and residential and medical office properties surrounding leading medical institutions in these metros is a smart choice. Economic growth may already be impressive in areas such as Mission Bay (in San Francisco), Longwood Medical Area (Boston), and Streeterville (Chicago), but it is likely just getting started.