A new report, Demographic Strategies for Real Estate, compiled by John Burns Real Estate Consulting for the Urban Land Institute (ULI), says during the next decade, 79 percent of household growth will occur in the suburbs. Suburbs of all kinds will dominate the coming wave of household creation as the 1980s Sharers and 1990s Connectors get a later start forming families. They will turn to the suburbs, where housing is more affordable and the schools are usually better. Urban and rural areas will grow, too, but more slowly. Urban areas, which tend to have higher prices, less room to build, and fewer desirable schools, will capture 15 percent of household growth, modestly boosting cities’ share of the total number of households. Rural areas, which have plenty of available land but long commutes to employment centers, will lose some of their share of the total, capturing just 6 percent of household growth.
KEY POINTS FROM THE REPORT
- Suburban office demand designed for flexible work lives will return: The 1980s Sharers, currently 26–35 years old, will soon move into senior management roles. They have already formed most of their households but have delayed marriage and childbirth more than any generation before them. The coming transition to family mode will cause many of them to move to the suburbs, a trend that is contrary to what has been occurring during the last decade. This rise in surban™ living will cater to their desire to live in good school districts with plenty of things to do near work and home. Female executives will play an increasingly prominent role in office space selection, given that women earned 58 percent of this generation’s college degrees. These inventors of the sharing economy will be far more willing to share space and e-commute (there is no more “tele-”) too because it is financially smart and offers them the flexibility they want. Expect fewer square feet per employee as more companies transition to a hotellike atmosphere where people “rent” a desk for the day.
- Housing rental rates will surge over the long term: Although a few overbuilt submarkets garner much of today’s attention, 7.3 million of the 12.5 million net new households created over the next decade will rent. The sharing economy continues to deemphasize owning, so we expect more and more households to rent and current homeowners to become renters sooner than usual late in life. Because heavy retirement will create more competition for good workers, we also expect wages to rise, resulting in better raises for many people. More income will allow for higher rents.
- Southern suburban migration will continue: The increase in population of those in their 20s over the last decade will almost certainly result in a surge in population in their 30s over the next decade. Affordable markets in pro-growth states will continue to attract young families. The southern regions where 42 percent of Americans currently live will welcome 62 percent of the U.S. household growth over the next decade. Rental housing, townhomes, and small-lot detached housing should continue to experience increased demand as today’s young adults begin their families.
- Municipalities can assist successful growth: Governments have always strongly influenced housing trends, and government laws and investments at the federal, state, and local levels changed society substantially. State government policies favoring low income tax have shifted population growth south, which is another reason we anticipate the southern states will see substantial growth in the coming years. Local government redevelopment investments have revitalized urban areas, and the most astute suburban municipal leaders are taking note and zoning areas of their communities for a mix of retail, housing, and jobs to reinvigorate themselves. Suburbs of all kinds will capture more than 79 percent of the coming wave of household creation as the 1980s Sharers and 1990s Connectors start families, shop for homes, and seek high-quality schools.
“Household growth over the next decade will tilt heavily south, toward the “affordable sunshine states” of the Sun Belt: Florida, Texas, the Southeast, and the Southwest.”