Article

How global demographics drive global real estate opportunities

April 22, 2024
How global demographics drive global real estate opportunities
Key takeaways
Economic and population growth
1

To identify potential real estate opportunities, population trends must be understood alongside macroeconomic drivers.

Aging and dependency
2

An aging population means more medical office and life science properties, and a range of age-related residential options.

Global supply chain shifts
3

China’s rising labor costs and projected population declines could alter supply chains, pushing growth to other regions.

What factors will drive real estate investment opportunities and where will they be? Follow the money and people! When economies and demographics shift, real estate opportunities emerge. This is the first in a series of articles on demographics and real estate. It covers the drivers of global demographics that are likely to generate several types of global real estate investment opportunities.

Here are some highlights from my paper, Follow the money — and the people.

Five demographic drivers

Five drivers of global demographic change are likely to stimulate real estate investment opportunities.

  1. Population versus wealth: Real estate opportunities arise from the combination of economic growth and population growth.
  2. Growth versus change: Slow global population growth in large economies means that many opportunities will be driven by shifts within those economies.
  3. Migration: Net migration usually reflects seeking of opportunities and stability.
  4. Aging: Real estate needs will likely shift as dependency intensifies.
  5. Income: Wage and labor cost escalation has eroded China's former status as the world's leading low-cost manufacturer, which is contributing to global supply chain diversification.

Real estate investment opportunities

Here are the types of investment opportunities that we expect for global real estate based on the drivers.

  • Wealth and migration together multiply opportunities
    Places with higher wealth tend to foster positive migration, which in turn drives more diverse investment opportunities.
  • Seniors are driving property demand in higher income economies
    Swelling senior population means surging demand for senior housing, medical office, and life science.
  • One roof, multiple generations
    Rising dependency, weakening affordability and immigration could spur multigenerational housing in wealthier countries.
  • Live-work solutions
    Rising dependency of seniors requires workers to double as caregivers, reinforcing the need for work flexibility and hybrid work environments. These needs will likely reinforce the trend toward urbanization as work opportunities concentrate within cities.
  • Housing market to experience less growth, more churn
    Expect home sales in advanced economies to be affected by competing trends — slower population growth rates will moderate the pace of home sales, whereas wealth transference from older seniors to younger generations may spur home sales and related purchasing.
  • New math means new configuration of global supply chains 
    China's labor cost escalation and population reduction is compelling a gradual yet imperative diversification of production activity to other countries.

 

Where we see real estate opportunities

While each driver is impactful in isolation, it's the interaction of these drivers that produces a fuller range of potential real estate investment opportunities (see table below). This range takes on unique characteristics as the consideration of demographics narrows from the global level to the country level, and down to the local or trade area level. Future papers in this series will look more deeply into demographic trends within regional and local geographies to see how they spur the potential for real estate investment opportunities.

Figure 1. Real estate opportunities from demographic drivers

Demographic drivers

Real estate opportunity Population vs wealth Growth vs change Migration Aging Income/wages
Wealth + migration = more and diverse opportunities ✔ ✔      
Needs of seniors will shape property demand       ✔  
Multi-generation housing demand to grow     ✔ ✔ ✔
Live/work: Hybrid work reinforced; urbanisation to persist ✔ ✔ ✔ ✔  
housing demand: Less growth, more churn ✔ ✔   ✔  
China production to shift to East Asia and Mexico ✔ ✔     ✔

Read my complete analysis about how global demographics shape real estate investment opportunities in “Follow the money — and the people.”

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Defined terms

  • Economic growth is an increase in aggregate production in an economy, which is generally manifested in a rise in national income.

    Population growth is an increase in the number of people in a population or group.

    Net migration represents people choosing to leave one country and move to another, as well as movement within a country.

    Global supply chain diversification refers to developing flexibility and redundancy of the global supply chain in order to minimize risk and increase agility, by increasing number of suppliers and/or expanding and reimaging manufacturing and distribution networks.

Investment risks

  • The value of investments and any income will fluctuate. This may partly be the result of exchange rate fluctuations. Investors may not get back the full amount invested.

    Property and land can be difficult to sell, so investors may not be able to sell such investments when they want to. The value of property is generally a matter of an independent valuer's opinion and may not be realized.

Important information

  • All data is provided as of March 2024, sourced from Invesco unless otherwise stated.

    This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.

    Views and opinions are based on current market conditions and are subject to change.

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