How Regional Demographics Are Driving Demand for New Commercial Developments
Demographics have long been a key player in commercial real estate (CRE), but with shifting population trends, its role is even larger today in shaping development trends. As regions face population growth, aging, and changing workforce demographics, commercial real estate investors and developers react with altering demand requirements for companies and buyers. From mixed-use urban hubs to emerging industrial corridors, demographics drive new commercial development locations and types.
Dov Hertz, a real estate developer with years of experience, describes how shifting population trends in regions shape commercial real estate in the future.
Population Growth and Urbanization
Where populations expand in key metropolitan areas, demand for office, retail, residential, and industrial spaces continues to climb. Sunbelt metropolitan areas, including Austin, Nashville, and Phoenix, have seen significant population inflows in recent years, boosted by factors such as lowered taxes, a healthy jobs environment, and housing at a relatively affordable price in relation to traditional economic centers such as New York and San Francisco.
“Developers follow the people,” according to Dov Hertz. “Where a city is growing at a rapid pace, you can bet that demand for housing, office, retail, and logistics will follow.” It is a matter of knowing in which direction people prefer to work and live and developing infrastructure that can serve them in a proper manner.
Where populations increase, mixed-use development is increasingly in demand, offering citizens a mix of living, retail, and working spaces in urban, accessible environments. Not only is it convenient, but it appeals to new, urban, and multi-generational living requirements preferred by new generations.
Aging Population and Healthcare-Led Real Estate
Another major demographic force shaping CRE is an aging population. As baby boomers retire, demand for medical buildings, senior living communities, and medical office buildings is growing in a big way.
“The aging population is creating one of real estate’s biggest demand shifts,” Hertz explains. “We’re seeing a boom in medical office buildings, assisted living communities, and even wellness-themed retail spaces. Developers who understand these requirements are positioning for long-term growth.”
Suburban and smaller metropolitan areas, in many instances, where many retirees prefer to retire, represent particularly strong markets for healthcare-facilitated development. In addition, retail malls are transforming to include an increased presence of medical tenants, including medical specialties and urgent care centers, to serve aging shoppers.
The Changing Workforce and Adjustment in Commercial Space
The workforce is changing, with newer workers prioritizing adaptability, technology integration, and sustainability in work environments. That demand for flexible workspaces, co-work environments, and environmentally friendly commercial development fueled demand for smart offices, green buildings, and co-work spaces, Hertz sees.
“Young workers crave modern, flexible spaces that allow for productivity and wellness,” Hertz sees. “That’s why demand for smart offices, green buildings, and co-work spaces is so strong. Employers understand that an effective work environment is a key talent attraction and retention tool.”
Corporations, meanwhile, are growing in suburban office markets with an expansion of work model options, including hybrid work options, becoming increasingly common. Cities with a deluge of remote workers and new professionals moving in are seeing demand for office buildings with both adaptability and high-end amenities rise.
The Future: Looking at Demographics Shaping CRE
As demographic trends form and reform, commercial real estate investors and builders must take at least one step in front of the curve. Constructing mixed-use communities in high-growing metropolitan regions, developing medical buildings for aging communities, and developing work spaces for emerging generations, for example, rely on demographics for guidance in commercial real estate development.
“Demographics don’t lie,” Dov Hertz concludes. “They tell us about where demand and smart real estate investments will go in the future. It’s a matter of predicting these shifts and developing buildings that will serve communities in the future.”
By examining population trends closely, builders can develop commercial spaces that cater to emerging region demographics’ needs. Where and in what manner people work, age, and live will mold commercial real estate in the future, and demographics will become one of real estate development and investment’s most significant factors.