Consumer demand patterns change as Boomers return to cities
on May 9, 2014

US housing May14The ageing BabyBoomers are now leaving the suburbs in large numbers, and moving back to the cities, as the blog discussed in October.  Thus as the Wall Street Journal reports, housing needs are changing quite dramatically. The main growth area for housing is now in high-rise apartment towers built for rent:

“The growth in new rental towers—which are usually woven into downtown office centers—is being driven largely by young professionals starting their careers, along with empty nesters who are in some cases downsizing from bigger homes in the suburbs. Together, they are helping downtowns evolve from places centered mostly on working and entertainment to more complete neighborhoods, with grocery stores, community centers and community services.”

It is impossible to overstate the importance of this change.  For decades, the Boomers led a flight to the suburbs.  Today, they are leading a new flight, in the opposite direction:

  • As the chart shows, one in three new homes are now being built as multi-home units
  • This is double the percentage of those built between 1990 – 2007, when Boomers were busy bringing up families
  • Now the Boomers are worried that government cost pressures will cut services for those away from city centres
  • They would also prefer to live in more lively neighbourhoods, and not have to drive to see friends

Putting these two trends together – of ageing populations, and the return of the Boomers to the cities – and we can easily see the potential for major changes in consumer demand patterns.

One change is obviously that the need for hypermarkets is much reduced.  Retired Boomers are now time-rich and cash-poor, the opposite of their working days.  And with no family to feed, they have no need to do a mad dash in the car each week to fill the freezer for the week ahead.  Instead, they can take their time, and visit local stores instead.

Equally important for the auto industry is that the Boomers’ move back into the cities means car-sharing, rather than ownership, becomes much more attractive.  Why bother to own a car, if you can rent a two-seater Smart car by the minute from Mercedes, with free parking and one-way rentals?  As BMW noted last year:

Now you can pay per use of a car. It’s like the music industry. You used to have to buy an album, now you can pay per play.”

Change is always difficult to handle.  That’s why major companies often simply disappear when disruptive change occurs in their markets.  Who remembers Kodak or Polaroid today – the early giants of the photo industry?

The changes underway in US housing markets are just one sign of the disruption now underway in western consumer markets.  The demographic changes that are causing them – falling fertility rates and rising life expectancy – don’t make front page headlines, like the launch of a new smartphone.

But they will likely prove far more critical for individuals, companies and the whole economy than any of us can possibly yet understand.

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