CHICAGO-Except for Europe, the world will experience strong growth during the next 40 years, significantly increasing the demand for commercial real estate, according to panelists this morning at Pension Real Estate Association’s 21st Annual Plan Sponsor Real Estate Conference at the Fairmont Hotel here Wednesday. In the short term, however, technology is the driver behind changes in the industry, the panelists said.
Leanne Lachman, president of research firm Lachman Associates Inc., said that the world population growth will get to about 9.2 billion people by 2050, with much of the growth coming from Asia and the Middle East/Africa. Only Europe is expected to see a net drop in population by then, with about 738 million people now and 719 million residents projected by 2050.
Demand for retail, office, industrial and residential uses will follow the demographic trends, she said. China, India and the United States will continue to present opportunity for the industry, while Africa, the Middle East and Southeast Asia are also expected to see strong population growth. This growth will go mostly into the urban areas, she said.
Another factor to consider is the future population boom coming in the United States, which she defined as Generation Y. The amount of 16-year-olds to 33-year-olds in the country, at 77.4 million, has already passed the Baby Boomers, at 76.2 million, and will be a force to explore for commercial experts for the next few decades. This new generation, combined with the global expected growth, will push the United States to positivity in the mid- to long-term, Lachman said.
Another panel followed Lachman’s presentation to discuss how these trends will affect the commercial sector. Included in this panel was Hyatt Hotels Mark Hoplamazian, General Growth Properties CEO Sandeep Mathrani, Archstone CEO Scot Sellers and Tishman Speyer President and co-CEO Rob Speyer.
The CEOs agreed that demographics play a large part in their choice of new or redeveloped locations. Hoplamazian said his firm is pushing into China to create a strong brand to build customers there, while Mathrani said his firm is working with a partner in Brazil, though he said GGP will not go further globally and will concentrate instead during the next three-to-five years on monitoring its US brand.
Each of the four chief executives said technology is causing the most significant change in their industries. Speyer said office workers are able to use technology to operate in less office space, affecting new and existing redevelopment efforts. Both Hoplamazian and Sellers said customers expect a high-tech experience, with email notifications of housing and hotel issues, and front desks taken completely out of the equation by technology by 2014, Sellers said.
Mathrani said technology of course has had a significant change to brick-and-mortar retail, but he said he believes both can exist side by side. The future of retail will encompass coordinated multi-channel retail, with Web site and smart-phone shopping operating side-by-side with stores, though large big-box stores may shrink to join malls, he said. Brick and mortar will hold its own, he says, especially since many online shoppers make returns at local stores, and even online giants like Amazon will probably need to open stores of their own in the future, he said.
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