| By David Leonhardt
D
emographic data tells us a lot about almost every facet of
life, from business planning to healthcare requirements,
from education to fashion. Age, income, ethnicity, gender,
mobility, employment and other demographic factors determine the
shape of our society.
Real estate is no less affected by the ebbs and flows of
demographic trends, particularly income, aging, family
situations and employment. Consider a residential real estate
broker, whose livelihood depends on people changing homes.
Economic mobility is a key determinant in the future of his
business, as is the economic health of the region.
"I look to see how fast the economy is growing, and how
many jobs are likely to be created as a result, to determine the
resources my business will need over the next five years,"
says Terry Denoux, who sells Bend
Oregon real estate.
Development planning relies even more on demographic data to
determine priorities. The average age of the population is a
major factor in the type of housing that will be required over
the next couple decades.
"A young population in an area will require more single
family homes with multiple bedrooms and plenty of space for
children to run," explains Wendy Cobrda, a provider of US
city and state demographic data reports. "On the other
hand, an aging population will need more hospitals, more medical
clinics, more housing that requires minimal maintenance."
For investors, the stakes are just as high. Investing in commercial
real estate, for example requires the ability to forecast
where there will be a growing population, and/or where the
population's average income will be increasing.
In fact, commercial property investment requires a deeper
understanding of demographic data; it is not just the population
trends that need to be considered, but the demographics of the
competition. And even those cannot follow a set formula.
For instance, an entrepreneur looking to set up a new car
dealership needs to consider where established dealerships are
located and set up shop nearby. Car buyers wanting to compare
similar models need to visit several dealerships, so they need
to be close to one another.
On the other hand, an entrepreneur looking to set up a new
hardware store, should look for an area underserved by the
competition or where new residential developments will be
opening up. Hardware shoppers can compare brands of similar
tools within the same store, so ease of access takes on a
greater importance.
Speaking of ease-of-access, traffic patterns can also make a
difference, especially near busy intersections. The demographics
of traffic can add to the complexity of making a commercial real
estate investment.
Understanding where to invest in retail properties is one of the
main reasons that demographic mapping is such a popular service,
Wendy Cobrda explains. "To visually see the movement of
people and their spending dollars helps businesses 'see' where
they should open their next store."
Demographic data plays a role in vacation rental real estate,
too. "Do you buy vacation rental properties, or do you sell
the ones you have now?" asks Steve Curtis, owner of a
listing website for vacation
rentals. "Well, that depends on how much disposable
income people have for vacations and, more importantly, on the
age of the population. A younger person is more likely to
backpack through Europe, and stay at a hostel. An older person
in more interested in comfort and privacy, which is what
vacation rental properties offer."
It also depends on where populations are growing more, as well
as where the affluence is growing. If an economic boom is
happening in England and France, but not in the USA and Canada,
a vacation rental in Spain might prove more useful than on the
Gulf Coast of Texas.
"Business planning is just a shot in the dark without solid
market data," explains Ms. Cobrda. "Demographic data
reports and maps help businesses project market activity into
the future, helping to avoid such catastrophes as building
stores with no customers or storing a few million dollars of
inventory that nobody wants."
Given the high ticket price of real estate, whether residential,
commercial or vacation rentals, demographic reports and market
segmentation data are even more important.
ABOUT THE AUTHOR
David Leonhardt is a freelance
writer and editor who also runs a manuscript
editors service.
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