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Turning the Graying of America into the Rebirth of Retail

Senior Real Estate Strategist Chris Macke of CBRE and frequent speaker at NAREIM events recently wrote this opinion piece that reflects on the potential for combining medical with retail uses in a time of aging baby boomers. (For a full print version, click here) Follow the Baby Boomer Money or Fall Behind It has been estimated that everyday 10,000 Americans turn 65. Yes, the Baby Boomers are entering their “golden years” in droves. And much like the outsized impact they had on real estate in their teens, twenties and every other phase of their lives their transition into their “gold years” will have a seismic impact on real estate. The only question is whether the impact will be a positive or negative for you, the stewards of billions of dollars of capital allocated to real estate investment. While this transition will certainly impact all real estate sectors, in this article I will focus on the retail sector. Retail is facing a number of headwinds including the migration of retail sales from terra based outlets to online based outlets. It is estimated that online retail sales will be $101 billion greater in 2016 than in 2011. While a staggering number, consider this: If growth rates in healthcare expenditures continue, expenditures on medical related goods and services will be $600 billion greater in 2016 than they were in 2011 – six times the estimated $101 billion increase in e-commerce sales. This is $600 billion that otherwise would have been available for GAFO purchases – the heart and soul of the shopping center property sector. GAFO includes General Merchandise, Apparel and Accessories, Furniture and other sales. (furniture and home furnishing stores, household appliances, electronic stores, clothing, sporting goods, hobbies, toys, electronics, books, music, department stores, discount department stores, warehouse clubs, general merchandise stores, office supply stores and gift shops. Not only will a larger portion of consumer expenditures go toward healthcare costs, but Baby Boomer expenditures will begin a precipitous decline as they enter their “golden years”. Consumers in the age range of 65-74 on average spend 19% less than consumers in the 55-64 age range. Looking a little further into the future, we see that consumers in the 75+ age category on average spend 38% less than those in the 55-64 range. (For a full print version, click here)
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