Implications for real assets demand.

The repercussions of Covid-19 will continue to be felt long after the final phases of the pandemic are over. Assumptions that are underpinned by real assets secular demand drivers require revising. 

At CBRE Investment Management, we describe ourselves as structurally driven investors. Simply put, we look for long-run structural changes in how our customers use the built environment and try to create the real assets that meet that evolving demand. This approach has underpinned our outsized allocations to emerging property asset classes, including student housing, senior living and life sciences. Our House View reflected our belief that demographic trends would drive demand for under-supplied real estate formats and deliver superior returns.

In this new series, we unpick the hidden demographic pivot points of the last two years and assess how our demographic assumptions might require re-evaluation. We will outline whether our re-analysis of demographic trends change to materially impact real assets forecasts over the next four decades across the major core markets where we invest – the US, UK, eurozone, Japan, Australia and China. 

Across these markets, we observed five major trends: 

shrinking populations; 

shrinking working age cohorts; 

fluctuations in student age cohorts; 

increasing early age retiree cohorts; and 

later age retirees becoming an increasingly large part of the retiree cohort.

We then graded the comparative strength of these five trends by severity to establish a demographics spectrum in order of most severe headwinds to most beneficial tailwinds. The results of our analysis, based on the United Nations 2019 Population Trends report, are represented in the table below.