SIMONSON SAYS: Changing Age Profile Carries Many Implications for Construction

Population is still growing in the United States, unlike many developed countries. That is good news for contractors, because demand for construction ultimately depends on economic growth, population growth and relocation of both economic activity and people. However, the age distribution of the population is shifting. The shift happens very gradually, since the number of births and deaths each year is very small relative to the existing population. More dramatic is the change in the number of people entering an age range (more precisely, a stage of life) relative to earlier periods. The most-noted change in the age distribution is the passage of baby boomers—those born between 1946 and 1964—into the over-65 age group, with many of them retiring in the next few years. The Census Bureau projects that the 65-74 age group will grow more than 4 percent per year this decade, compared with growth rate less than half as high last decade. Meanwhile, the growth of the 55-64 age cohort will slow from 4 percent annually to less than 2 percent each. Not only will older workers be exiting the labor market, they will have more time for leisure activities and travel. In addition, some of them will want new housing. Of those, most will stay in the same area (based on past patterns) but are likely to seek locations closer to center cities and transit, with smaller or no yards. Others will move to more benign climates. These trends should spur demand for multifamily and cluster housing, with more of it in the South, Southwest and southern California. Seniors will not necessarily flock to assisted-living facilities, however, as developers of such housing learned last decade. The most likely candidates for such properties, the 75+ age group, will increase only modestly, from a 1-percent to a 2-percent annual growth rate. Complicating the outlook for housing shifts, there will actually be fewer people in the 45-54 age group, which historically bought homes that seniors were ready to sell. This cohort, which includes many of managers, supervisors and executives, will shrink at nearly a 1-percent annual rate instead of expanding at the 2-percent clip that occurred last decade. At the other end of the workforce age profile, the growth of the 15-24 age group will slow from over 1 percent per year to virtually zero. This implies added challenges for contractors looking for young workers. It also suggests the current surging demand from higher education for new facilities may wane. These demographic changes, combined with a lower rate of immigration, will make it difficult for contractors to find both entry-level workers and mid- to senior-level staff to replace those retiring or leaving the industry for other opportunities. At the same time, the types and locations of construction that are required will be different from before. As always, the only constant in construction is change.