How Demographics Can Design Your Firm's Future

April 27, 2005 · by Patricia P. Rosenzweig

There were 76 million people born between 1946 and 1964. Since the school building boom of the ‘50s, the marketplace for the built environment has been shaped by demographics, especially by the Baby Boom. As they move through their life cycle, this largest generation has been a dominant influence on what is being built.

There were 76 million people born between 1946 and 1964. Since the school building boom of the ‘50s, the marketplace for the built environment has been shaped by demographics, especially by the Baby Boom. As they move through their life cycle, this largest generation has been a dominant influence on what is being built.

In the early ‘90s, they were 26 to 44, the peak ages for first and progressively upscale single-family homes. Despite a recession and job uncertainty, the suburban housing market flourished. Now 41 to 59, the older boomers are entering a new stage of life. As their kids graduate and move out, their disposable income and leisure time are both increasing. Progressively their health is deteriorating and requires treatment. Their parents are living longer and boomers are making medical and living choices both for themselves and for their parents (which often affect their own life/medical decisions). The younger boomers are still bearing children, as the older ones are becoming grandparents. The population bulge of this group is large enough that the generational overlap creates high demand for obstetric and neonatal facilities.

We know that boomers make choices differently than prior generations. I call this “generational behavior.” And now they are “the management class.” People in their 40’s and 50’s tend to lead institutions of all stripes, so how they think guides how we get and deliver work. They want more information, more options, more proof of competence that the process or product they choose will deliver to their specific needs. This creates the need for firms to address the drivers and dynamics of sub-specialties—not just K-12, but private vs. public; religious vs. charter vs. college prep. The healthcare providers also expect their architect to have areas of specialization: cancer center specialists, NICU specialists, Women’s Health; cancer care in community hospitals vs. at a university medical center. It goes on. Boomers’ value systems affect design, away from corner offices and grass cloth walls, to an emerging buy-in to the environment. They believed in environmental stewardship when they were in college, and now some are in a position to effect it in their facilities.

The power of demographic analysis is its immutability and elegance. The minute somebody is born, we have a notion what he or she will be doing 80+ years from now. We may not know exactly how—whether they will be treated in a home, in a hospital environment or in a robotized minivan. But we do know that in 2085, the body of somebody born today will not be as strong as it was in 2050. The importance to firm leaders is that, just as demographics shape the built environment, they can help us shape our practice five to 10 years out. With demographic analyses, we can forecast to change our practice through acquisition, disposition, staff development and delivery process.

Definitions

Demographics is the art or science which counts measurable characteristics of the population. Age, labor force participation, birth and death rates (especially those data that are measurable by the variable of age) are the most powerful triggers to projecting the built environment. Age, or life-cycle behavior, determines what we do at various ages: go to school, go to work, live in certain kinds of residences, go to the doctor, buy certain kinds of toys, want certain kinds of cosmetics, travel.

Table 1 is a snapshot of the dominant behaviors influenced by age. Depending upon the nature of your existing practice, you may want to go beyond the obvious. For example, if your strength is industrial or distribution, you examine more fully the goods that will be needed. Toys? Expensive cars? Furniture? Or perhaps, the supplies/components that are required for their assembly?

Change, not absolute numbers, is what counts. With fewer people in an age group than in the past, it is likely that there will be an oversupply of the space used for that age-specific behavior. If there are more people moving into an age bracket, this will likely imply demand for more.

How activities happen is influenced by societal issues that occur during our teen or college years. For example, those born between 1930 and 1945 (Depression and Eisenhower babies) are financially conservative, respectful of tradition and authority. After all, they made their way through the Depression and World War, and emerged with great success. The boomers, however, became young adults during a period of rebellion, even revolution. Raised on that post-World War II bounty (and Dr. Spock, who encouraged self direction), this generation challenges authority. Hierarchy is bad. Being a boss is bad. We see this in the fragility of client relations that require us to prove our worth each time we pursue a job. “Trust me,” is not enough. We’ve seen it already, and it will continue, as the youngest boomers will not retire for at least 20 more years.

A look ahead

The second table uses U.S. Census Bureau population forecasting (by age) to examine change. Where we see a significant increase in the number of people in an age cohort, one can expect increased demand. The 1997 to 2003 column reflects our present market. Strong education markets from kindergarten through graduate school, strong housing of every kind, acute care’s introduction into the healthcare mix, and facilities that support leisure time: hotels and retail.

2003-2010 depicts the short-term market and then the 10-year market in 2015. High school through higher ed will continue strong for the next 10 years. Pediatrics and Obstetrics are the next healthcare boom accompanied by acute care. And then there are the life-style markets: recreation, retail, travel and housing. There is a red flag. It doesn’t appear that suburban high-end single family housing will last much longer; that can have a ripple effect through community support facilities—libraries, police departments, etc. On the other hand, is it too late to establish yourself in condos?

Here’s how to analyze the data:

  • All the boomers are over 40; within 10 years they will be over 50 and none will yet be 70. They’re still in the independent housing market.
  • These are the empty nesters who seek to reduce their maintenance time; ergo the condo/townhouse market.
  • Add the generational characteristic that will reject age-specific and/or institutional housing as long as they physically can.
  • Add the additional households created by the boomer divorce rate and, conversely, the two-career high income younger people who resist the suburbs as long as possible.
  • Also consider the later death rate of both men and women that permits couples to remain in independent housing longer than ever before.

    Don’t worry that you’ve missed the condo market. Housing is relatively easy to analyze, as interest rates are about the only external driver of demand. Healthcare is another matter. Public policy at federal, state and local levels manages this marketplace. Age-specific patterns of illness are available publicly, on-line. But demand needs to also acknowledge length of stay. For example, people 65 and over stay in the hospital two days longer than those in the 45 to 64 bracket. Thus, the number of people 65+ doesn’t have to increase much to have a large impact on demand.

    For the past 25 years, the healthcare market has been moving away from inpatient to ambulatory care. We all know about the pressures to reduce length of stay. The age of the population allowed that to happen. It wasn’t until the past decade, between 1990 and 2000 that boomers entered the 45+ age group; it is there that acute illnesses such as heart disease and cancer increase significantly. Thus, we are now seeing facilities specializing in diagnosis and treatment of these dominant diseases. By the end of this next 10-year period, in 2015, we will be seeing new inpatient facilities for the first time in 25 years, as by then, significant numbers of boomers will be over 65—and all of them will be over 50.

    Unquestionably, healthcare will be the market of the 21st century. Your challenge is where to focus because each segment mentioned here—pediatrics, obstetrics, cancer diagnostics and/or treatment with or without research, and inpatient facilities—are all specialties which contain various departments. And these markets are fragmented by the nature of the owner. Recognize that no one can excel in all specialties and with all types of owners.

    One sea change on the horizon is that we are entering a management shortage. By 2010, there will be three million more people at retirement age than in 1997. And there will be 3.5 million fewer people entering the management age group, 35-50. Will the 65-year olds continue to retire on schedule? Will the younger boomers and gen-Xers want them to stay? Will there be a new entrepreneurial boom? Will the shortage further accelerate our clients’ comprehensive dependence upon architects and other trusted advisors since our clients’ management will have less time to deal with physical assets and construction projects? Or will the quality of client representation deteriorate as less experienced people take on leadership in our client’s firms? As design practice leaders and as architectural educators, how do we accelerate young professionals’ appreciation, if not knowledge, of practice? It’s not too soon to anticipate.

    So examine the data, which is immutable. It’s up to you to interpret how to fulfill the demand; whether you should choose to fulfill it; and if so, how to do it best. Demographics are a certainty; use them to look far enough ahead to do make the right decisions for your future, today.

    —Patricia P. Rosenzweig

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