12 / 06 / 22 - 5 minute read
Demographics is the first draft of the future,” says Dr Marcus Cieleback, Chief Urban Economist of PATRIZIA. “You can't escape the effects, but because they are only felt decades later, there is a tendency to ignore the warnings.”
This is a mistake, he argues, because the long-heralded impact of demographic change will be strongly felt in the next eight years of this decade and reshape the economies of developed nations.
“The impact of long-term drivers – increasing life spans and fewer babies – will become a reality,” he explains. “Importantly, by the end of the 2020s the last of the Baby Boomers will be entering retirement.”
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Baby Boomers (those born between 1946 and 1964) were the largest generation in history, at least in the West, and their exit from employment will have a dramatic impact. The number of employed people in the EU 27 peaked in 2020, and companies will increasingly find themselves competing for an ever-shrinking pool of young talents.
Even under the best scenarios of the Ministry of Labour and Social Affairs, by 2030, Germany will have 2.9 million fewer than today. “And that is assuming that politicians and organisations do everything possible to expand labour supply,” cautions Cieleback. “Many European countries – Greece, Italy, Poland, Portugal and Spain, to name a few – will have similar problems.”
Marcus Cieleback, Chief Urban Economist, PATRIZIA
Demographic change will reshape many aspects of society apart from workforce composition. For example, the European Union notes that as the number of households in Europe increases, their average size decreases. In 2019, there were 195 million households, an increase of 13 million since 2010. But those households are, on average, getting smaller. Significantly, about a third of all households consist of single people, many of them older.
The EU says that as the continent ages, a growing number of people aged 65 and above will live alone. This applies especially to women. In 2019, the share of older women living alone was 40%, more than double the figure for men.
The World Health Organization says social isolation and loneliness among older people are growing public health and public policy concerns made more salient by the COVID-19 pandemic. In some countries, up to one in three older people feel lonely. A large body of research shows that social isolation and loneliness severely impact older people’s physical and mental health, quality of life, and longevity.
Chorus to Eleanor Rigby
The Beatles released Eleanor Rigby in 1966 as a single, its lyrics capturing a deep sense of loneliness and melancholy. The song is said to express the void left in society post World War II, although with the numbers of Eleanor Rigbys rising it seems more applicable now than ever.
So, the answer to the first question posed in the chorus of Eleanor Rigby is, to a large extent, demography. The answer to the second question in the chorus, says Jan-Hendrik Jessen, could lie in developing new housing types.
As Head of Fund Management, Operated Properties at PATRIZIA, he oversees a portfolio of more than 50 healthcare properties encompassing more than 4800 care places. Jessen says there is a market gap with baby boomers retiring in substantial numbers but with many active years ahead of them before needing accommodation in elderly homes with serviced healthcare.
“We believe there will be a growing demand for independent living services,” he explains. “These would be barrier-free apartments with shared living spaces and facilities, including green spaces for activities like gardening or farming.”
Jessen summarises the idea under ‘best-age living’. Notably, he adds that it is not co-living, a residential model where three or more biologically unrelated people live in the same unit. Instead, residents remain independent and can choose how deeply they want to integrate into the community lifestyle. He also notes that such projects should be embedded in the broader community by offering cultural and sporting activities, such as yoga, to attract people from outside into the community.
“There has been a tendency in the past to cut off older people from involvement in the wider world, which is a shame,” Jessen says. “It makes society poorer because all the knowledge and experience of lifetimes are locked away and isolated. We can make more vibrant communities by better integrating all ages.”
Extensive research by Jessen and his team indicates there is a significant niche for such housing, and he is currently negotiating with partners to create and manage such assets. The point, he explains, is to keep people as healthy and as independent as long as possible before they move into a care home.
“Increasing longevity should be a cause for celebration, especially as Europeans are generally living longer, healthier and safer lives,” he says. “High-quality social connections are essential to mental and physical health and well-being. Such community housing can provide that and help combat loneliness.”
Jan-Hendrik Jessen, Head of Fund Management, Operated Properties, PATRIZIA
Cieleback notes one driver could be ‘downsizing’. In Australia, the United Kingdom and the United States, there is a well-observed phenomenon where retirees sell their family home because it has become too large to maintain and move into smaller housing.
“Others find that they are ‘asset-rich but income-poor’, as retirement progresses,” says Cieleback. “Having paid off their home, they may be sitting on a sizable asset but struggle on their monthly retirement incomes, so downsizing to unlock the housing wealth and live more comfortably in their Golden Years.”
The trend has not been observed in Europe to the same extent. Europeans tend to move less than Americans, and there is a stronger tendency for family homes to be passed down through generations. Different countries also have different attitudes to renting. In Germany and the Netherlands, renting is more common than in the US or the United Kingdom, so people are less likely to shift. But Cieleback notes that people have never lived longer throughout entire human history nor in such numbers: “This greying of societies is a completely new experience and cities will need to find ways to address the changes this is bringing.”