Simon Kuestenmacher Director and Co-founder of the Melbourne-based Demographics Group recently treated attendees to this week’s API Fellows lunch to insights into shifts in the Australian workforce and expected impacts on residential and commercial property.
While Australia is growing by three and a half to four million new people, this population growth isn’t evenly distributed across the whole age spectrum.
There’s essentially, no growth in the kids zero to 14 years of age, and the thirties will be stagnant. Meantime, young adults 15 to 25 is booming, driven by international migration, largely international students.
But the single biggest year of age where there will be the most growth in coming years is 43-year-olds. It’s super annoying for these individuals, but it’s cool for the economy, as every penny that you earn at 43 goes straight out the door, back into the economy.
In the next 12 years, we’re going to double the 85-plus population from 500,000 people to almost 1.1 million. That’s massive because statistically speaking 85 is called the median age of death.
March of the wrinklies
Overall, one of the dramatic storylines hiding within the demographics is Australia’s rapidly aging population. In relative terms our fastest aging group is 70-year-olds. While this cohort is still active, doesn’t need care, and has reasonably low medical costs, things get quite dire once they reach 85.
In the next 12 years, we’re going to double the 85-plus population from 500,000 people to almost 1.1 million. That’s massive because statistically speaking 85 is called the median age of death.
It’s expensive to grow old as a nation, but it is also outrageously labour intensive, and we’ll need to double age care workers in just 12 years. But this aged care workforce will not come from Australia, we will need to import them and there will be many challenges collocating care workers with the locations of old people.
Bye bye baby boomers
Age care workers aside, skill shortages that were turbocharged by covid will remain with us easily for the next 12 to 13 years, because it’s baked into the demographic pie – notably due to baby boomers retiring.
Usually, when a cohort retires there’s a larger cohort entering at the other end of the spectrum. But this time the bulge of people in the fifteen in the 15 to 25 bracket will not add to your labour pool as most are international students who eventually leave.
If this wasn’t bad enough, the millennials procrastinated until their mid-thirties before having babies. Given that they will, at least temporarily, leave the world of work behind, the skills shortage will not get better.
Population reshuffle
Interestingly, the single biggest driver of the population reshuffle we’re witnessing across Australia’s capital cities is demographic in nature – millennials making babies.
The lack of three-to-four-bedroom dwellings in the inner city means millennials need to move further out. Millennials can’t move to the middle suburbs because that’s where their baby boomer parents hog the three-and four-bedroom homes as empty nesters, and they’re not thinking about downsizing and block development wherever they can.
The only place where millennials can go is to jump the middle suburbs and move to the urban fringe and this general pattern will persist over the coming decade.
While you will easily get your migrant workforce into the office, getting millennials – in the family formation stage of the life cycle – into the office will be challenging.
The one power that will save commercial real estate is counterintuitively AI as it takes away the boring tasks.
Face-to-face when learning
When looking at the return-to-office narrative, it’s important to note there’s no research whatsoever that indicates that you’re more productive in the office. However, research shows that face-to-face contact is crucial for company culture, yet it makes no difference whether your team is together in the office for one day or for five per week.
While the strongest case for people returning to the office has to do with learning and knowledge transfer, there’s little argument for a return to full-time in the office.
Interestingly, the world of AI is a big fat driver back to the office in the long run as it interpersonalises knowledge work and takes away boring tasks. The one power that will save commercial real estate is counterintuitively AI as it takes away the boring tasks.
Walk a mile in staff shoes
With staff retention becoming an absolute priority, it’s important to treat your staff nicely.
I encourage bosses to really understand the workers’ perspective. I want every boss, to understand to the penny the cost every worker occurs by going to the office, parking, fuel, public transport, the cost of lunch compared to lunch at home and so forth, and then consider incentivising them to return.
Remember, lots of young people gave up on finding meaning in their work and they don’t hunt for the next promotion with the same rigor that you did back in the day. They realised, ‘even if I work twice as hard and earn 50% more money, I can’t afford a house – so why bother’.
All of those things play together and from a commercial property perspective, suggest a move away from the office, at least in the short to medium term. To understand the future developments for commercial property, we need to understand the shifts in the Australian workforce over time.
Every business needs to constantly lift its game, getting staff back into a super sleek, sexy office tower with cool end-of-trip facilities. But when it comes to getting staff back into a crummy old-fashioned office tower – good luck.
