Demographic trends are the key to predicting future values and the next big opportunity in real estate. Changes to the age and makeup of our country’s population is what drives basic economic forces of supply and demand. When you overlay technological advances and changes in social patterns, a more accurate picture emerges of what new opportunities may lie ahead for real estate investors.

The two key demographic trends that are playing out right now and will continue over the next two decades are the aging Baby Boomer population and the coming of age of the millennium generation. The Baby Boom generation represents about 74.9 million, roughly one quarter of the American population. The Baby Boom generation has dominated the country’s economy for decades. The youngest Boomers were born in 1964 and are now in their early 50’s, while the oldest were born in 1946 and are now in their early 70’s.

Although generally more active in their later years, Baby Boomers are also following in their parent’s generation footsteps in terms of where they want to live favoring warmer climates. With 12,500 people a day turning 50, Baby Boomers are, like their parents, migrating from the Northeast and Mid-West to the warmer southeast and western parts of the country. States such as Arizona, Colorado, Idaho, Nevada, Oregon, Utah, Florida and the Carolinas are benefiting the most from this migration.

The Millennial Generation on the other hand are the children of the Baby Boomers and were born between 1977 and 1995. The Millennials slightly outnumber the Baby Boom generation at 75.4 million and are far more diverse. While the Baby Boomers started the computer and cell phone industries, the Millennials have taken the use of those technologies to another level; and by doing so, are changing the way we live and how we use real estate.

Millennials have initially been more interested in living in the inner cities and less committed to home and car ownership embracing the “sharing” economy. The Millennial generation, now in the 22 to 40-year age bracket, have driven the demand for apartments to record levels in the past decade. Burdened by student debt and the Great Recession, Millennials have been slow to embrace home ownership, however there are signs that is changing. So far in 2017, first-time home buyers accounted for 57 percent of all home tours nationally, up from 27 percent in 2016. This is leading to a big uptick in demand for entry level housing.

Over the next twenty years, these two demographic trends are likely to create demand in several segments of the real estate industry. The Baby Boom generation is going to create demand for retirement communities in the southeast and southwest, luxury housing for the wealthier Baby Boomers, assisted living, nursing home facilities, Alzheimer care centers and eventually funeral home facilities. The best investments are likely to be in nursing homes and assisted living facilities. The Millennium generation is going to create demand for entry level homes, condos for some years to come, and continue to create demand for inner-city residences where a shared economic model and more social interaction that has become a hallmark of the Millennium generation.

The weakest part of the real estate economy is likely to be in the retail sector as Baby Boomer’s spending declines and Millennials accelerate the trend to on-line shopping. Another area that could show weakness is in the office market as Baby Boomers retire and Millennials adopt a more mobile and socially connected work environment that requires less office space. Astute real estate investors looking for the greatest returns should be mapping out their investment strategies for the next decade or two with these demographic trends in mind.

William Small, CCIM is the Founder and CEO of Zenith Realty Advisors, LLC, a commercial-investment real estate advisory and investment firm. If you’re interested in contacting him, you can reach him at (970) 925-3866 or by email at William.Small@ZenithInvestment.com