Throw the demographic forecasts in the trash!

Published on 2015/09/29

I have organised more than 310 “Berlin Real Estate Roundtables” since 1998. In that time, I am sure that there haven’t been more than a small handful of events where presenters haven’t made use of slides containing demographic forecasts to underscore their arguments on real estate market topics.

Demographic challenges have repeatedly been a major focus, particularly in relation to residential real estate investments. And this is despite the fact that Tobias Just, in his excellent work on “Demographics and Real Estate,” impressively demonstrated that the housing market is one of the last arenas to feel the impact of demographic changes. For example, it should be self-evident that labour markets are affected by any changes much sooner than housing markets, which is why he Just correctly makes more of the “significant risks for office real estate.”

Over the last few years, discussions on opportunities and risks within the retail property sector have seen an increasing amount of time devoted to the effects of demographic developments.

The best thing for the real estate industry to do right now, would be to start by forgetting every discussion we have had on demographics over the past few years. I say this because the forecasts were just plain wrong. I am not blaming the researchers, it’s simply down to the fact that we can’t see into the future. In Just’s definitive work quoted above, a work I cannot praise highly enough, two base forecasts are referred to: the first forecast assumes “low migration” of 100,000 people per year; the second assumes “high migration” of 200,000 people per year. The book was published in 2009.

In the two years 2013 and 2014 alone, net migration in Germany stood at approximately 800,000 people per year, more than double the “high migration” scenario and more than four times the “low migration” scenario. Forecasts for 2015 indicate that between 800,000 to 1,000,000 refugees are expected, and that’s not including regular migration. Of course, not all of the refugees will be staying. Nevertheless, it is clear that the “base forecasts” of 100,000 to 200,000 migrants per year were way off the mark.

My recommendation: take a look through all of the slides you are planning to use during presentations at EXPO Real. Throw away all of your slides that contain demographic assumptions. It doesn’t matter where the forecasts have come from – Bertelsmann, Prognos or elsewhere. They are only fit for the trash. You might be able to use new forecasts in three or fears years’ time, but previous forecasts are unusable. We have no idea how many migrants will arrive; we have no idea how many of them will stay, and we can only speculate that a majority of them will end up in the largest cities.

Anyone who understands the crucial role demographics plays in real estate market forecasts will recognise that the situation that is currently playing out approaches a revolution for the real estate industry. It is already clear that we won’t just need a lot more apartments than we previously thought. Other real estate sectors will also be affected, and discussions have so far skirted around a number of very real issues. More than anything, we are going to need to increase the number and/or size of our shopping centres. Whether a refugee spends a few weeks, a few months or a few years in Germany, they are a consumer from day one – they need groceries and clothing, and they also need accessories for their cell phone, etc.

Have any researchers out there started to deal with these impacts? If you have, please contact me (, as I would like to involve some smart researchers (and speakers) in an upcoming event on the effects of the current wave of migration on demographic and real estate market forecasts.

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