America’s real estate is aging in place, just like its population. Investors and CEOs can’t ignore it

Fast forward to the present day, and America’s real estate is “aging” much like its population. The generational transfer of wealth and retirement wave have long been expected, with baby boomers passing on their $80 trillion net worth. But something unexpected happened along the way – the housing market froze and older owners stayed put or were downgraded to compete with younger generations for “starter homes” that were also ideal for retiring grandparents to be close to their families. As birth rates slowed and not enough people were being born to support growth, commercial real estate also remained stuck in place, unable to meet modern needs.

For the first time in decades, we are faced with buildings that no longer create value for the businesses and people who use them. A warehouse that is too small for robots, an office that fails to attract top talent, or an apartment that does not have sufficient digital infrastructure all fall into this category. This is the statute of limitations. For business leaders and investors, this is not a real estate professional’s concern. These assets help people and businesses compete or quietly drain productivity and capital.

While the headlines focus on interest rates, the deeper danger is the huge stock of old buildings that are no longer suitable for modern life. As capital markets return to normal, investors can no longer rely on cheap debt to mask poor performance. Buildings either create value, or they don’t.

Demographics and demand are rewriting the rules

The forces driving the American real estate market into obsolescence are as much demographic as financial. Birth rates in the United States are at historic lows, and an average of 11,000 Americans are retiring every day. Boomers are wealthier and more active than any previous generation, and spend more on experiences. Millennials and Gen Z allocate more than half of their discretionary spending to experiences, not goods. These long-term trends should be the focus of the real estate industry.

Technology is amplifying this transformation. Remote work has separated households and businesses by geography, transforming real estate from a supply-driven business to a demand-driven business. People now choose spaces that improve their quality of life and work, not just where they have to be. Properties that fail to deliver are left abandoned, regardless of their good location.

For investors, this means that office spaces that once supported culture and collaboration can now undermine talent strategy, or that warehouses that once drove efficiency can now slow down supply chains. The stakes have shifted from square footage to competitiveness.

Office assets, often located in previously bustling central business districts, are a timely example. According to CBRE, 23.3 million square feet of office space in the United States is scheduled to be demolished or converted in 2025, while only 12.7 million square feet is under construction. For the first time in decades, stocks will shrink, underscoring the scale of the challenge.

Obsolescence across asset classes

The effects of these changing demographics are evident everywhere. Industrial warehouses that were once built with low ceilings and narrow bays now restrict e-commerce distribution, where robotics and volume determine efficiency. Many retail chains, previously built on predictable foot traffic, are closing, while the same footprints are being reimagined for new, service-driven uses.

Flexible working has reduced business travel, but has also increased demand for alternative accommodation. Retired baby boomers, along with their millennial-led families, are seeking out RV parks and campgrounds to share recreational experiences. Meanwhile, apartments without digital infrastructure or secure packaging facilities are rapidly losing relevance as groceries and packaging services increasingly arrive on demand.

The common thread: utility, not location, now determines value. Physical assets linked to supply chains, workforces and customers can either adapt to these generational shifts, or quietly erode competitiveness.

The new rules of the investment game

For decades, real estate investing was like stock trading: buy, hold, sell. All of this was based on the undeniable confidence that prices would continue to rise in an era fueled by cheap money and low interest rates.

Today, borrowing is happening again. Commercial real estate lending rose 26% last year, but the loans are now priced in a market where the 10-year Treasury yield exceeds about 4.05%. In this environment, debt by itself no longer guarantees returns.

Forward-looking investors are already repositioning assets. We see value in redeploying legacy properties into core operating businesses. 20-foot-tall industrial warehouses, unsuitable for modern, robotics-driven distribution, could be repurposed for more relevant uses such as climate-controlled warehousing. Buildings that once seemed like fixed costs must now be managed as active tools of business strategy, able to adapt as customer needs and business models evolve.

Likewise, the spate of closings of former CVS, RiteAid and Walgreens shows how quickly valuable assets can become obsolete. Once seen as safe bets for rent-stabilized properties, many are now vacant. However, their size, parking and prime locations make them ideal for conversion into early childhood education centers, a growing need for millennial families.

These examples show that strong returns no longer come from financial engineering or passive buy-and-hold strategies. It comes from operational execution, transforming old buildings into businesses that serve the evolving needs of Boomers to Millennials to Generation Z and beyond.

A turning point for investors

For investors – and CEOs – the lesson is clear and straightforward: American real estate will either age and freeze capital in empty structures, or be renovated into platforms that drive growth. Winners will treat real estate as a business, rather than a commodity, generating returns by creating meaningful places that meet the needs of evolving generations and deliver lasting value.

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