Foreign investors briefed on American lifestyles

Real Estate Weekly, Nov 17, 1993

Just as the 1970s ushered in the hedonism of the "Me Decade," the '90s rapidly are becoming the "Age of Cynicism," in which Americans believe that success or failure in life is a direct responsibility of each individual. Americans have abandoned their traditional sense of reliance and trust on institutions such as government, the business establishment, or even the medical profession.

And, as America's population growth continues to be dominated by immigration - not the birth rate, ethnic diversity is reinforcing the trend toward self-reliance by individuals and small groups.

These findings were the subject of in-depth briefings by renowned demographic and behavioral experts who recently addressed the Association of Foreign Investors in U.S. Real Estate (AFIRE).

Representing major European and Asian corporations and financial institutions, AFIRE members hold $15 billion in direct U.S. real estate investment and account for half of all foreign investment in U.S. real estate.

At the association's annual meeting in Washington earlier this month, demographer M. Leanne Lachman of Schroder Real Estate Associates of New York and Watts Wacker of the national public opinion polling firm Yankelovich & Partners, gave guidance to AFIRE members on their future U.S. investment strategies in commercial, retail and residential real estate during the next 15 to 20 years.

In general, their advice was to target real estate products toward a diverse marketplace, not a homogeneous one such as the Yuppie market of the mid-80s.

Ms. Lachman said, "Although immigrant flow is an important contributor to the country's cultural diversity, most minority households in the U.S. are neither short-term residents nor poor. Ethnic preferences have not been recognized sufficiently in the marketplace.

She added, for example, that one-third of all adult New Yorkers are foreign-born and almost half of them arrived in the 1980s.

In regard to behavioral attitudes, Mr. Wacker said, "Today, the happiness index is down to 26 percent of the people of all ages saying that they're very happy. What we have seen is a crisis of confidence in the institutions of our life."

He added, "For people older than 50, the two greatest events in life were the Great Depression and World War II, whether they lived through them personally or they were imprinted by their parents having lived through them. For people under 50, the equivalent of that today is women in the work force and MTV."

Regarding the former, Wacker explained that women of today believe they have just as much right as a man to have a fulfilled life. He said that MTV was "just as profound," because it represented an Information Age in which a 60-second television commercial could contain as many as 1,000 individual edits.

Combining with the phenomena of ethnic diversity and a general sense of mistrust of institutions, Lachman noted that the U.S. population is no longer dominated by certain age brackets. She said, "In the year 2010, the baby-boomers will be between 45 and 64 and all the age groups beneath them will account for increasingly uniform portions of the general population."

She added, "Each fairly large generation will be of approximately equal size, and none will have sufficient clout to dominate. This is a major shift. We are already seeing the effects in the strong competing interests of voting blocs and the extreme difficulty of reaching consensus. It will only get worse."

Because Americans distrust their institutions, according to Yankelovich surveys, they are moving toward self-sufficiency. Wacker said, "There is a can-do sense of |I am going to teach myself.' It is the non-formally trained person whom we go to for advice. We are a fraternity of strangers. You don't go to a salesman for advice. You go to someone in your workplace, your fraternity of strangers, who taught themselves."

Confirming this trend away from institution-based behavior, Ms. Lachman cited the fact that fewer than four out of 10 American households contain a child and under 20 percent of all households include one or more school-age children.

She said, "For a traditionally youth-oriented culture, this is a dramatic shift. It also suggests that fewer voters in America will be concerned about committing funds in support of schools."

In conclusion, both Ms. Lachman and Mr. Wacker agreed that one of the worst mistakes that a real estate investor could make in the 1990s would be to "build or market a project for yourself. Do not identify yourself with your market segment."