Household of the Future
Home stretched home
The last few decades have seen disruption hit almost every sector. But one area that’s remained comparatively stable is the household. Aside from an urban trend towards single occupancy, household composition has remained comparatively stable.
But that is about to change. I believe we’re about to experience one of the biggest shake-ups in household composition and behaviour in decades. That trend for single occupancy is slowing down. In fact, get ready for households to get bigger, as children stay home much longer and their grandparents move in. Add to that mix the increasing importance of neighbourhoods, sprinkle in the impact of e-commerce and delivery services alongside the emotional desire to reconnect with family post-lockdown, and it all makes for a volatile situation.
We believe it will drive three key household composition trends:
- bigger households
- more shared living
- more co-living developments
The impact will be huge. The shift to smaller households had a massive impact on business, creating entire new product sectors and markets. A swing back to bigger households will have an equal and opposite reaction. Its impact will resonate across sectors, from food to transport, insurance to entertainment.
Below I offer a glimpse into tomorrow’s households, the commercial opportunities (and threats) they offer, and what businesses can do to prepare.
Children are leaving the family home later and later in life. Today 40 percent of 25-29 year olds in the European Union still live at home with their parents. There are now more UK 20-34s living with their parents than living on their own.
It’s down to combination or economics and emotions. Increases in both youth unemployment and house prices mean young people are having to wait longer until they can afford to move into their own home. Adults and children alike place greater value today on spending time with their family. That and the rising cost of housing mean the young may not feel the need or desire to move out.
Such factors are putting a brake on the trend for children to leave home for good once they reach university age. The trend for Boomerang Children to return to the family home after university is well established. Add to that two new trends. Children are living at home while attending local universities, and children from high e=income families not going to university.
Meanwhile, with interest rates so low, grandparents are finding it harder to live alone on their pensions. Moving in with their children will become increasingly attractive. Especially given the equity they can realise by selling their homes. Already one in eight UK adults expect their parents will move in with them.
There are more multi-generational households in the US today than ever. In 1996, just 5.7 percent of children lived in multigenerational families. Twenty years later, this figure had nearly doubled to 9.8 percent. Multigenerational households are the only type of shared living arrangement that increased over the last 20 years. In the UK, the number of granny flats and ‘graddy flats’ – that is, self-contained spaces for grown-up children returning home after university – has risen by a third since 2014. As noted above, one of the biggest trends in holidays in recent years has been three-generation holidays.
The pandemic is likely to accelerate the multi-generation-household trend. Many families were kept apart geographically by lockdown and suffered emotionally as a result. This will inspire some to mitigate the situation by moving their family in with them.
The trend won’t just impact family households. Growing love of social interaction plus growing economic concerns, will encourage more non-familial sharing too.
As time with friends becomes more important, and with house prices in many areas still rising, house-sharing with friends and strangers will grow. The number of people looking for flatshares has risen 31 percent since 2011. More than half (51 percent) of those sharing in the UK today previously rented alone or with a partner, and 16 percent used to be homeowners.
If economies remain unstable, more older and higher income groups will start renting. The proportion of UK 35 to 54-year-olds who live as private tenants nearly doubled in the last 10 years. Between 2014-2018, one UK flat sharing website saw searches by over-35s rise 26% and those by 45-54s rise 50 percent. According to the Centre for Ageing Better, the number of over-60s renting privately in the UK rose from 254,000 in 2007 to 414,000 in 2017. It predicts about a third of over 60s could be renting by 2040.
Sharing won’t be limited to rental. Recent research from Marks and Spencer Bank identifies a trend for groups of friends to buy homes together. It’s a big enough trend for them to create a new product just for them: the ‘Mortgage For Four’.
“Our research suggests the majority of millennials would take out a mortgage with two or more people to get a foot on the property ladder. The option of becoming a mortgage-mate is particularly appealing to those already in a housemate arrangement.”
Paul Stokes, Head of Products, M&S Bank
Build to let
In the short term much of the new sharing will take place in traditional spaces such as converted family homes. But in the longer term, it will drive growth in co-living spaces: purpose-built multi-occupancy apartments that include communal amenities like kitchens, shops and food halls.
Rooms in co-living spaces are already in demand. Common, a co-living startup with homes in New York, San Francisco, Chicago and Washington, claim it’s receiving 1,000 applications per week for its 500 bedrooms. Meanwhile three quarters (76 percent) of property development professionals believe there will be a rise in co-living spaces in the next twelve months.
Given the growth of community, and its importance as a driver of co-living, we believe the successful co-living developments of the future will embrace their communal spaces. They might include more home cinemas or ‘playrooms’ with access to streaming services – the Netflix and Xbox Game Pass packages of the day. We see managed kitchen dining spaces, a hybrid of cook-it-yourself and professional catering, where Building Services offer pizza nights or group cooking sessions.
Community-driven co-living could develop in several directions. Examples range from those targeted at the young and single, to those like the Amaryllis Centre in Bonn, Germany which houses both pensioners and young families.
Room to live, work, play
Live work play developments have long been predicted as the ‘next big thing’. The community trend looks set to make such mixed-use social environments a reality.
Malls focused more on leisure than retail are already hugely successful. One that points the communal way forward is The Forum in Groningen, Netherlands. It’s a 10-storey “part library, part meeting space, part science museum and part recreational hangout ‘multi-space’, which saw 700,000 visits in its first six months: which is impressive in a city of only 250,000 people.
The next step for mixed use will be adding more flats and offices into the blend, realising a much-anticipated shift towards integrated ‘live work play’ (LWP) spaces.
Such spaces could be key to keeping people away from the traditional rush hour-driven city centres. They could also be the solution to isolated malls. If malls incorporate living and working spaces too, people won’t need to drive there.
Residential demand for such spaces is already there. According to a recent study from the International Council of Shopping Centers, 78 percent of US adults would consider residing in such a development. Such integrated communities used to attract older residents. But today they’re most popular with the young. 85 percent of Millennials and 81 percent of Generation X polled would choose one compared to just 71 percent of Baby Boomers.
Opportunities: bigger households
With traditional household composition breaking down, retail and leisure strategies based around traditional households will need to change. New households will create new needs, driving demand for new products and services.
There will be more demand for industrial size and ‘variety packs’; and products that work in multiple rooms and multi-occupancy homes, like voice assistant hubs and payment management apps.
Multi-occupancy households will seek products previously outside the budget or requirements of single households and flat shares. That could include high-end sports equipment like Peloton bikes, electric vehicle charging points, 3D food printers or portacabins for additional house sharers. Flat shares and WLP centres might want to hire out entire bowling alleys, music venues or charter flights.
Companies will need to extend family and household products. The scope of ‘family’ loyalty cards, car club memberships, streaming and co-working discounts should be broadened to ‘framilies’ and extended families. This will be especially true for leisure centres, theme parks, heritage sites and the 80 million leisure centres predicted to exist in Europe by 2025, as the composition of family – and framily – holiday groups shifts.
There will be an increasing demand among sandwich households for more adaptable products and services, from modular furniture to multi-user insurance policies. Sandwich parents will appreciate smarter furniture rental that enables them to adapt to the comings and goings of their family. For instance, Ikea has just set up a furniture-hiring subscription service.
Opportunities: build to let
New commercial living spaces will also provide a whole new sales platform. As co-living and LWP communities develop over the next ten years, they will compete for residents by offering the most attractive amenities. Smart retail and leisure brands will help them out, placing small retail and leisure outlets in these new living spaces. In terms of functionality, most spaces will be improved by a branded cafe or gym, a ‘corner shop’ or a pharmacy. For smaller sites, there’ll be increasing opportunities around next generation vending machines.
There’s an obvious brand benefit to placing products within consumers’ lives, as demonstrated on a larger scale by companies from Versace to Muji who have built their own branded hotels. Investment and placement in co-living and LWP sites offers a similar benefit for a much smaller investment. As such spaces grow in influence, they’ll provide further opportunities for brand investment and sponsorship. Mini, Amazon and Airbnb have recently begun investing in housing developments. It’s easy to imagine a Coca Cola LWP community in London or Chicago. Or perhaps a more socially conscious Patagonia or Ben & Jerrys one in Margate or San Francisco.
Any company currently marketing to households needs to understand how they are set to change. They also need to know what opportunities – and threats – such changes will provide, and how to take advantage of them.
Next Big Thing offers the solution. We also offer tactical and strategic consultancy on the topic. We’ve created an action plan for companies looking to target tomorrow’s households. FounderWill higham has also created a talk on the topic that he can deliver online or in-person. It offers practical methods companies can use to appeal to tomorrow’s households.
At Next Big Thing we’ve spent years exploring how companies can best prepare themselves for a changing market. We’ve helped businesses find success across a range of macro-shifts: from the migration from physical to virtual and mobile, to the emergence of Generation Y and Z. We’d love to help you and your products appeal to tomorrow’s households.
To find out more, just call (020 3542 1900) or email (firstname.lastname@example.org).