If, like me, you’re a baby boomer – born sometime between 1947 and 1964 – you know how good we’ve had it. The economy has catered to our wants and needs for decades, with everything from mutual funds to insurance policies to soft drinks to health spas to automobiles designed and branded with us specifically in mind. But all that’s about to change. Not only because most of us are now thinking retirement, but also because the economic ground has dramatically shifted beneath our feet.
The financial crisis that broke loose a year ago is not just a temporary setback; it’s one of those defining generational events that alter behaviours and attitudes forever. Think of the Great Depression. Think of how often you hear something along the lines of “Grandpa lived during the crash of ’29” – a shorthand way of explaining why he’s so cautious or frugal – or the thousands of apocryphal stories we hear and pass on about someone “losing everything” during those years. Well, those attitudes are back with a vengeance. We’re back to clipping and saving, and buying carrots at Safeway and beets at Save-On-Foods. And if those catering to the boomer want to keep their doors open for business, they’ll have to start stocking their shelves differently – and soon.
Boomers have long been in the habit of spending just about all of their disposable income – on expensive foreign cars, fancy private schools, Fiji suntans, gold-plated cellphones and plasma TVs. Many of us have long presumed that a big inheritance was going to be coming down the pipes – a legacy from Ma or Pa that would clear the deck of any debts and solve all post-retirement problems. Yet this market meltdown, which has seen a huge erosion of our mutual funds, pensions and stock portfolios, has affected grandma too. Her portfolio – as conservative as it is (or was) – got whacked, and now she’s being forced to dip into her savings. Our inheritance.
The early warning signs of the new, more frugal world order are everywhere: in the U.S., deep discounting has become the norm at high-end retailer Barneys while Wal-Mart’s stock continues to climb. There will always be the super rich who have a steady diet of Louis Vuitton and Holt Renfrew, but for the rest of consumers, who in the past only occasionally bought a Louis Vuitton handbag or a pair of Manolo Blahnik pumps, they’re now going to be spending a lot more time shopping in such places as Wal-Mart and buying no-name brands for their non-essentials.
In the real estate world, we’re going to have to recognize the new reality and start looking at boomers differently. When my firm brought the Fairmont Pacific Rim Residences to the Vancouver market over 2½ years ago, it was Canada’s most expensive address: waterfront units there were selling for well over $2,000 per square foot. It fit with the trend everywhere: boomers were trading up, selling their $4-million single-family homes and moving into $5-million condos. Now boomers will be “trading down”: selling the house and finding something smaller and more affordable, either to pay off their debts or to increase their cash position. And in a break from the past, they’ll no longer be waiting until all the kids have moved out to make the big move.
On the exterior walls of my new offices in Chinatown, I’ve installed a 23-metre neon work of art by Britain’s Martin Creed. It reads, EVERYTHING IS GOING TO BE ALRIGHT. And it will. Yes, we boomers are on the downward side of our peak earning years. Yes, we’ve experienced the biggest financial collapse in our lifetime. We will have to institute dramatic changes in how we entertain ourselves, where and how we travel, what we drive, where we live and how we ultimately pass on wealth to our children. For the enterprising business person, there are many opportunities out there to capitalize on this new reality. But for those praying for a return to yesterday, forget it. It’s gone.