Investing in today's dynamically changing landscape presents both opportunities and challenges. This is true for all asset classes including commercial real estate, given its longer-term investment horizon. For over 40 years, Clarion Partners has grounded our investment strategy in market expertise and detailed research. We work to identify fundamental themes that are driving the economy and creating demand for various property types. Our goal, on behalf of our clients, is to invest in the right assets, in the right markets, at the right time. And throughout this video series, we'll explore five macro themes and their impact on real estate — and examine the sectors we believe will outperform.
The first macro theme is Demographics. How is the overall population growing and changing? Where are people and jobs moving? On one hand, the Millennials and Gen-Zers are entering their prime earning, spending, and household formation years. This impacts all real estate sectors. On the other hand, the large Baby Boomer generation is living longer supporting different types of housing, medical office, and the life science sector.
Our next macro theme is Innovation. Think about how innovation and technology have changed our lives over the past decades — from the way we communicate, to the way we shop, to how long we live. How does this affect real estate? Take for example the development of new medicines and technologies — leading to strong demand for both life science space to support R&D, and medical offices for treatment. The rise of AI and the resulting need for increased data storage and distribution capacity, is leading to strong demand for data centers. In a geographic context, technology and innovation are driving the rise of Next Gen Cities such as Austin and Nashville, as well as the expansion of existing technology hubs like Seattle, Boston, Silicon Valley, and North Carolina's Research Triangle.
Our third macro theme is Shifting Globalization Patterns. The changes in where goods are coming from, combined with an increase in onshoring and nearshoring, are resulting in shifts among distribution hubs and warehouse locations. Further, growing concerns over supply chain security are driving investment in domestic manufacturing, with additional implications for industrial warehouse and housing demand.
Our fourth theme is broadly related to Housing. Within this, two major trends are unfolding: first, an overall undersupply of Housing, and second, affordability challenges. Since the Global Financial Crisis, the construction of new homes has fallen well short of the historic demand driven by new household formation, resulting in an estimated 3-5 million unit shortfall throughout the U.S. This is one of the drivers of today's affordability challenges, along with already high for-sale housing prices and significantly higher borrowing costs. We believe that these dynamics are long-term tailwinds for all rental housing, from traditional apartments to built-to-rent single family communities, as well as sectors that are correlated to housing, like self-storage.
Our last macro theme is Resiliency. Climate impacts, environmental sensitivities, and changing governmental regulations are just a few examples of risks that may influence real estate value. So how do we protect our portfolios against this risk? We believe it's prudent to be defensive and focus on investing in assets we think are well-positioned for the future.
So those are our five macro themes that we feel are driving trends within commercial real estate and guiding our investment targets. We'll take a closer look at the specific property sectors that benefit most from these themes over the coming weeks.