Fast forward to today, and America’s real estate is “aging in place” much like its population. The generational wealth transition and the wave of retirements have long been expected as the baby boomers pass on their $80 trillion of net worth. But something unexpected has happened along the way—the housing market froze and older owners stayed where they were or downgraded to compete with younger generations for “starter homes” that were also perfect for retired grandparents to be close to their families. As birth rates slow and not enough people are being born to sustain growth, commercial real estate is also 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 using them. A warehouse that is too small for robotics, an office that fails to attract top talent, or an apartment without adequate digital infrastructure all fall into this category. This is obsolescence. For business leaders and investors, this is not a niche concern in real estate. These assets either help people and companies compete or quietly drain productivity and capital.

While headlines fixate on interest rates, the deeper risk is the vast stock of outdated buildings that no longer fit modern life. With capital markets normalizing, investors can no longer rely on cheap debt to mask underperformance. Buildings either create value, or they do not.

Demographics and demand are rewriting the rules

The forces driving America’s real-estate obsolescence are as demographic as they are financial. U.S. birth rates are at historic lows and an average of 11,000 Americans retire daily. The boomer generation is wealthier and more active than any before, and spends heavily on experiences. Millennials and Gen Z devote more than half of their discretionary spending to experiences rather than goods. These long-term trends need to be a focus of the real estate industry.

Technology amplifies the shift. Remote work untethered households and businesses from geography, turning real estate from a supply-driven business into a demand-driven one. People now choose spaces that improve their quality of life and work, not just where they’re forced to be. Properties that fail to deliver are left behind, no matter how well located.

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

Office assets, often located in central business districts that were once bustling, are a timely example. According to CBRE, 23.3 million square feet of U.S. office space is slated for demolition or conversion in 2025, while only 12.7 million square feet is under construction. For the first time in decades, inventory will shrink, underscoring the scale of the challenge.

Obsolescence across asset classes

The effects of these changing demographics are visible everywhere. Industrial warehouses once built with low ceilings and narrow bays now constrain e-commerce distribution, where robotics and scale define efficiency. Numerous retail chains, once built on predictable foot traffic, are shuttering, while the same footprints are being reimagined for new service-driven uses.

Flexible work has reduced business travel, but it has also expanded demand for alternative accommodations. Retired baby boomers, along with their millennial-led families, are seeking out RV parks and campgrounds to share leisure experiences. At the same time, apartments without digital infrastructure or secure package facilities quickly lose relevance as groceries and package services increasingly arrive on demand.

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

A new investment playbook

For decades, real estate investing was like stock trading: buy, hold, and sell. All of this was based on an unchallenged trust that prices would continuously rise in an era sustained by cheap money and low rates.

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

Forward-looking investors are already repositioning assets. We’re seeing value in redeploying obsolete properties into essential operating businesses. Industrial warehouses with 20-foot clear heights, unsuitable for modern robotics-driven distribution, can be repositioned into more relevant uses such as climate-controlled storage. Buildings that once seemed like fixed costs must now must be managed as active tools of business strategy, capable of adapting as customer needs and business models evolve.

Similarly, the wave of former CVS, RiteAid, and Walgreens closures shows how quickly prized assets can become obsolete. Once considered safe bets for steady rent, many now sit vacant. Yet 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. They come from operational execution, transforming obsolete buildings into businesses that serve the evolving needs of Baby Boomers to millennials to Gen Z and beyond.

A turning point for investors

For investors—and for CEOs—the lesson is direct: America’s real estate can either age into obsolescence and freeze capital in empty shells, or be renewed into platforms that drive growth. The winners will treat real estate as an operating business, not a commodity, generating returns by creating useful places that meet evolving generational needs and deliver lasting value.

The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.