Remote work and its effect on real estate
A pandemic necessity. But, how have remote preferences and hybrid workstyles since impacted business and real estate development?
The mainstream adoption of remote work practices has been one of the COVID-19 pandemic’s most prolific and long-lasting legacies. Even as more companies move toward hybrid workstyles, remote work has fundamentally changed the face of the spaces in which we live and work, in more ways than one.
The effect on real estate
During the pandemic, priorities shifted. Research by Stateline, which analyzed postal change-of-address forms, found that in the first year of the pandemic many moved out of city centers and metropolitan areas into suburban and rural areas. With access to a reliable internet connection, many people quickly realized that effectively fulfilling their work responsibilities doesn’t require a commute to an office five days a week.
Remote work created a shift in housing demand which subsequently affected housing prices across the country. Between 2020 and 2022, the U.S. housing market saw house prices increase by 20%. Locations that were attractive to remote workers – namely suburban and rural areas – saw average house prices sharply rise, according to analysis from the Economic Innovation Group.
As homeowners and renters continue to face high costs in 2023, the housing market is steadily cooling. Interest rates are increasing, affordability is deteriorating and construction levels are gradually declining in response to the market cooldown according to a recent report by the Joint Center for Housing Studies of Harvard University.
The mass exodus from major cities may have been somewhat short-lived, but the sudden expansion of remote work and the ongoing persistence of hybrid schedules are likely to continue to influence future house prices and inflation.
The effect on office spaces
As of summer 2023, half of all offices across the largest cities in the United States remain unoccupied. Kastle Systems analyzed data to identify trends in how Americans are returning to the office. Their research found that both Chicago and Los Angeles reached post-pandemic office occupancy highs of 55% and 51% respectively – not even reaching two-thirds capacity. 95% of offices were occupied pre-pandemic.
New office leases decreased from 250 million square feet pre-COVID-19 to 100 million square feet in 2022. Office property values have yet to return to their levels from before the pandemic. It’s predicted that by 2029 office values will remain 40% lower than they were in 2019.
Research conducted by The Centre for Economic Policy Research indicated that companies navigating remote or hybrid workstyles are cutting office space to save money on empty space and calibrate for new ways of working that don’t revolve around centralized offices.
What do workers want?
Technology is the enabler of remote working. But since the pandemic, cultural attitudes of workers have also been just as important in how remote work has been embraced. For that reason, the pandemic was a tipping point.
Research from workplace solutions company Regus found that 54% of workers have employers who allow remote work, and 70% of workers said flexible working arrangements are important to them. Almost 33% said they were more productive at home than at the office. Add in the lack of a commute and more time to focus on maintaining their work-life balance, it’s understandable why the flexibility of remote working is appealing to so many.
But workers aren’t prepared to completely cut out their in-office time. Data from Forbes Advisor indicates that a third of workers prefer a structured hybrid schedule – one that offers the best of both worlds: flexibility and collaboration.
Hybrid work may continue to lure workers out of the cities and into the suburbs, prolonging the economic shockwave in both the private and corporate real estate markets. But hybrid models may have long-term economic benefits too: reduced absenteeism, greater efficiency and better mental health among workers.
Sources: stateline.org; frbsf.org; jchs.harvard.edu; kastle.com; businessinsider.com; regus.com; cepr.org; forbes.com;