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Remote work is changing real estate in unexpected ways
Remote work became the standard for many during the pandemic. Many companies were forced to create a new ‘work from home’ (WFH) model in order to mitigate the risk of infection.
Subsequently, employees experienced the real advantages of remote work.
Now, the desire to work from home is affecting real estate prices, choice of locations, job options, floorplans, and design.
Remote Work Affects Job Choices
A November 2022 Columbia University study confirmed that remote work is a benefit that employees enjoy and are willing to pay for.
In response, many firms have gone fully remote. Others have moved to a hybrid work schedule of 2–3 days in the office per week.
Another source, which collected data from 1,000 office workers in July 2021 asked workers if they would choose either the long-term ability to work flexibly, or a 10% pay raise. Nearly 75% of office workers would prefer flexibility.
Flexibility vs. Pay Choice Differs by Age
The study also revealed that two-thirds of workers aged 18-35 would not apply for a new job unless it offered hybrid working.
The hybrid model was even more popular with younger workers. Over 84% of employees aged 18-24 would opt for flexible working over more money.
In contrast, those aged 55-64 are more than twice as likely to choose the pay raise and return to the office (41%) over remote work.
People can choose to live where they want
Home buyers and renters who work from home can choose to escape the city if they want. They can eliminate their commutes and the necessity of living close to public transport or freeways to take them to work and back.
Because of this, suburbs are experiencing a growth in new residents. These places are more attractive because they offer a higher quality of life and a lower cost of living.
Winning and Losing Locations
Cities with more tech jobs, which are attractive to remote workers, have seen more residents moving in, and consequently driving up house prices. Places with pleasant climates are also popular with remote workers.
On the other hand, cities less amenable to remote work lost residents and saw slower house price growth. Places based on service industries fall into this category.
Remote workers are driving up prices
A Federal Reserve Bank of San Francisco study states that nearly a third of employees work from home part-time or full-time as of August 2022. This has significantly increased housing demand and is a key factor explaining why U.S. house prices grew 24% between November 2019 and November 2021.
Indeed, the shift to WFH may account for more than half of overall house price increases and similar increases in rents.
Remote Work Requires Space
Unsurprisingly, buyers are more inclined to look for homes with a dedicated home office. It could be a spare bedroom, a basement, or even a sizable corner. Whatever it is, buyers are now searching for something that will allow them to separate their work life from their home life — even if it’s just in the form of four walls and a door.
In the future, we are apt to see builders incorporating a co-working space in developments as an added amenity. Other solutions could include co-working spaces within suburban neighborhoods. Certainly, the physical requirements of remote work present an opportunity for the industry to adapt and evolve.
Less Commercial Space is Needed
Commercial real estate, particularly office buildings, has been particularly impacted.
The Cambridge study highlights that pre-Covid, around 250 million square feet of new office leases were signed per year, but this fell to just 100 million in the first half of 2022.
In order to reflect the remote work trend, the size of office space could be reduced by 30% to 50% or more.
Businesses can save thousands of dollars on rent each month because there is no longer a need for a space big enough to accommodate all the employees. Even hybrid offices can choose rolling schedules where workers don’t have to come in simultaneously.
Weakening Value of Urban Office Space
The remote work trend has had an understandable impact on office values, which fell considerably and remain below 2019 values.
Simulations of office values show that the value of all NYC office properties dropped by more than 40% in 2020.
Predictions suggest that office values in 2029 will remain an average of 39% lower than they were in 2019.
Interior Design for Remote Work
Spending more time at home while sustaining job productivity is key for successful long-term remote work.
Interior designers are focusing on ways to make the remote work experience better. For example, having daylight is essential. There is a direct correlation between well-being and the amount of natural light in the workspace.
When possible, having a choice of places to work at different times can positively impact creativity, engagement, and health.
Having a connection with nature is beneficial to one’s productivity and mental health. Windows looking out, house plants, and even an herb garden can be a benefit.
Finally, but perhaps most importantly, privacy is essential. It can be difficult to find the privacy to work effectively in tight quarters. Portable physical screens can help. And, of course, sound barriers are easily created with headphones.
Future
Beyond commercial space values, the Columbia research suggests that the move to remote work could also have a similarly significant impact on the equity and debt markets.
They explain that for all of human history there has been a link between the places we live and the places we work. The rise in remote working has severed that relationship. This will impact not only the real estate market but society more broadly.
See also: Real Cost of Living Alone: The New “Singles Tax”
The views expressed in this article are not personal advice. You should contact a qualified, and ideally regulated, adviser to obtain up-to-date personal advice regarding your own personal circumstances. If you do not, then you are acting under your own authority and deemed “execution only”. The author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. This article reflects the legislation current at the time of writing. New legislation is rarely added to existing articles. Please check for later articles or changes in legislation on official government websites.
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