Before the Covid-19 pandemic, most Americans were unfamiliar with the unique challenges and flexibility of remote work; the past two years, however, have irrevocably changed the nation’s relationship with work-from-home or remote work opportunities. A significant portion of the American workforce will work either part-time or full-time from home for the foreseeable future. Many major companies have already transitioned to offering full-time remote positions. This massive, unprecedented change in industries nationwide will present widespread changes in the real estate industry for years to come.
Changes in Demand for Commercial Spaces
Traditionally, the development of commercial spaces would lead to an increase in surrounding property values to accommodate a new wave of employees. This pattern, however, has been disrupted by the growing popularity of remote work ushered in by the coronavirus pandemic.
The next few decades may see a decreasing demand for office spaces and other commercial buildings. This is because remote work in the technology, education, healthcare, customer service, and retail industries move many workers entirely online or shift to a hybrid model (a combination of remote and in-person employment). Businesses may downsize their office space or forgo physical spaces altogether.
The Housing Market in Major Cities
Because of the increasing availability of remote work, new homeowners may not have the same obligation to choose their residence based on employment or proximity to public transport. That means that young families, new homeowners, or investors in residential real estate may be looking outside of expensive cities for attractive, affordable properties. Overall, many experts predict that the value of housing in large urban centers will dramatically decrease.
Increase in Demand for Suburban Rentals
While many workers may be leaving their urban environments, they may not necessarily be purchasing homes of their own. For real estate investors interested in expanding their properties to the suburbs, it may be profitable to consider the needs of work-from-home tenants. Properties with office space and up-to-date appliances are likely to fill quickly. Overall, this will lead to an overall reduction in rental turnover. Smaller cities just outside major urban centers are likely to be the first areas with increased demand for rental units.
The Rising Cost of Suburban Real Estate
When urbanites are no longer tied to big cities for employment, they often seek properties in less expensive suburban or rural areas. While suburban properties are traditionally less expensive than their urban counterparts, the influx of remote workers in these areas may create a housing affordability crisis in suburbs nationwide. In some cases, even small communities across the nation are experiencing a sudden boom in population. This boom in population is from remote workers looking for affordable housing in suburban and rural areas.
Co-Working Spaces in Expensive Cities
How will these changes affect the real estate markets in big cities? Some workers may be unwilling or unable to leave their urban homes. While many jobs will go online, many more will go online only part-time. This means that many workers will still need to reside within commuting distance of their place of employment. Living in expensive, crowded cities, these workers may not have the requisite home office space to navigate their work-from-home responsibilities. To accommodate this, many apartment complexes or commercial buildings offer co-working spaces. Remote workers can rent these spaces if they do not have adequate space at home.
What This Means for Real Estate Investors and Agents
If you are an investor in commercial and residential real estate, it is essential to pay attention to real estate market trends influenced by the increase in remote work. While the commercial real estate value may decrease over the following decades, we may see a boom in the residential housing market. Investors need to be flexible and adapt to the coming changes in the real estate market. Make sure to have professional photos taken of your listings and ensure that those photos highlight things like a home office or big yard.
