Can you remember three months ago? In just 90 days, things have changed dramatically. Just 90 days. Yet, in that short amount of time, the way we think about where we live and how we live has completely changed.
In the latter part of those 90 days, I have heard from many people that the pandemic has forced their hand and has actually inspired investment in new technology or motivated a change in operations. These changes are adding up to huge impacts.
One of the big changes is the work-from-home policy. What started as a way to keep employees safe at home is now turning into the most popular work trend across the country, inspiring companies everywhere to step away from very large real estate construction projects and lease deals.
When office real estate is expensive and the country is facing an economic meltdown, and a work-from-home trend falls from the sky, it would be silly not to take it, right?
This Margins article reports that 40% of all venture capital funding in Silicon Valley actually goes to landlords instead of product development, and admits that even though it’s a big number, it is probably very conservative.
Which, again, points to the soundness of organizations running away from physical real estate.
Massive global corporations across the country are either going completely or partially remote. The list starts with Twitter, which decided to go 100% remote. Other companies, like Mondelez, Nationwide, Facebook and Barclays, are also considering a permanent shift to work from home.
“It takes three months to form a habit,” says Mollie Carmichael, a principal at the real estate research firm Meyers Research. “We have been in COVID for three months, and because of this three-month period, we have gained trust and routine for working at home. We are going to see businesses letting more employees work remote.”
A survey conducted by the research firm Gartner reported that 75% of respondents plan to increase the number of permanent remote employees.
Another benefit from dedicating to a complete remote workforce is that the talent pool would be much broader than what could be found within a certain geographic circumference around the office. Some corporations, like Facebook, are looking at this as an opportunity to adjust pay scales as well, another silver lining to the work-from-home situation for the companies.
On the Other Side of Pay Day
Yes, this can be good for corporations, but what about the people who work for them? The majority of workers are rejoicing.
First, if these changes save the company money and that means they can keep their job, then, of course, that’s a win.
On top of that, the work-from-home world gives them flexibility, gets rid of the commute and lands them more family and leisure time.
Carmichael says that many of her clients love work from home because they are finally reconnecting with their family, and even starting to look at life a little differently.
A Hanley Wood flash survey showed that 60% of those working from home would like to continue to work from home. This recent Gallup poll, also showed that nearly 60% of respondents said that they would like to keep working remotely after restrictions on businesses and schools have been lifted.
Is there more than that?
There are also social reasons to cheer a more remote future. It might help reverse the geographic stratification of American life. Plus, remote work is showing a positive impact on the environment, since less commuting means fewer emissions.
Moving Out of the Office and Out to the Burbs
Urban lovers are giving up what they prize about city lifestyle to save money. The Hanley Wood survey also asked if employees would consider moving to a new home if they were allowed a permanent remote work situation—more than 36% said yes.
That number shoots up to 55% when respondents were asked if they would move if they currently lived in an expensive market and could go all remote. The affordability of the market, made a big swing in responses.
Which is certainly evident from what Facebook CEO Mark Zuckerberg told the Wall Street Journal recently. He said that about 75% of his employees expressed some interest in moving to a different city if they could work remotely. Certainly, anywhere would be more affordable than living near the Silicon Valley headquarters where the cost of living is ballooning because of a lack of new housing and because of the wealth created by the tech boom.
Carmichael pointed to online data on moving trends that definitely supports the idea that people are looking for places to live outside of urban areas.
“People will seek out the big house on the hill or the larger home away from everything because of the quality of life it gives you,” Carmichael says. “You get more space, better lifestyle, maybe drive in two times per week or don’t go into the office at all.”
Tom Woliver, principal and owner of a master planned consulting firm called Oxland Advisors, shared that opportunistic buyers can find deals on land. After doing some research, he says that land in “A” locations, which would be suburbs, costs 20% to 40% more than land in the next ring out.
“These outer rings were once considered next cycle opportunities, or drive to qualify opportunities,” said Woliver. “With more people working from home, these have shifted to ‘now’ opportunities due to cheaper land, resulting in lower home prices.”
Justin Onorato, CIO at BTI Partners, a master planned community land investor based in Florida, hopes this trend can help solve the nationwide housing affordability crisis.
He is currently getting entitlements for a planned residential community on 1,400 acres about 30 minutes from downtown Orlando that will house 4,000 lots. This community will have an urban center with retail and shopping, along with wetlands and natural features, and a grocery store a mile away. The residents would rarely need to leave the boundaries of the community.
“Sites like that will be in high demand,” Onorato says. “I always believed one day there would be a distributed workforce. People would start to realize that they didn’t need to commute an hour each way and that they could accomplish more from home and save the commute and the money. I live in Miami and our headquarters is in Fort Lauderdale, which is 25 miles and the drive would be an hour. Even with the new Brightline high-speed commuter train, it is still an hour commute.”
Onorato points out that builders don’t have the ability or desire to carry land at the moment, but with the lower cost of remote land becoming more desirable, there may be a land grab as capital starts flowing into home building.
Spreading the Wealth
Many of the jobs that can be remote happen to be at a higher-level pay grade and very often are also dual-income households. Some households are now made up of many salary-earners as more young adults move home in search of reprieve from suffocating urban apartment life.
In an article from Stansberry Research, when and if these remote workers pack up for a more affordable location, no matter where these workers settle, it’s going to have a big rising-tide effect.
For instance, the average age of Facebook employees is 29 years old, and the median pay for a Facebook employee in 2018 was more than $240,000.
These families will consume in the new location, maybe new locations that don’t offer such high paying jobs, and they will start to spend. The Stansberry article calls it “capitalism’s next rising tide,” eventually evolving into a more equally distributed, highly paid labor force.
So, although Onorato, and probably all of us, is hopeful that this will help solve the affordability issue, remote work only applies to a certain subset of the economy.
What’s Missing and Will it Matter?
There has been a definite trend in office real estate to use open office floor plan design that would encourage spontaneous interaction with colleagues, and therefore, hopefully, lead to the next best invention. However, as more offices move toward this design option, they are starting to uncover the pitfalls, including that office workers hate it.
Which leads me to this very brief evaluation of the substance of the remote work trend. So far, surveys show that employees are happily embracing the trend, but perhaps it will take more time to uncover some of the risks.
For instance, in the office there is a physical hierarchy, such as corner offices, which are opaque in a remote work environment. But less tangible are the social and emotional benefits of connecting to colleagues that may have a bigger impact on work results.
Despite the things remote work can’t deliver, Onorato predicts that the shift we are experiencing will last beyond the health risk of the pandemic.