How Working Remotely Will Impact the Future of Real Estate
We’re becoming a more globally connected society right before our eyes. In 2010, only 1.8 billion people had access to high-speed internet. By 2016, this had increased to 3 billion. And according to experts, it is possible that all of the world’s 8 billion people will have high-speed internet access as early as 2022.
The proliferation of high-speed internet is boosted by advances in technology. Companies like Google and Facebook are leading the way by testing solar-powered drones that could deliver high-speed internet to remote areas from the air. Really high-speed internet. Google’s Project Skybender aims to deliver data using 5G technology, which some say could be 40 times faster than the 4G service we’re accustomed to today. Not to be outdone, Tesla and SpaceX founder Elon Musk has asked the FCC for permission to launch 4,425 satellites into space as part of a plan to blanket the Earth with broadband.
The widespread availability of high-speed internet is already changing the way we work. Working remotely is on the rise, and it’s become easier than ever for companies to hire people abroad. Case in point: approximately 30% of Mynd’s team works remotely, from as far away as Eastern Europe. Most of the remaining 70% work at least one day per week from home.
Platforms like Slack help to streamline project management, and Google Hangouts allow us to have virtual meetings as easily as if we were all in the same conference room here in Oakland.
It’s not just employees who love the ability to work from home. Employers see the benefits, too. Overhead costs are lower, and studies show that working from home can increase productivity. Perhaps most importantly, a remote working culture gives companies access to a global talent pool, rather than a local one. And, for companies in high-salary areas like the Bay Area, much of that global talent can be hired for a fraction of the salary of local employees.
The trend toward working remotely is going to have major implications for the real estate industry. Here are a few key considerations for real estate investors to monitor closely.
People may become less tethered to more expensive work centers.
The cost of real estate is sky-high in cities like San Francisco, Los Angeles, New York, Miami and Boston – and with good reason. These cities are major employment hubs that attract people from all over the world in search of well-paying job opportunities. Working remotely may mean that people no longer need to live in those areas in order to land jobs with companies based there. They can move to cities like Park City, Utah where the quality of life is high but job prospects are few and far between.
“This should lead to ascending real estate values in the most beautiful vacation spots, though it will take some time for that trend to accelerate as people reluctantly leave more ‘target rich’ (from an employment perspective) environments for the tranquility of their desired turf,” according to Forbes article on the subject.
Zapier, a San Francisco-based tech company, has gone so far as to offer employees $10,000 to move away from the Bay Area where the cost of living is lower. Zapier will undoubtedly recoup the incentive through lower overhead costs, but the company also sees it as a way to offer employees a higher quality of life by allowing them to work remotely in an area that is less expensive. Zapier has nearly 70 employees around the world, all of whom work remotely.
Workers may be willing to live farther from downtown.
Not everyone will be able to work from home every day. It’s just not conducive to some occupations (e.g., nurses, teachers, police officers) and some employers will want their team in the office more frequently than not. Nonetheless, a Gallup survey released last month found that 43% of Americans work remotely at least some of the time. The newfound freedom to work from home (even just occasionally) will inevitably affect where people decide to live.
Those who long for a single family home in the suburbs may flee the city, accepting a longer daily commute if they only have to make the trip a few times a week. In exchange, they’ll enjoy the larger homes, lower real estate prices, better schools and neighborhoods with lower crime that typically characterize the suburbs.
Demand for specific housing features will change.
The shift to working remotely is rocketing the importance of home offices. Working from the sofa, beach or Starbucks just doesn’t cut it anymore. It might be easy to integrate a home office into a single family rental property, but it will be harder to provide in smaller multifamily rental units. But this doesn’t mean multifamily owners should turn a blind eye to the working remotely trend. Many multifamily developers are now building co-work spaces into their rental properties.
“When I was looking for apartments, a lot of buildings said they had an office, but when you got there you’d find this sterile room from the 1990s, lots of brown and mauve,” explains Maani Safa, the co-founder of Etch. “A space like that is utterly useless – an office should be about invoking a feeling of creativity and calm, it should be a place I want to bring people. Otherwise I’d stay in my apartment.” Safa ultimately leased a two-bedroom apartment at the Abington House in West Chelsea, a multifamily building that offers a modern co-working space on the ground floor. Other developers are following suit, adding collaborative work studios and computer bars as part of their amenity packages.
Based upon these predictions, it might seem as though the growth of the remote workforce is going to spell the end of cities’ popularity. Not so fast. While some people may relocate to more affordable areas, we suspect demand for downtown living will remain high. Cities offer a dense collection of restaurants, arts and culture, entertainment and job opportunities that is hard to replicate in the suburbs. So we anticipate people will continue paying a premium to live in walkable, transit-oriented areas for the foreseeable future.
Real estate and technology are often looked at as different realms—but there’s growing overlap between the two sectors. It is important for real estate investors to monitor these trends closely in order to understand how advances in technology will impact the future of real estate. Those who remain at the forefront will be best positioned to protect their portfolios as the market shifts.