Last year, the world came to a standstill. Office workers across the country moved to remote work from home pretty much overnight. And here we are, fourteen months later, with the pandemic still looming over us. Most office-goers are still working remotely from home, and it doesn’t look like it might change anytime soon.
The Covid 19 pandemic has helped the world adapt to remote working far quicker than anything else has in the past. And since we now realize many businesses can operate fully or partially in a remote setup, it is unlikely we will go back to the traditional office space like before.
Now, this has caused some turbulence in the real estate market and industry. The way both businesses and consumers have started to look at property ownership and leasing is way different from what it was before.
Real estate pricing and development pretty much depend on two things – where people work, and where people live. Commercial and consumer real estate are highly intertwined, in that one has an effect on the development of the other.
Cities have grown into mega civilizations based on the fact that people want to work and live in cities because of the opportunity at livelihood they present. A house close to the city center or business park costs more to buy or rent purely because it provides easy access to said commercial spaces. A similar-sized property would cost less if it is away from the city.
How things are changing
It’s a game of pure supply and demand. If a new business center is developed, there is bound to be new housing property development to cater to the crowd that would potentially work in that area. If a commercial project development is taken up near a residential neighborhood, property prices of the houses there will see an automatic raise.
But the pandemic has changed the idea of both where we live and where we work. With working remotely being the norm, people no longer need to work out of an office building or space. That immediately puts the thought on how commercial real estate and office space development will look like from now on.
People are also looking to move to or are already moving to suburbs and smaller towns, away from the expensive city real estate. Many companies, big and small have announced that they would be working partially or fully remote even after the pandemic subsides. People are encouraged now more than ever to buy or rent in areas which were not as popular before. And we are already seeing this happen.
Since going to work every day is not a thing anymore, people don’t have to worry about being closer to public transport or freeways which take them to and from work and home.
The housing market is hot right now
While the pandemic has shifted the focus of where people are buying, it hasn’t slowed down residential buying as such. The buying interest has just changed locations, that’s all.
Smaller cities and suburbs are seeing a huge influx of interest. They seemingly have a better quality of life at a better cost of living. Which in anybody’s mind will sound like a win-win situation. This is motivating people, especially first-time buyers, to seek such properties and real estate opportunities out.
Companies will be taking a call on extending remote work opportunities in the near future. If not fully remote, at least hybrid working will be the most common compromise. As people increasingly realize that they do not necessarily have to be tied down to a physical location for their employment and livelihood, the residential real estate market will keep seeing a constant shift.
Businesses will rethink their property holding and leasing
A lot of commercial real estate is office spaces to accommodate white-collar office workers. Now any job that can be done on a laptop, can be done working from home. The need for many jobs to work out of physical office spaces is no longer a real need.
In this changing scenario, businesses that have their own office spaces or ones that rent or lease are reconsidering how they want to use them. The need for larger office space no longer seems to make sense. With almost all such companies agreeing and enforcing a work from home policy, they know that they will never have the same number of people in the office as before.
The need for an office space that accommodates all their workers is no longer necessary. Businesses can and are choosing to downsize their real estate footprint. They are opting for smaller office spaces which works better if you have a rolling roster of employees in and out, and will never have all of them come in at the same time ever.
This will save these businesses costs associated with having and running an office space, especially if it is in dense downtown city centers. They could also choose to relocate to a not-so-urban area where setting up a smaller office would be far cheaper.
Since a sizeable chunk of their workforce will be remote and the rest will come in only a few days of a week, this would work out in favor of such businesses.
A different kind of working and living spaces will emerge
Future development of office building projects will most definitely incorporate the above ideas and trends in determining how office spaces will look in the future. Close quarter working will no longer be desired.
The size of the typical office space could come down by 30% and as much as even 50% or more. It would be built for lesser people and with more open spaces. Conventional commercial real estate will evolve to cater to these new needs and trends of businesses.
As for residential spaces, we might see an increase in the demand for properties with home offices. Or at least with a space in the building or neighborhood for a co-working setup. Having work studios and the ability to have dedicated workspaces integrated or in parallel with living spaces will be all the rage.
The bottom line…
The ways in which people conduct their business and how they live their lives are changing. But it does not necessarily spell doom for the future of real estate at large. In fact, this is an opportunity for the industry to adapt and evolve to cater to the needs of the people and the market.
Remote working is here to stay, there is no doubt about that. The real estate industry needs to look at the behavioral change of its consumers and provide new and innovative solutions that meet what they are looking for.