Last year the world stood still. Office workers across the country switched to remote working from home virtually overnight. And here we are, fourteen months later, with the pandemic still looming over us. Most office visitors are still working from home, and it doesn’t look like this is about to change anytime soon.
The Covid-19 pandemic has helped the world adapt to remote working much faster than anything else in the past. And now that we are realizing that many companies can operate in whole or in part in a remote setup, it is unlikely that we will return to traditional office space as we did before.
This has now caused some turbulence in the real estate market and the industry. The way both businesses and consumers have started looking at home ownership and leasing is vastly different from the previous one.
Real estate pricing and development depends pretty much on two things – where people work and where people live. Commercial and consumer real estate are closely intertwined as one influences the development of the other.
Cities have become mega-civilizations because people want to work and live in cities, because they have the opportunity to earn a living. A home near the city center or business park will cost more to buy or rent simply because it offers easy access to that business space. A property of similar size would cost less if it was outside of the city.
How things are changing
It is a game of supply and demand. When a new business center is developed there will inevitably be new residential property developments to serve the crowd that would potentially be working in the area. If a commercial project development is started near a residential area, the real estate prices of the houses there are automatically increased.
But the pandemic has changed the way we think about where we live and where we work. Since working remotely is the norm, employees no longer have to work from an office building or room. Immediately one notices what commercial real estate and office space development will look like from now on.
People are also already looking for or moving to suburbs and smaller cities, away from expensive city properties. Many companies, large and small, have announced that they will work partially or completely remotely even after the pandemic has subsided. People are now more encouraged than ever to buy or rent in areas that were not so popular before. And we’re already seeing that.
With the daily commute to work no longer an issue, people no longer have to worry about the proximity of public transportation or the highways that get them to and from work and home.
The housing market is hot right now
While the pandemic has shifted the focus to where people are buying, it has not slowed down home purchases as such. The buying interest has just changed locations, that’s all.
Smaller towns and suburbs are seeing a huge influx of interest. They seem to have a better quality of life for a better cost of living. Which will sound like a win-win situation in everyone’s opinion. This motivates people, especially first time buyers, to look for such properties and real estate opportunities.
Businesses will be accepting a call to expand remote working opportunities in the near future. If not completely removed, at least hybrid working will be the most common compromise. As people increasingly realize that they don’t necessarily have to be tied to one physical location to do their jobs and livelihoods, the residential real estate market will change all the time.
Companies will rethink their property ownership and rental
Many commercial properties are office space to accommodate office workers. Now any work that can be done on a laptop can be done from home. The need for many workplaces to work from physical office space is no longer a real necessity.
In this changing scenario, companies that own, rent or lease office space are rethinking how they are used. The need for larger office space no longer seems to make sense. With nearly all of these companies agreeing and enforcing a home office policy, they know they will never have the same number of employees in the office as they did before.
The need for office space to accommodate all of your employees is no longer necessary. Companies can and want to reduce their real estate footprint. You opt for smaller office spaces that work better when you have a rolling list of employees who come in and out and never all come in at the same time.
This saves these companies costs associated with setting up and running office space, especially if they are in dense city centers. You could also opt to move to a less urban area where setting up a smaller office would be much cheaper.
Since a considerable part of their workforce will work remotely and the rest only come a few days a week, this would work out in favor of such companies.
A different type of work and living space is created
The future development of office building projects will definitely incorporate the above ideas and trends in determining the future appearance of office space. Working in confined spaces will no longer be desirable.
The size of typical office space could decrease by 30% and even 50% or more. It would be built for fewer people and with more open space. Traditional commercial real estate will evolve to meet these new business needs and trends.
In the case of living space, the demand for properties with home offices could increase. Or at least with a place in the building or in the neighborhood for a co-working setup. Work studios and the option of having dedicated work areas integrated or parallel to living spaces will be trendy.
The bottom line …
The way people run their businesses and live their lives are changing. But it doesn’t necessarily mean the downfall for the future of real estate as a whole. Indeed, this is an opportunity for the industry to adapt and evolve to meet the needs of the people and the market.
Remote working is here to stay, no doubt about that. The real estate industry must take into account the changes in behavior of its consumers and offer new and innovative solutions that meet their needs.