Although remote work has existed for many years in some sectors, it saw a sudden rise during the COVID-19 pandemic. Throughout 2020, companies were forced to send their employees home and adapt to a new work-from-home model.
Today, some employers have called their workers to return to the office. However, many companies have maintained their remote or hybrid work structures. Remote work offers a number of valuable benefits for employees and employers alike. Employees enjoy more flexibility and a better work-life balance, and employers can expand their recruitment pool to candidates outside of their immediate location.
Overall, most people would agree that remote work has changed life for the better. Its effects can be felt in more ways than one, though. Since 2020, the rise of remote work has had a major impact on the real estate market. Because remote workers spend so much time at home, their needs and wants for their houses have shifted. Demand has also risen sharply across the country, which is due in part to the migration of remote workers from cities to suburbs.
Whether you’re a prospective buyer, seller, or investor, understanding the impact of remote work on real estate can help you find success in the market.
Migration From Cities to Suburbs
The COVID-19 pandemic was the beginning of remote workers’ exodus to the suburbs. For many, living in a major city suddenly lost its appeal. The amenities that used to be available to city dwellers were closed or limited due to the pandemic, and many individuals and families had growing concerns about health and safety.
Those whose jobs went remote saw the opportunity to leave the city while maintaining their employment and salaries. Not only did suburban or rural communities feel safer during the pandemic, but they also offered a much lower cost of living. A salary that could only afford you a cramped one-bedroom apartment in a major city could potentially get you a spacious house in the suburbs. This made homeownership a possibility for many people who were stuck renting when they had to live close to their offices.
Moving to the suburbs for more space and peace wasn’t the only trend during the work-from-home boom. Some remote workers also relocated to be closer to families or to live in their desired climate. Overall, though, the country saw a shift away from cities and toward smaller communities.
Rising Housing Costs
Housing costs have risen across the United States for several reasons in the last few years. For instance, the drop in interest rates in 2020 and 2021 motivated many buyers to enter the market, driving up demand. Rising material costs and supply chain issues have caused a shortage in available homes as well.
Although remote work is not entirely to blame for the rise in home prices, it seems to have contributed. Because remote workers gained the ability to move wherever they wanted, many chose to relocate to lower cost-of-living areas to reduce their expenses. As these areas saw an influx of high-earning remote workers, housing prices sharply rose. Not only was there an increase in competition for the available real estate, but the new residents were often able to make larger bids.
The Need for a Home Office
In addition to increasing the demand for housing across the country, remote work has also caused a shift in what buyers look for in a property. Before the COVID-19 pandemic, a home office was seen as a nice addition to a home, but it wasn’t usually a selling point. Today, a home office is a necessity for many buyers. Full-time remote workers value having a designated space to work that’s quiet, private, and in a low-traffic area of the home.
If your house has a room that functions well as a home office, it could be a great feature to highlight if you ever plan to sell. Even if you don’t use the space as an office, you could stage it before putting your house on the market. An extra bedroom can always be converted into an office, too.
Remote Work’s Impact on Rentals
In most areas, the rental market tends to stay in line with the real estate market. As housing prices skyrocketed throughout the early 2020s, rental rates also rose. The demand for rentals in major cities did decline somewhat at the beginning of the pandemic as workers migrated toward the suburbs. However, in today’s market, there’s a high demand for rentals in practically every area of the country.
Mid-sized cities, such as Orlando, Charlotte, and Boise, are seeing a dramatic rise in rental demands. These cities are popular with young professionals, many of whom are remote workers looking for growing, up-and-coming communities. Although these cities are still more affordable than major cities like New York and Los Angeles, rent prices continue to rise.
Investors are wise to appeal to remote workers when marketing their rental properties. Some even create a shared co-working space in their buildings that remote employees can enjoy. High-speed internet is another great amenity to offer.
Commercial Real Estate Market Decline
As demand outpaces supply and prices continue to rise for houses, the commercial real estate market is actually facing the opposite problem. Because so many companies have shifted to a hybrid or remote work model, they don’t need massive office buildings anymore. Some have downsized to smaller buildings, and others have eliminated their office spaces altogether.
Throughout the country, many office buildings remain unoccupied. The demand for office spaces will never disappear, but investors are starting to look elsewhere for opportunities. For instance, retail and industrial buildings are performing better in the real estate market than offices, so commercial investors may begin to prioritize these spaces.
The Future of Real Estate With Remote Work
Work-from-home has established a permanent place in our culture. The flexibility of remote work has allowed home buyers to expand their search to new locations, driving up demand in mid-sized cities and suburban communities. For as long as the demand exceeds the supply, housing prices will likely continue to rise. Those who secured their homes for a low interest rate in 2020 and 2021 will hesitate to sell, further reducing the supply of available properties.
Some companies have called their employees back into the office after a few years of fully remote work. However, most remote employees are strongly resisting the return to in-person work. Many have moved so far away from their offices that they physically can’t commute anymore. In many industries, it appears that remote work is here to stay.
If you’re a remote worker who’s planning to buy a home, you can enjoy the flexibility that your job offers you in regards to your location. If you live in a popular area for remote workers and are planning to sell your home, consider how you can market your property to the work-from-home population.