07.3.2024 PropStream
Disclaimer: PropStream doesn’t offer investing advice. We highly recommend consulting licensed professionals before choosing a real estate market to invest in.
The COVID-19 pandemic changed the way many Americans work. According to the Pew Research Center, in October 2020, 55% of workers with jobs that could be done remotely worked entirely from home—up from just 7% pre-pandemic.
Now that accommodations for the virus have mostly subsided, many companies have asked their employees to return to the office. In February 2023, only 35% of workers with jobs that can be done remotely were working from home all of the time, and a growing share (41%) had hybrid schedules—working from home some days and from the office other days.
In this article, we’ll explore how these work trends may impact the real estate market so you can make dynamic investment decisions.
Table of Contents
- Rise of Remote Work Inspired Urban Exodus
- Return to Work Mandates and Hybrid Schedules
- How a Return to Office May Impact Real Estate
Capitalize on Return-To-Work Market Shifts With PropStream
Key Takeaways:
- As we return to a sense of normalcy post-COVID, many offices are requiring employees to return to the office either part-time or full-time.
- This shift will likely create notable changes within the real estate industry regarding which property types increase in value (due to demand), which regions are more sought-after, etc.
- Real estate pros can navigate the changing market using PropStream’s in-depth datasets and other tools.
Rise of Remote Work Inspired Urban Exodus
Before diving into how a return to work may impact housing, you must first understand what the abrupt shift to remote work in 2020 did to real estate.
No longer tied to their offices in cities, many workers moved to more rural and suburban areas—to minimize their risk of contracting the virus, live closer to family, pursue a different lifestyle, or find cheaper housing. The resulting migration increased demand for housing, especially in historically lower-cost areas like Texas, Florida, and North Carolina. Some mid-size cities received such an influx of remote workers that they were dubbed “Zoom towns” (after the video conference platform Zoom).
Home values responded accordingly. Between Q2 2020 and Q4 2022, the median sales price of U.S. houses jumped from $322,600 to $479,500—a 48.64% increase.
Meanwhile, office occupancy rates and values plummeted. Not only have offices suffered from less demand, but higher interest rates have made it harder to refinance mortgages. Now, building owners and the banks that hold their loans face a major crisis, which could have second-order effects on residential real estate.
Return to Work Mandates and Hybrid Schedules
Today, many employees are being called back to the office. According to a survey of 1,000 company leaders conducted in August 2023, 90% of employers plan to implement return-to-office policies by the end of 2024, and nearly 30% said their company will threaten to fire employees who don’t comply.
At the same time, some experts predict that the 5-day, in-office work week will no longer be the norm. A Bankrate survey showed that 68% of full-time workers support a hybrid work schedule, working at least one day a week remotely and the other days in the office. Furthermore, only 10% oppose it, and 23% said they neither support nor oppose it.
Now that many workers have become accustomed to working from home, they may be reluctant to give it up completely, and hybrid schedules may become the new norm.
How a Return to Office May Impact Real Estate
Employees getting called back to work in the office (full-time or part-time) could significantly impact the real estate market. Even if you’re only required to be at the office once per week, that still requires you to live near it, which could result in the following:
Costly relocations. According to a 2023 survey, 10% of home sellers were forced to sell due to return-to-work mandates. When faced with the choice of moving back to the city or losing their job, many choose the former—even though it often requires selling at a loss (if you bought at the market’s peak) and taking on a higher mortgage rate.
Changes in homebuyer preferences. To minimize their commute, many people want to live within walking or biking distance from work or at least near a highway. Those who move back to the city may also need to downsize. Additionally, the demand for home office space may fall and inspire increased demand for open floor plans.
Home value shifts. Urban areas with large employers may see a rise in property values due to the increased housing demand fueled by return-to-work policies. Conversely, rural and suburban areas may see a drop in home values due to recent move-ins returning to the city for in-person work.
Rental market shifts. Urban rental markets could tighten, leading to higher rents and lower vacancy rates. In contrast, rental properties in suburban and rural areas may see lower rents and higher vacancy rates as tenants return to the city for work.
An uptick in demand for office space. While commercial real estate (CRE) is still facing a major crisis, it may see an uptick in demand from companies calling workers back to the office. Shared offices may become especially popular as they allow employers who impose hybrid schedules to cut costs by sharing office space with other companies. Overall, the increased demand for office space could put upward pressure on CRE values and local home values.
Note: Real estate trends are highly regional. Not all cities may see the trends described above. Do your due diligence before investing in a particular market.
Capitalize on Return-To-Work Market Shifts With PropStream
As more Americans return to in-person work, some markets may see an increase in demand and value while others see a drop.
To stay on top of these housing trends and maximize the ROI potential of your future deals, PropStream It! Our platform has data for over 155 million properties nationwide that you can sort through with hundreds of convenient filtering options.
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Frequently Asked Questions (FAQs)
How will return-to-work mandates affect urban and suburban housing markets?
On the one hand, return-to-work mandates are likely to increase demand for housing in urban areas as more employees need to live closer to their workplaces. On the other hand, they are likely to lower demand for housing in suburban areas as many new move-ins are forced to return to the city.
Will the demand for home office spaces decrease with return-to-work mandates?
Yes, the demand for dedicated home office spaces may drop as more employees return to offices. However, those with hybrid schedules may still need an office at home, making this trend less pronounced than it otherwise would be.
What should investors consider when analyzing real estate markets affected by return-to-work mandates?
Among other things, investors should consider major local employers and their work policies, local transportation infrastructure (used to commute to work), and overall housing demand.
Which cities will see the most considerable appreciation in property values due to return-to-work mandates?
It’s impossible to say. However, cities with employers who let their staff work from home during the pandemic and are now calling them back may see the most significant upward pressure on property values (e.g., Seattle, San Francisco, and New York City).
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