Over the past couple of weeks, we’ve been discussing the topic of remote work as more people consider what the future of work looks like. The first part of this series identified the pros for remote work and how it could affect employees and employers. In the second part, we looked at the cons in order to help paint a picture of how working from home can change the employment landscape. The third and final part will examine the possible impact of remote work on the economy.
Before we dive into its’ impact, let’s revisit some of the key pros and cons involved in the conversation surrounding working from home:
Pros for remote work:
- Higher employee satisfaction
- Both parties can save money
- Increase independence and technical skills
Cons for remote work:
- Creates disconnect among teams
- Distractions can lead to decreased productivity
- Not applicable for every position
When discussing remote work, most of the conversation focuses on how it will affect managers and their teams. But it’s also important to look at the big picture, and that includes how implementing remote work could impact the economy.
It’s estimated that by 2025, 36.2 million Americans – which makes up 22% of the workforce – will be working remotely. Major players like Spotify and Twitter have announced that their teams can move to an entirely remote schedule if they choose, with dozens of others following suit. But with millions of people working from their homes (or wherever they choose), what will happen to the corporate real estate market, or the retail businesses and restaurants that rely on in-office employees to make money?
Some reports have already begun to show the effects of remote work on office leasing. Moody’s Analytics, which provides insights into financial intelligence for clients, predicts that office vacancy rates will climb to over 20% in 2022, up from 16.8% in 2019. Their recent survey of 248 chief operating officers in the U.S. “found that one-third plan to reduce office space in the coming years as leases expire.”
Though it feels like the coronavirus ushered in the decreased need for physical office space, office occupancy has been on the decline since around 2009, which some believe is due to rent increasing after the 2008 recession. This 10+ year decline might have had a bigger impact on the real estate industry if it weren’t for the fact that only 40% of real estate is made up of office space. (The other 60% is comprised of retail, apartments, and industrial real estate, each making up 20%.)
Another point to consider is the hybrid work model, which experts believe is the most realistic option regarding remote work. In this model, employees would split their time between working remotely and in the office depending on their preference or what they’ve agreed to with management. This way of working would allow teams to connect in person but still offer the opportunity to telecommute – and it would mean companies would still need a physical space to operate from.
In large cities like New York or Chicago, the downtown areas are comprised of office buildings and, in some cases, skyscrapers that contain thousands of workers. The ecosystem surrounding them is typically made up of cafes and other lunch spots, retail shops, and bars advertising happy hour –– all of which are reliant on the corporate crowd for revenue. Even under the hybrid model, these businesses will likely suffer without the office workers around to help grow revenue.
With all this considered, there will be some trends that emerge related to remote work, particularly regarding the effect on the real estate market. Here are our predictions:
Shorter office leases
According to Business News Daily, the average commercial lease is three to five years. Because the coronavirus taught us how important it is to be adaptable, brokers will probably start offering shorter leases, so companies don’t feel trapped by a long commitment. This could usher in a new era where companies can move offices more efficiently if need be for reasons like mass layoffs.
The new workplace trend will differ from the traditional office setting as we see more companies opting for flexible work spaces, similar to WeWork’s model. These work spaces, which will likely be short-term leases with the option to continue, will allow for the hybrid working model and account for fluctuating remote workers. It’s possible that flexible, shared work spaces will take over the now empty office spaces and buildings from businesses not resigning their leases.
Rent and retail costs increase
Because there’ll be fewer corporate workers in major downtown areas, landlords and business owners will have to find other ways to bring in money, and that will presumably lead to increases in rent for those living in the area. Prices at retail stores and restaurants may increase as well, or close permanently if they can’t make ends meet.
Companies find new perks to offer
In-office advantages like a coffee bar or ping-pong table are often listed as employee perks in job descriptions, but with remote workers, these perks aren’t quite the same. Hiring teams will have to be creative when thinking of perks for the employees that work remotely.
- Empty offices/buildings will be replaced with flexible, shared workspaces that individuals or companies can utilize.
- Rent and other amenities may increase to accommodate for less corporate workers in downtown areas.
- Real estate brokers will focus on quantitative results, offering shorter (and probably less expensive) leases.
Remote work has had an impact on most aspects of our life; but one not often considered is how it positively affects the environment. “Work from home jobs reduce the number of cars on the road, thereby reducing overall greenhouse gas emissions, fossil fuel consumption, and energy usage. It also helps reduce environmental and human health impacts as a result of decreased air pollution.” (Via Virtual Vocations)
Throughout The Future of Work (From Home) series, we’ve looked at the pros and cons of remote work and the possible impact on the economy. We know that while some things will stay the same, the traditional 9-5 in-office model has been permanently disrupted – and that the 2020’s will bring in a new era of work. Use this guide to understand how remote work will affect your communities and whether it’s right for you or your company.