REAL ESTATE: 5 CONSEQUENCES OF TELEWORKING FOR INVESTORS.

 REAL ESTATE: 5 CONSEQUENCES OF TELEWORKING FOR INVESTORS.

“Location, location, location!”

You know that old adage that is repeated over and over again in real estate?

It may well be that he is no longer as truthful. At least not in the way we imagine.

Long considered the most important factor in real estate investing, with the rise of remote work, this principle is being significantly challenged.

In 2023, the remote work trend had significant impacts on real estate investors.

Let's explore five key ways remote work has changed the game for real estate investors.

All supported by relevant statistics on the American real estate market

real estate teleworking

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Definition and operation of MLS in the United States

Remote working has led to a shift in demand for real estate.

The business environment has changed significantly. Even after a few years of the pandemic, many companies are allowing their employees to work remotely.

According to FORBES , by 2023, 12.7% of full-time employees will be working from home and 28.2% will be working in a hybrid model.

The consequence is that people are no longer obliged to live close to their place of work.

According to a survey conducted by Upwork , 41.8% of the US workforce worked remotely in 2021. This shift has increased the demand for properties in both SUBURBAN and RURAL areas.

In fact, the National Association of Realtors reported that the median home price in suburban areas increased by 13.6% in 2021, compared to just 11.2% in urban areas.

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Remote work boosts second home prices

Rise in popularity of second homes:

With remote work allowing individuals to work from anywhere, the popularity of second homes has exploded. People are increasingly investing in vacation homes or properties in desirable locations, where they can work remotely while still enjoying a desirable lifestyle. According to the National Association of Realtors, vacation home sales increased 57.2% in 2021 compared to the previous year. This trend presents an opportunity for real estate investors to capitalize on the growing demand for second homes.

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Focus on amenities and lifestyle

With remote working offering more flexibility, individuals are increasingly prioritizing amenities, facilities, and lifestyle when choosing a property.

According to a survey conducted by Zillow, 63% of remote workers said they would consider moving to a new city or state if they had the opportunity to work remotely permanently.

This shift in thinking has led to an increased focus on properties offering amenities such as outdoor spaces, fitness facilities and proximity to recreational activities.

Real estate investors can capitalize on this trend. The first step is to invest in properties that suit the lifestyle preferences of remote workers.

The fact is, home offices have been around for a while. In reality, they weren't used by many people other than the entrepreneur working from home.

In 2023, the home office has become a staple of most real estate listings.

Many real estate developers and property dealers are currently adding home offices to their homes. These offices are equipped with built-in desks, shelving, and custom lighting.

Adding a home office may not technically increase your property's value from an appraisal perspective. But it will certainly make your home more attractive to potential buyers.

Demand for office space is transformed

As remote working becomes more widespread, the demand for flexible office space has also increased.

Many people prefer to work in shared workspaces or coworking environments because it provides them with a dedicated workspace away from home.

Indeed, while many people are looking to work from home, some people are against this and are looking to find a dedicated workspace far from home.

According to a report by Global Market Insights, the global flexible workspace market is expected to reach $111.7 billion by 2027, growing at a CAGR of 21.3% from 2021 to 2027. Real estate investors can tap into this growing market by offering flexible office spaces tailored to the needs of remote workers.

Typically, this translates into greater contractual flexibility. Whereas historically, commercial leases could be signed for several years, it's likely we'll see more and more flexible types of contracts in office settings.

The concrete impact of teleworkers on commercial real estate

It is on this segment of real estate that the rise of remote working has had a significant impact.

As more companies adopt remote work policies, demand for office space has decreased.

According to a report by CBRE (Global Commercial Real Estate Services), the office vacancy rate in major US cities reached 18.7% in 2021, the highest level since 1993.

This shift has prompted real estate investors to explore alternative investment opportunities, such as converting office space into residential or mixed-use spaces.

This has also led to a decline in rental prices for office space, making it a difficult market for traditional commercial real estate investors.

Commercial real estate is currently experiencing the most drastic impacts, particularly in the office sector. In the first quarter of 2023, office vacancy rates hovered around 16%, compared to 11% before the pandemic.

There are simply too many offices available for rent and not enough demand.

Cities like Los Angeles are experiencing even higher vacancy rates. Vacancy rates reached a record high of 22.5% in the first quarter, up from 20.3% a year ago.

Large employers in the United States are realizing that it is no longer necessary to occupy thousands or even millions of square feet of office space.

The math is easy to do. They can increase their cash flow by eliminating these massive rent expenses while improving employee satisfaction.

This has created a painful situation for investors in large office buildings around the world.

Conclusion and future

In conclusion, remote work has brought about significant changes in the real estate industry. These are all factors that real estate investors must consider in their investment strategies.

As remote work continues to shape the way we work and live, adapting to these changes will be crucial to success in the real estate market.

People enjoy the freedom to work from wherever they want, so suburban real estate markets could continue to boom. Home offices will become a non-negotiable option in residential properties. Owners of large office buildings will face difficult decisions about what to do with these enormous assets, which could turn into long-term liabilities.