The traditional 9-to-5 workday may have become a thing of the past. Surveys show workers expect workplace adaptations to stick, because flexible schedules and reduced commute times outweigh the challenges of isolation and longer hours. According to research, employees value flexibility and believe a hybrid model is ideal. Employees want the option to work a few hours each week outside of the office, and they believe this model is ideal. With continual workforce shortages, employees have more power than every before in the decision of how to work.
Research on paid job postings from LinkedIn revealed remote work shot up 457% from 2020 to 2021. According to the U.S. Census, information and professional, scientific and technical services were among the industries most affected by the transition to remote work. Retail trade, manufacturing, and accommodations and food services were least likely to offer remote work to employees.
The shift to more remote work has changed commuter patterns, daytime populations, and spending patterns. With fewer people commuting in for work that means less people are dining at local lunch spots, stopping at nearby coffee shops for their daily lattes, dropping off their dry cleaning or picking up items before heading home. Places like downtown areas with many daytime jobs but fewer residents were the most impacted by the move to remote work.
CBRE specializing in commercial real estate found that vacancy rose at a faster pace in downtown areas versus the suburbs. The 17.4% U.S. downtown vacancy rate marked the second straight quarter that it topped the suburbs, which totaled 16.9% last quarter of 2022.
Over the past four years, office vacancy rates have continued to rise, starting before the pandemic, and further accelerated by remote and hybrid work, layoffs, and higher interest rates. According to a recent National Association of Realtors report, the office vacancy rate has risen by 3% since 2019 to 12.5% in Q4 2022- the highest vacancy rate in the last four years.
The percentage of office spaces that sits vacant in most US metros has risen. However, some communities have weathered or bucked the trend. According to data from CoStar, out of the 139 metro areas measured, only 25.18% have an office vacancy rate that is currently lower than what they had before the pandemic in the first quarter of 2020.
|Metros with the Highest Office Vacancies||Vacancy Rate||Metro with the Lowest Office Vacancies||Vacancy Rate|
|Houston, Texas||18.89%||Huntington/Ashland, West Virginia-Kentucky-Ohio||1.95%|
|Dallas/Fort Worth, Texas||17.57%||Wilmington, Delaware||2.14%|
|San Francisco, California||15.45%||Savannah, Georgia||2.57%|
|Washington, D.C.||15.20%||Olympia, Washington||2.74%|
|Chicago, Illinois||15.08%||Youngstown/Warren/Boardman, Ohio||2.92%|
Based on the assumption that remote work is likely here to stay, the loss of value in the U.S. commercial offices may total about $522 billion by 2029 from its pre-pandemic level in 2019, according to a study, “Work From Home and the Office Real Estate Apocalypse,” published by Columbia University and New York University researchers.
On a bright note, the remote work trend has given hope to smaller, rural communities looking to reverse years of rural brain drain. The out-migration of a rural community’s best and brightest to large metros looking for more job opportunities threatens the economic vitality of rural America.
Taking advantage of the remote work trend, communities looking to attract location-neutral workers are offering incentives to relocate to their communities. The most notable program is Tulsa Remote. The program offers a $10,000 grant to remote workers and entrepreneurs living outside Oklahoma to relocate to Tulsa for one year – with the goal that they stay longer and truly engage in the community.
Whether such incentive programs actually work remains to be seen. However, it is clear the pandemic led to a reshuffling of priorities and personal preferences. During the “Great Resignation,” 30 million people quit their jobs or left the workforce. Some moved to less expensive, less congested communities. According to Federal Reserve Bank of Cleveland Report, migration away from high-cost, large metro areas spiked during the pandemic. Gross migration flows from the high-cost, large metro areas toward lower-cost, large metro areas increased by 5.6 percent. The flows from high-cost, large metro areas to midsized metro areas increased by 10 percent, and the migration to small metro areas and rural regions increased by approximately 9 percent. Even if the percentage of remote workers moving to lower-cost communities is small, the numbers may be enough to grow their workforces.
As the workplace continues to evolve, the remote or hybrid work trend has created winners and losers. On the winning side: workers looking for more flexibility and work-life balance and communities that can tap into this sentiment.