It’s no secret that the pandemic has transformed the way we live and work, with remote work becoming the new norm for companies of all sizes across the world. And this shift was already taking shape long before the pandemic, as tools like Zoom, Slack, and other forms of technology made it possible to work from anywhere.
This shift towards remote work has impacted just about every industry, most notably real estate, as many home and business owners have shuffled their priorities and real estate buying habits. Let’s examine the profound impact of remote work on the real estate industry, including both the residential and commercial sectors.
Changes in Location Preferences
One of the most significant impacts of remote work on the real estate industry is the shift in location preferences. With many people no longer needing to commute to a physical office, there has been a rise in demand for homes in suburban and rural areas. Not to mention, people were suddenly able to move where they wanted to live, rather than where their employer happens to have an office. Places like Michigan, which provide an exceptional quality of life, have become even more desirable for remote workers. Location was already important during the buying process, but it became even more valuable, as buyers now had the freedom to consider and prioritize their life outside of work.
Reduced Demand for Commercial Real Estate
Naturally, there has been a reduced demand for commercial real estate. With many businesses adopting a remote work model, there is less need for large office spaces, and many companies are opting for smaller offices or shared co-working workspaces instead. This has had a significant impact on the commercial real estate market, with many properties remaining vacant or being repurposed for other uses. This vacancy was at an all-time high during the pandemic, but has improved since, as some companies have returned to an in-person or hybrid model.
Increased Demand for Home Offices
In March 2020, so many were quickly converting their dining room table or spare guest room into a makeshift office, thinking this setup would only have to last a couple of weeks. But alas, working from home became a bit more permanent for everyone, and as a result, there was a need for a more permanent home office solution. In turn, we saw an increased demand for home offices — as well as the creation of multipurpose rooms that can be used for work, exercise, or relaxation — during the home search. And this trend is expected to continue with the rise of remote work.
Changes in the Rental Market
There has also been an impact on the rental market. With many people moving out of urban areas, there has been a decline in demand for rental properties in these areas. This has led to a decrease in rental prices in some urban areas, while prices have increased in suburban and rural areas. According to MLive, at the end of 2022, rent prices across the nation saw a year over year change of just 8.8% — the first time it’s been in the single digits since October 2021. Here in Michigan, we saw an increase of 10.5% in that same year, hitting a median price of $1,321, which was lower than the national average of $2,002. But in Ann Arbor specifically, one-bedroom rents were up by 23% year over year, reaching $1,595 at the end of 2022. This makes buying a more wise decision, as rent prices will continue that upward trajectory.
Increased Competition in Some Markets
In areas where remote work has led to an influx of buyers from other regions or countries, there has been increased competition for homes. This has led to bidding wars and a rise in home prices in some markets, making it more difficult for first-time buyers or those with lower budgets to enter the market. This intense competition has slowed down a bit in 2023, but it is still prevalent, especially in more popular cities.
Changes in Home Financing
Remote work has also impacted home financing, with some lenders now requiring proof of income or employment for remote workers. This can make it more challenging for those who are self-employed or who work for companies based in different states or countries to secure a mortgage. But with a little bit of extra work, it can certainly be done! And the mortgage industry has become more equipped to handle more complicated financing scenarios.
Shift Towards Sustainable Homes
The rise in remote work has also led to a shift towards more sustainable homes. With more people spending time at home and therefore using more resources, there is a greater focus on energy efficiency and environmental sustainability. This includes the use of renewable energy sources like solar power, as well as the installation of energy-efficient appliances and insulation.
Impact on Real Estate Agents
Finally, remote work (and the dynamics of the pandemic as a whole) has had a significant impact on real estate agents themselves. With many people now able to view properties remotely, there has been a shift towards virtual tours and online listings. This has forced many real estate agents to adapt and embrace technology to stay competitive in the market.
Always Adapting
While some of these changes may be temporary, many are expected to be permanent. As the world continues to adapt to new changes in the years ahead, the real estate industry will continue to evolve and adapt to meet the changing needs of buyers and sellers.
