From the luxury market to first time homebuyers, the shift to work from home continues to drive the housing market. Changing economic patterns continue to evolve and are likely to remain in flux during 2022. In this article I’ve highlighted recent news and trends locally and worldwide for deeper insights.
Demand for work from home flexibility is driving business leaders to rethink the new office environment. Residential real estate trends are closely intertwined with commercial real estate markets as a new definition of “commute” and work environments continues to evolve.
For example, Harvard Business School’s reports in Business Research for Business Leaders;
“A year ago, COVID-19 forced many companies to send employees home—often with a laptop and a prayer. Now, with COVID cases subsiding and vaccinations rising, the prospect of returning to old office routines appears more possible. But will employees want to flock back to buildings even when it’s safe again? Should companies do away with Zoom and return the workplace to its pre-COVID ways? The answer, in a word: No.”Harvard Business School
Office Space High Vacancy Rates
Residential markets that are tied to commercial space have had the hardest time recovering from COVID driven economic downturns.
For example, the Rittenhouse Square condo market that was in deep distress one year ago has revitalized from 18 months of inventory when we almost couldn’t give away a condo, to a balanced market of approximately 6 months of inventory moving steadily into a seller’s market.
“For workers, the great wfh experiment has gone fairly well. Adjusting to the new regime was not easy for everyone—especially those living in small flats, or with children to home-school. Yet on average workers report higher levels of satisfaction and happiness. Respondents to surveys suggest that they would like to work from home nearly 50% of the time, up from 5% before the pandemic, with the remainder in the office. But people’s actual behavior suggests that their true preference is to spend even more time in their pajamas. How else to explain why, even in places where the threat from covid-19 is low, offices are only a third full?”Economist.com – Nov 8, 2021
Commercial industry leaders predict an increase in distressed commercial properties in some metropolitan areas next year. Creative repurposing of urban storefront spaces into non-traditional uses is a story that’s not yet told. We may see more loft-style live-work residential development in previous commercial spaces. Non-traditional retail and restaurant spaces are evolving in some metropolitan areas.
How Center City’s commercial corridor will look in 2022 is still uncertain.
Center City Pedestrian Traffic Up but Office Vacancy High
“The city is still not seeing the same number of workers, residents or visitors in its downtown core compared to before the pandemic, Levy said. Earlier this year, data based on pedestrian volumes at 20 locations throughout the core of Center City showed daily averages rose to 103,296 people in April, up from 91,574 people a day downtown in October 2020.”Technical.ly Philly
Levy told attendees that while vaccines have allowed companies to call their employees back to work, occupancy levels at office buildings in Center City are currently at about 30% to 40% of their pre-pandemic levels. Before 2020, buildings saw about an 11% vacancy rate, but that is about 18.5% today, he said.
“Those in buildings right now are the people who can’t work remotely,” Levy said.
Outside of Center City, in neighboring areas like Northern Liberties or Queen Village, restaurants and retail stores are operating at about 81% of their taxable revenue, pointing to people spending their money closer to home than downtown.
Global Trends for WFH
Trends in major metropolitan areas throughout North America and Europe face similar challenges. As I network with business leaders globally I’m hearing the same dynamics in Canada and Europe. Ironically, as we faced many “shut downs” due to COVID-19, business and real estate have opened to a truly global marketplace. With borders opening recently, we’ve seen an influx of European luxury home buyers purchasing resort locations that can serve as a retreat or continue work from home literally anywhere in the world.
European business leaders continue to dig deep into new working patterns, employee retention and how to accommodate a high demand for work from home flexibility. Advice from consulting resources echo the opinion voiced below:
“A number of major tech companies lead the way and announced a permanent shift to remote work after the pandemic – and other employers have followed suit. At the same time, we have made quantum leaps in adopting new technologies that facilitate new ways of working. As a consequence, new migration and relocation patterns have emerged – some of which are here to stay.”Future Place Leadership
What do Buyers Want?
Regardless of price point, buyers are sensitive to the need for different “zones” in their homes. After being quarantined in COVID shut-downs, working from home and having family members to care for, the need for extra space to serve multiple purposes has become a “must have.”
For instance, that can be a finished basement, serving as a home gym, office or space for kids to do home schooling. This also impacts desirability of open living spaces. While open floor plans are still in high demand, buyers are also looking for the ability to section off space for private activities.
How you tell the story of your home is critical for matching buyer demands in today’s dynamic real estate market. If you’re thinking of selling, consult with us for a customized strategic marketing plan to accomplish your goals.