How Will Remote Work Affect the Future of Real Estate?

Since the COVID-19 pandemic struck, remote work has become the new normal. With the stay-at-home and social distancing orders, millions of Americans have been forced to work from home. However, a survey conducted last year during the pandemic revealed that over 80% of company leaders intend to allow employees to continue with remote work part-time after the pandemic. About 47% plan to permit employees to work remotely full-time. According to another survey by FlexJobs, 27% of workers said they are willing to take a pay cut of up to 20% to work remotely. So while it may seem like remote work is just a trend that developed due to the coronavirus, these stats prove it may be here to stay.

Related: 7 Real Estate Trends to Expect in a Post COVID-19 World

For real estate investors, the big question is ‘How will telecommuting affect the US housing market 2021 and beyond?’ Here are some of the ways working remotely will impact the future of residential real estate and commercial real estate:

4 Ways Remote Work Will Impact the Future of Real Estate

Reduced demand for office space

According to a Future Workforce Report from Upwork, 58.6% of the US workforce was engaged in remote work. Out of this, 41% were fully remote, while 15.8% were partially remote. Even as offices start to open up and workers are allowed to return, it is expected that 26.7% will continue working remotely on a full-time basis. As a result, there will be less demand for office space in the future. Danny Ismail, Green Street’s lead office analyst, believes that office demand will drop by 10-15%.

Migration from cities to small towns

Where people choose to reside has traditionally been connected to where they work. With the significant shift to remote work prompted by the coronavirus pandemic, many people now have the freedom to live and work from anywhere. According to a Zillow analysis, very few households in the metros have spare rooms that can be used as a home office for remote work. Therefore, many people are likely to move to the suburbs where they can find bigger homes that are within their budget. A report by Redfin revealed that there was an increased interest in small-town and rural areas during the COVID-19 outbreak.

Higher home prices in the suburbs

One way remote work will affect the future of real estate is by driving suburban home prices up.

One report showed that due to the demand for homes in suburbs, the year-over-year median sale price increased by 9.2% in August 2020. As the remote work trend persists, it is expected that homebuyer interest in suburban areas will remain high. And with the low interest rates, homeownership is now within the reach of more Americans. Due to the high demand, suburban home prices are likely to continue rising in 2021 and beyond.

Related: Suburban Real Estate Market Boom Due to COVID-19

A drop in city rents

As people continue to move out of urban areas due to remote work, the rent prices in those areas will likely continue to drop. Realtor.com recently analyzed the median rents in some of the largest cities in the US. The study revealed that median rents had dropped by more than 10% in New York City, Salt Lake City, Denver, Washington DC, and San Jose, CA.

Related: 15 US Cities with the Highest Rents in the US in 2021

Invest in Real Estate in the 6 Best Places to Work Remotely in 2021

Considering the future of real estate and remote work, where should you invest in the US housing market in 2021?

You should target areas that are considered the most suitable for remote working. Moneycrashers.com recently shared a list of the best places to work remotely in 2021. These locations were selected based on factors such as internet coverage, cost of living, housing costs, walkability, average weather, proximity to green space, and overall economic health. We reviewed the list and selected some of the top cities where real estate investors are earning a good return based on Mashvisor’s real estate data.

We’ve also included Airbnb data as remote work is having an impact on the short-term rental industry as well. Before moving to a new location, many travelers were giving neighborhoods a test-drive by staying in Airbnb rental properties first in 2020. Be sure to check local Airbnb regulations first, but owning an Airbnb in some of the best places for remote work may also prove to be a profitable real estate investment strategy in 2021.

#1. Omaha, Nebraska

• Median Property Price: $456,167
• Price per Square Foot: $166
• Price to Rent Ratio: 18
• Monthly Traditional Rental Income: $2,058
• Traditional Cash on Cash Return: 3.2%
• Average Airbnb Daily Rate: $93
• Monthly Airbnb Rental Income: $2,740
• Airbnb Cash on Cash Return: 3.7%
• Airbnb Occupancy Rate: 59%

#2. Pittsburg, Pennsylvania

• Median Property Price: $343,944
• Price per Square Foot: $217
• Price to Rent Ratio: 21
• Monthly Traditional Rental Income: $1,350
• Traditional Cash on Cash Return: 2.8%
• Average Airbnb Daily Rate: $114
• Monthly Airbnb Rental Income: $2,184
• Airbnb Cash on Cash Return: 6.2%
• Airbnb Occupancy Rate: 62%

#3. Grand Rapids, Michigan

• Median Property Price: $298,378
• Price per Square Foot: $174
• Price to Rent Ratio: 21
• Monthly Traditional Rental Income: $ 1,172
• Traditional Cash on Cash Return: 2.7%
• Average Airbnb Daily Rate: $127
• Monthly Airbnb Rental Income: $2,081
• Airbnb Cash on Cash Return: 4.0%
• Airbnb Occupancy Rate: 60%

#4. Greenville, South Carolina

• Median Property Price: $365,476
• Price per Square Foot: $171
• Price to Rent Ratio: 23
• Monthly Traditional Rental Income: $1,348
• Traditional Cash on Cash Return: 2.6%
• Average Airbnb Daily Rate: $129
• Monthly Airbnb Rental Income: $2,260
• Airbnb Cash on Cash Return: 3.8%
• Airbnb Occupancy Rate: 61%

#5. Eau Claire, Wisconsin

• Median Property Price: $292,638
• Price per Square Foot: $140
• Price to Rent Ratio: 22
• Monthly Traditional Rental Income: $1,132
• Traditional Cash on Cash Return: 2.2%
• Average Airbnb Daily Rate: $129
• Monthly Airbnb Rental Income: $2,653
• Airbnb Cash on Cash Return: 6.2%
• Airbnb Occupancy Rate: 67%

#6. Traverse City, Michigan

• Median Property Price: $536,510
• Price per Square Foot: $282
• Price to Rent Ratio: 28
• Monthly Traditional Rental Income: $1,573
• Traditional Cash on Cash Return: 2.0%
• Average Airbnb Daily Rate: $210
• Monthly Airbnb Rental Income: $2,743
• Airbnb Cash on Cash Return: 3.8%
• Airbnb Occupancy Rate: 44%

Conclusion

It is clear that the remote work trend will continue to have a major impact on the commercial and residential real estate market. Therefore, before making an investment decision, take time to study the real estate market trends. COVID-19 has definitely shaken up the real estate industry and it’s important that you adapt. Don’t forget to use Mashvisor’s real estate investment tools to ensure that, no matter what is happening in the market, you find a profitable investment property for sale.

To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.