Understanding shift to remote work, creating an impact on residential real estate demand

In the post-Covid-19 era, remote work has become a norm, moving beyond the preliminary notion that will be a short-term arrangement. Its influence on multiple industries and economies can be witnessed to a great extent, since it is impacting the manner in which individuals live and work. This changeover is most noticeable in the residential real estate market, in particular, which is defining the characteristics of the modern workforce. 

A McKinsey report states that since the pandemic, approximately 90% of organizations have embraced a range of hybrid work models that allow employees to work remotely from off-site locations (including home) for some or much of the time. In addition, for many businesses, remote work is no longer a substitute, but a strategic alternative to steer cost savings, boost employee satisfaction and attract top talent. 

Considering this unique trajectory, it is worthwhile to dive into the trends which have shaped this movement.

Rise of exurban living
Conventionally, residential real estate was led by its proximity to offices and urban hubs. Nevertheless, given the fast surge of the remote work culture, this dynamic has changed manifold. In the present-day, employees no longer consider the need to reside within the commuting distance of their workplaces, eventually contributing to the demand for homes in suburban and exurban regions. It is most relevant for millennials, many of whom often find the urban markets to be expensive. 

While this change is relevant for India, a similar wave has been observed in America as well. For homes in rural areas, the median sale price increased 11.3% year over year in the four weeks ending August 2, 2020, and it rose to 9.2% in suburban areas. Whereas, urban centres saw a smaller (6.7%) home-price increase. 

These statistics reflect a clear shift in preferences across the world, with individuals choosing larger homes which are spacious, consisting of proximity to nature and offering an enhanced quality of life. Additionally, the swing towards exurban living is bound to have implications on environmental sustainability in the long-term. 

As people move further from cities, the development of green spaces, public transportation in suburban areas and energy-efficient home designs may emerge as potential outcomes. This transference in home-buying trends underlines a broader pattern of migration, one driven by changing priorities and lifestyle choices. 

Motives for urban migration
Regions outside urban centers have thrived since Covid-19, considering that the initial months of the pandemic witnessed an outflow of people from major cities. Be it New Delhi, New York, Chicago, or even San Francisco, city dwellers, especially families, looked for safer, quieter environments along with lower living costs. Nevertheless, post the pandemic, many of them decided to return to urban centers. This resulted in a resurgence in demand for rental properties in cities, where the young workforce sought for career opportunities and cultural amenities. 

That said, the pandemic also intensified the need for urban regions to adapt. In the same vein, city developers began focusing on mixed-use developments to incorporate residential, commercial and recreational spaces, thereby supporting a work-from-home lifestyle. Equally, the demand for villas, homes with gardens surged, as individuals began appreciating the need for peaceful dwellings. Such a transition in migration patterns have resulted in a deep impact on the real estate sector. 

Influence on residential real estate 
With companies offering remote work arrangements, residential preferences too have evolved. It is enabling employees with greater autonomy to manage their day between home and office and empowering them to make informed housing decisions. Having a ‘home-office’ is now no longer a luxury but a necessity for them. In the said context, real estate developers or property owners are actively providing homes with office spaces, high-speed internet connectivity, soundproof rooms, and ergonomically designed workspaces. 

Furthermore, the rise of remote work has accelerated the need for technological adoption in the real estate sector. Features such as virtual tours, AR walkthroughs, and online property management tools have become essential. These have become integral to modern real estate marketing and management strategies, catering to a tech-savvy buyer demographic. Looking ahead, understanding this hybrid work culture further will aid developers in enhancing their offerings. 

It can be said that the change in working models has irrevocably altered the residential real estate market. With employees continuing to prioritize affordable living, the time is ripe for real estate developers and investors to tap into the changing needs of home buyers. 

-- Dennis Ebenezar, Founder and MD, Deejos.