We’ve all cultivated new routines during lockdown. And while some are thrilled at the prospect of working from home in sweatpants, others are going stir-crazy, weary at the thought of having to yet again sit through one more Zoom meeting.
But for those in the real estate world the pressing question is: which routines will have long-term staying power and what impact will they have on future real estate development?
A shift is already in motion. The pandemic brought with it a new desire for city-dwellers to get out of dense urban areas and into more remote, spacious locations. We saw how heavily-populated areas were hit hard and just how rapidly the virus was able to spread. But it’s not only the increased potential of contracting the virus that has people craving more space.
The lockdown transformed our homes into more than just a living space — they became a school, an office, a gym, and a place for happy hours all rolled into one. After being cooped up with family or roommates for months, it’s more than understandable that people are craving a separate space they can escape to and call their own. And for those confined to tiny apartments, it’s especially tough. The virus has certainly put a premium on space and private amenities, prompting buyers to prioritize backyards and secluded patios and balconies.
The move towards remote work is also playing a large role in people’s decision to relocate to more remote areas. According to a recent Gartner survey, 74% of CFOs plan to permanently shift at least 5% of their workforce into remote positions. Giants like Nationwide, Barclays, Twitter, and Facebook are already embracing remote work as an option for employees. This means homes and apartments with designated office space will be in high demand. Plus, without the constraint of needing to live near your workplace, more buyers will be free to search for homes outside of city centers, stretching their dollars further.
Getting Out of Dodge
“Rural demand is much stronger right now than urban demand, and that’s a flip from where it’s been for the longest time, where everybody wanted to live in the city,” said Glenn Kelman, Redfin CEO in an interview on CNBC’s Closing Bell.
“We’ll see how it comes back, but there seems to be a profound, psychological change among consumers who are looking for houses.” - Glenn Kelman
According to data from Redfin, year-over-year page views of homes in rural areas increased 115% and page views for small towns were up 88%. Comparatively, page views of homes in cities with a population of one million or more decreased by 10%.
But those shifting to remote work won’t be the only market looking to escape the cities. The vacation home sector of the market will likely see a spike as buyers with expendable income seek out second properties in more remote locations, retreating from the potential risks of crowded cities.
Seizing an Opportunity
Developers are capitalizing on this new shift. While older generations, families, and those with kids traditionally migrate out of cities and into suburbs, the threat of the coronavirus has accelerated this trend, giving developers ample opportunity for real estate expansion. But this shift isn’t only happening in the residential sector. Companies are also looking to relocate offices into suburban areas. The move to suburban office parks allows plenty of room for parking and separated offices, alleviating fears over crowded public transportation and cramped workspaces.
The pandemic has allowed us a rare opportunity to reshape our cities — from how we design both public and private spaces to the materials and technology we implement. For developers, one impactful way to change our cityscape is to design and build properties located in an Opportunity Zone. Developers see significant tax breaks building in Opportunity Zones, but more importantly, development in these areas has the potential to stimulate communities and their economic growth, providing more opportunities in both remote areas and populous metros.
When it comes to how and where we decide to live, with the virus remaining ever present, it seems as if for now many will continue to gravitate out of the cities to more remote locations. And developers that shift their attention to properties outside of dense metros, creating spaces that focus on health and wellness, will likely see great success.