More than one year after the switch to remote work en masse, the coronavirus pandemic and a newly untethered nomadic workforce continue to transform not only how, but where professionals choose to work. On Tuesday, realtor.com released its latest monthly rental report detailing housing prices and year-over-year fluctuations for cities around the U.S. Turns out, people are looking for bigger spaces after a year of the home doubling as a remote office, virtual learning center and private quarters. But what lasting impact could the remote work model have on major tech hubs?
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“Overall, the U.S. rental market is beginning to return to pre-pandemic levels. With the largest growth occurring outside of major cities, renters are encountering different scenarios depending on the market in which they are searching and size of the unit they are looking for,” said Danielle Hale, chief economist for realtor.com, in a press release.
To illustrate this point, Hale points out that Charlotte’s median rental rates for a two-bedroom unit have increased 11% from a year ago while a similar Boston unit has decreased nearly 4% over the same period. Overall, the median U.S. rental average was $1,483 in April, representing a 2.7% year-over-year increase, down from an annual growth rate of 3.2% recorded in March 2020, according to the release.
WFH relocations and affordability
Due to the remote work opportunities, millions of remote workers could be on the move. In fact, up to 23 million U.S. workers were planning to move due to work from home flexibility, according to an October Upwork survey. Interestingly, one in five of those planning to relocate were based in major cities and about half (52.2%) of respondents households said they were planning to move into a home “that is significantly more affordable than their current home.”
In the April realtor.com report, Californian cities Riverside and Sacramento topped the national market in terms of growth and the release attributes “much of their success” to the “relatively affordable median rental prices” compared to nearby metropolitan areas (Los Angeles and San Francisco).
Talent exodus in tech hubs
In recent months, there has been much speculation about a so-called tech exodus from traditional hubs; especially in areas with notoriously high housing costs like Silicon Valley. The realtor.com release said that rental prices across the largest U.S. tech cities have decreased 5.4% year-over-year; an uptick from February’s 6.6% decline.
“In tech centers, rent declines are getting smaller, signaling they are on the path to turnaround. If the trend continues, renters could expect to be paying pre-pandemic rates by as early as this fall,” Hale said in the release.
Since March, median rental rates in U.S. “tech centers” increased 1.1%, according to the release, with Denver and Austin experiencing year-over-year median rent upticks of 2.2% and 1.7%, respectively.
“We can look at data on home shopping trends from one area to another… to show that there is an increase in traffic from Silicon Valley to more affordable tech-oriented markets such as Austin,” Hale said via email.
Rents are lower in larger tech hubs such as San Jose, San Francisco and Seattle, with declines of 12.5%, 10.9% and 7.3%, respectively, and the release said these “declines are lessening, especially for larger two-bedroom units.”
“With working from home still very much a reality for many, space has been a priority for home buyers and renters alike, and that rise in demand has been reflected in home listing prices and now in rents for larger units,” the release said.
People also appear to be migrating toward units with more space in general. Year-over-year, units with two bedrooms are up 5.2% in April compared to 3.5% growth recorded last March, and the median rent for studios in April has decreased 1.9% since last year, according to the release.
Around the Chicago metro area, studio rent is down 14.6% year-over-year, according to realtor.com data, and one-bedroom median rent is down 1.8% over this same period, however, rates for two-bedroom rentals are up 5.7% from the same time last year. In and around the New York and Newark areas, overall rent remains the same year over year, however, studio rents have decreased 13.3% and two-bedroom rent has increased 7.8%, according to realtor.com data.
The lasting impact of remote work
In recent weeks, some companies have started to bring employees back to the traditional in-person office, however, a number of companies have made long-term commitments to remote work and hybrid work models. When discussing the potential effects long-term WFH commitments could have on tech hubs, Hale said “the question of a lasting impact is still very much up in the air.” Hale said that despite the changes associated with the switch to remote work, “many businesses, particularly tech businesses have thrived.”
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“I think this answers the question of whether or not remote work is possible. The open question is whether or not remote work is ideal,” Hale said via email. “The answer is likely that it depends. It depends on the business, the employee’s role, and likely even the particular projects that they’re working on from day to day.”
Additionally, Hale explained that it is important to note that proximity to the office is “one of several factors drawing workers to Bay Area cities” alongside other “cultural amenities like restaurants, nightlife, and museums.”
“As we move past the pandemic these factors are likely to continue to draw residents to these tech hubs even if proximity to the office is not as important as it was pre-pandemic.”