Working from home and the impact on Australia's real estate market

We quickly moved our business to a remote work environment last year when the pandemic first hit. In our weekly podcasts, we made the bold prediction that remote work was here to stay and one of the few positives to emerge from the pandemic. We noted that the workforce of the future will more carefully consider their homes as a place to live, eat, sleep, work and educate their families.

The outbreaking of the Delta variant has further accelerated transition.

Our conversations last year were around the “return to the office”. Our conversations now are about “what the office looks like” and how we move our office from an everyday environment to an on-demand utility which our employees can voluntarily use, whenever they like.

What’s clear is many aren’t yet ready for a totally office free environment. But almost everybody we talk to is happy to have the flexibility to use the space if they need it.

The transition to an on-demand office has several implications which interest me. It’s not just the economic impact of paying less/saving future rental increases but also the social and environmental impact of a global professional workforce that no longer wants to go back to the 9-5, Monday to Friday slog.

What’s going on overseas

It’s a mixed bag. According to Axios, US retail giantTarget, which had planned to roll out a hybrid back-to-office model in September, has told headquarters workers they can work from home for the rest of the year. The company is gradually reopening offices, which any HQ staff member can access starting Sept. 20, according to a spokesperson.

Apple has delayed its planned September return to the office by at least a month, according to Bloomberg News and the Wall Street Journal.Googleis now aiming to have most of its workforce back to its offices beginning Oct. 18 instead of its previous target date of Sept. 1.

Amazon has pushed its reopening date from September to January 2022. (For corporate employees, that is — warehouse workers basically never left.)

Twitterclosed its San Francisco and New York offices only two weeks after the company reopened. The company has paused future office reopenings at the moment.Asana, a software company that originally planned in-person returns in September, has told employees that offices in San Francisco and New York will reopen no earlier than February 2022.

Houses are rising because they are in low supply

Work from home means more attention on the residential aspect of real estate. Those who can afford to have used the opportunity to move into larger houses, with more space, to set up base and transition to the new normal. Apartments have been a mixed bag. They obviously have less space, but they’re also cheaper, so those who have had their incomes hit by the pandemic have used apartments as an opportunity to reduce their housing costs.

I’m also starting to see more developers and builders incorporate amenity for the increase in remote working demands. New buildings are being offered with co-working spaces, as opposed to the traditional gyms and pools. This is a smart move, not only are co-working spaces cheaper and more energy efficient to run, but they will also alleviate a lot of stress that comes with working inside a confined apartment space for both adults and students.

Remote work has a double edged sustainability impact

Travel is of course reduced when employees work remotely. The average U.S. round-trip commute time is about an hour; for those who drive alone to work, like the vast majority of Americans, that equates to nearly 3.2 tons of carbon per year, per person.

Global Workplace Analytics previously estimated that if all U.S. residents who could and wanted to work from home started doing so for half the week, “it would have the greenhouse gas equivalent of taking the entire New York State workforce off the road.”

But it's not that simple.

Remote work shifts carbon. Emissions from energy and food still exist, but at employees’ homes, where they may be better or worse than in the office. I haven’t yet come across proper studies, but it's not unfair to make the argument that offices are much more efficient when it comes to heating and ventilation as opposed to each individual employee powering their own homes, particularly in suburban areas.

Newly built apartments might solve this problem with better built facilities and new energy saving technology implemented.

Commercial real estate is a specialist investment field

The opportunity in this pandemic is to innovate what the entire commercial real estate ecosystem looks like. Retail sales were on fire before the Delta outbreak, but the dollars are flowing to a few large players as opposed to smaller operators. It's unclear just how much damage the lockdowns will have on small commercial real estate operators — gyms, salons, restaurants, wedding halls. I simply don’t know the answer.

What I do know is that the smart investors I speak to are going after strategic assets - energy efficient buildings, adaptable industrial close to infrastructure, greenfield sites where things can be purpose built from scratch and so on.

Capital is starting to flow towards carbon conscious and sustainable investments. I’m sure we will start to see innovators and developers being rewarded with more favourable loans and investment flows for projects that are socially responsible from an environmental, social and mental wellbeing perspective.

Finally, I want to thank our team at Wealthi and all other employees across the economy for managing the lockdown and transition to remote work. It’s not easy, but without sacrifice, we cannot appreciate the highest joys of life. To all the parents out there homeschooling and keeping things together, I also salute you. You are all true champions.