The Real Estate reset: how we’ll live and work in 2030
Most of us haven't commuted for two months. What if that sticks? What if working from home becomes the norm? Simple: it'll be the biggest transformation in urban living in nearly two centuries.
The question we keep asking is this: Is this a reset or a pause? If you want to know the answer: look to the property market. What happens there will point the way to the future. Why? Well, real estate underlies every human activity, to some degree. Whatever we do – we need somewhere to do it. Harassed information workers experience this viscerally every day now sharing a house with a spouse, children. It's much harder if you don't have enough space to seclude yourself to get some work done.
Now, it would be easy to assume that we’re just in a pause, with the reset to the office norm on the horizon, once the viral threat is eased, through vaccination, treatment or track’n’trace. That’s been what we’ve seen in the past. Work and place have been inextricably linked, be it in agrarian societies working the fields, industrial societies working the production lines – or information workers heading to offices to shuffle paper around.
In theory, digital has freed us of that. But for most, the reality has not matched it. It was only a few years ago Marissa Mayer pulled employees back to the office, in the ill-fated final days of Yahoo!. The inertia of place is strong.
Tweet from home
But then, we have Twitter announcing that — from now on — any staff who wish to, and who can, can work from home. That’s not a time-limited measure – it’s a permanent shift to their business model. They will not be the last. Tales are spreading of start-ups selling their offices, and choosing to operate virtually, once the pandemic proved it could be done.
What if more companies follow their lead? What if more employees refuse to return to office life, now that they know that they can work from home?
Let’s start extrapolating outwards from there. What happens if more companies follow their example? What if fewer people commute to work every day? Good question! The first thing to bear in mind is that this doesn’t necessarily reduce the need for space — it just changes it. And understanding that change will be critical.
Rethinking the role of office property
If fewer people come in to work routinely, that means a change to the nature of any office you do have. It will, most likely, no longer focus on desk work, but on collaborate and meeting-based working — workshops, planning, team meetings, client meetings: that sort of thing. It becomes a more social space.
Inevitably, that could see a reduction of the need for office space. Some companies won’t survive the crisis, which will further depress the need for space, and those who do are likely to take the overhead cuts. We’re looking at a lot of empty office space. That’s a characteristic of recession at the best of times, but the particular circumstances of this one are likely to accelerate it. The only thing that might sustain the office market is a need for lower density of occupation to allow for social distancing – but that, in of itself, somewhat defeats the need for many people to come in.
But the consequences extend further than that. If fewer people are coming into the business districts, all the business that support those workers will suffer. Goodbye, sandwich shop, farewell dry cleaner. Auf Wiedersehen to the shops catering to lunch break shoppers. A vicious cycle ensues, with increasingly empty districts becoming less and less attractive to new occupiers. Might Manhattan become a ghost town?
Home, sweet home office
But what of the residential market? Many people will be discovering that they need a little more space than they expected. A spare room to use as an office will start to become a must have, not a luxury. Those whose jobs survive the downturn might well look on it as an opportunity to move, and upgrade their property while the market is depressed. The high-density apartments that many cities have been throwing up look a lot less attractive than they once did, once the assumption that you’ll be spending more of your time out of the apartment disappears.
Instead, the new home-workers will be catered to by a new breed of coffee shop and café. They serve food and drink - but also provide social contact and an alternative workplace. No longer filling their social needs through their co-workers, they socialise while working with their neighbours instead. Initially, while fetching a coffee or a sandwich in a socially distanced way, but eventually with a few hours working with your laptop from a local café.
They’ll be home all afternoon, though. The food delivery is coming, before the ravenous kids get home from school. Demand for distribution property will surge, as those of us who have got used to delivery during our extended stay at home stick with it. Delivery works so much better when there’s someone in most of the time. The emptying shopping malls get repurposed as distribution hubs.
The 15 minute district
New districts form – perhaps on the 15 minute model – where you can get most of what you need within 15 minutes of your house, or via delivery. (If no vaccine is forthcoming, these new units might become vital, as it’s easier to quarantine districts where food supply is readily available in walking distance, as opposed to suburban sprawl.)
House prices on properties that offer work-from-home space start to outstrip the market. That’s where the demand is. Developers spot the opportunity. More properties like this are needed. Where can they find the space to make them? Well, there’s a lot of vacant office space downtown, going for a song. Liberalised planning guidance, to help regenerate suffering cities, allows rapid conversion of office space to residential use. Depressed property prices make it economical to buy, reconfigure them as live/work accommodation, and sell them on.
As the new live/work building start to fill up, the empty shops live again. They're no longer serving transient office workers. Instead they provide social and informal meeting places to people who live and work there.
By 2030, many of our cities look radically different, with a shift towards an old fashioned neighbourhood model redesigned for the digital age. Those neighbourhoods enjoy smaller shops scattered in each area, with support from delivery warehouses on the outskirts of the cities.
A property fantasy based in history
Yes, this is a fantasy. But it is not fantastical. I was a commercial real estate journalist for the best part of a decade, and I reported on how cities were reshaped after the early 90s recession. These same patterns I’ve talked about here – of redundant space being recycled into new space that suited new working and living methods – applied then, and will apply again now.
The basic pattern of regeneration has been tried and tested over multiple property cycles. We know that declining values, emptying districts, leads to mass redevelopment, and slowly rising prices as the properties custom-built for the new era become more attractive.
Property cycles take time, though. Rome was not rebuilt in a day. And I’ve only scratched the surface here. There are huge implications for transport. With public transport likely to be shunned while infection remains a risk, has the time for micro-mobility finally come? Will people be so keen to own cars, if opportunities to use them are more limited? If delivery becomes the norm, that only pushes people further away from the private vehicle. No big weekly shop is one less reason to own a car.
Resetting our property assumptions
Remove a basic assumption of the way human society is structured – that people commute to work – and you reshape everything else around that. To take that thought a step further: those cities, regions or countries that accept that this change is coming, and facilitate that change coming as quickly as possible, will be in a position to out-compete other regions. They will win the battle for talent, businesses and all that comes with that. Paris, for example, was starting to think about 15 minute neighbourhoods before the pandemic hit. China has been working on it for over a year. The crisis is only likely to accelerate that.
As Bill Gates once said: we always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. If this truly is to be something of a reset, the way we use space might be very different in 2030 than it was at the beginning of 2020. And the winners will be those who start adapting now.