The coronavirus has changed so much of how we think about health and personal safety. Food preparation, vacation considerations, larger work and entertainment events, social interaction and more have been reshaped before our eyes and all in a matter of a few months.
Another major change has taken place. Twitter made news by stating its employees that are non-essential to physical presence in their facilities can work remotely forever. This has sent ripples of questions about the role of commercial real estate and urban work centers that may … and I only say “may” … have long-lasting repercussions that could impact housing, transportation, service industries and more.
A recent New York Times article questions when, and really if, New York City might return to where it was. “Half of the hotels in the city are not operating, and with no reliable forecast for when tourists might return, many may stay shut. Nearly the same portion of the city’s smallest businesses — some 186,000 shops employing fewer than 10 people — could fail, city officials fear. Replacing them could take years.The city’s real estate and construction industries, major drivers of the local economy, have all but stopped.”
A new reality may be emerging, with the realization that workforce effectiveness can remain high, regardless of where employees are stationed. That reality was forced upon the employers of this nation solely because of this virus, but it has become a valuable learning process that may change how we think about workforce co-location going forward.
A Brookings research study recently released highlights just that. In this analysis they note a variety of trends, one of which was that prior to the virus, approximately 25% of the US workforce was already working remotely on any given day. The recent events simply have accelerated this experiment. They note how increasing the rate of teleworking can reduce traffic congestion and more during peak commute times. They also state how it may make it more affordable for businesses to locate themselves in previously-too-expensive urban markets, noting: “Locating in an in-demand, high-cost urban area is more affordable for an employer when telework allows them to consume fewer square feet per worker, reducing land and energy consumption.”
There are challenges. Not everyone can telework. There are people needed to maintain office spaces, physically work on technology systems, and more. There are limits to location of the tele-workforce based on things like availability of broadband in some rural areas. But their conclusion is one that many others are likely considering it, just as we heard in the Twitter announcement. As the Brookings paper concluded, “the coronavirus disruption is demonstrating that digital connectivity, including telework, is a valuable tool that makes places stronger and more resilient.”
In fact, what we may realize is that the office space designs of today, with cubicles putting co-workers in close proximity to one another, is perhaps the most risky floor plan coming out of this virus. As we think about co-location and separation needs, we might be seeing a new way of thinking about workforce location. Clearly, no employer wants to jeopardize the health and safety of their workers. This may lead to a new way of thinking about office space, its design, and leveraging telework in a sustained way.
But the real question we need to answer is how it impacts productivity. Perhaps that conclusion is being realized now, and we will see more research from this forced experiment in the months and years to come.
As we think about all of these questions moving forward, its important to be aware of this one point. Working remote has been a benefit typically restricted to higher income earners as highlighted in this chart from Brookings.
The necessity of expanding this option to a broader set of the workforce was forced upon us by COVID-19. But the results will bring a new reality that may change how employers deploy more flexibility to many employees in the future.
As Brookings states: “On the plus side, workers tend to prefer working from home, it reduces emissions and office costs, and it helps people (especially women) balance work and family roles. It may even make us more productive. The downsides: managing a telecommuting staff can be difficult, professional isolation can have negative effects on well-being and career development, and the effects on productivity over the long run and in a scaled-up system are uncertain.”
The integration of small businesses co-located near places of employment is not by accident. Nor is the demand for housing and transportation. The significant growth of rental housing and more in major cities is all related to the fact that this is where employers are centered. Workers stroll out to restaurants, dry cleaners, shops, and more during their breaks while at work. Should this paradigm shift, the implications to commercial real estate, co-located small business, housing demands, and more could change the landscape of communities across the country. Should teleworking become a larger force in America over the years ahead, this likely is negative for large urban centers, and perhaps positive for more suburban communities.
In any case, the collective ability of so many today to use Webex, Zoom, and other technologies only highlight how work teams can be productive without needing to be housed together in an office building at all times.
This just might be the new normal. And strategically thinking about these implications is going to be key for executives and management teams. If there is anything we have learned from this virus, there is no old normal any more.
David H. Stevens, CMB, is a Mortgage Media Advisor, and former SVP of Single Family at Freddie Mac, former EVP at Wells Fargo Home Mortgage, former President and COO of the Long and Foster Realty Companies, former Assistant Secretary of Housing and FHA Commissioner, former CEO of the Mortgage Bankers Association.