Ari Chazanas is the founder and CEO of Lotus West Properties, a real estate management and investment firm based in West Los Angeles.
The pandemic is responsible for changing the world in ways we could never have imagined. One of the most profound changes has been the massive shift of the US workforce to embrace remote work. Now, with 2023 on the horizon, working from home has become the norm for more than half of today’s workers with tasks that can be done remotely, and that change is having a major effect on both commercial and residential real estate. While many additional factors come into play, commercial real estate suffering while homes are experiencing a price increase that has affected even the smaller markets as sales rise.
Property owners now have a lot to think about. On the one hand, an increasing demand for housing means offering real estate at a higher market rent. On the other hand, the unit can be exposed to higher levels of wear and tear as the tenants spend more time in the unit.
Working from home can make houses more expensive for both the tenant and the landlord. But a remote worker doesn’t have to burden your finances, nor does it need to ensure that your device can withstand increased levels of usage. It’s time to consider how this US employment trend could impact your business.
Higher demand usually means higher prices.
It’s the same in every industry: when public demand rises, so do prices. The real estate market is no exception, and we only see how remote workers have an effect on home ownership in housing markets of all sizes. Gone are the days of moving to a city for work; now people find they can work just about anywhere without having to worry about a mind-numbing commute. Remote working means that a task can be done anywhere, and even if an employee has to come to the office two or three days a month or even a week, employees are left with a wide choice of options where to live.
The shift is being seen across the country as home buyers are to move house at much higher rates than in previous years. They often find that home prices are lower in smaller markets, bringing home ownership within reach for those who have the finances to do it. But in many cases, new buyers also drive up the price of a home in areas where prices have typically been cheaper. So instead of living in Los Angeles or any part of California, some homebuyers move to places like Nevada and Arizona to buy a home and still stay with their current employers.
An unintended consequence of this shift is an increase in housing costs, which first-time buyers in these cities are pricing out. Many new buyers migrate to the areas where house prices are cheaper and buy up all available inventory, leaving the locals who were saving to buy a house out in the cold, so to speak.
Tenants also have options, so emphasize the value of the space.
With an influx of buyers leaving larger, more expensive cities and buying homes in the smaller, more affordable cities, house prices are rising and inventory is falling. Mainly get starters on the housing market priced from the market, and they have little choice but to rent. Rents will naturally fluctuate due to the rise in house prices. But landlords targeting those tenants shouldn’t expect prospective tenants to just knock on the door to sign a long-term lease.
Remote workers have plenty of alternatives, and if they can’t find a place that’s right for them, they’ll travel to find the place they really want. The movement of homebuyers to buy a good home for value is also seen among tenants who want a clean and spacious place to live for their money. Rental prices will be just as competitive as purchase prices and that can affect both landlords and tenants.
So my advice to any property owner is simple: make it worth it. It starts at the beginning with the way you stage the property when you show it to potential tenants. If this is going to be the home and office in one building, show it off in that capacity from the start. Tenants can’t always imagine what a unit will look like when they step inside.
Property owners who display a model home for future tenants to see when they come to view a home must demonstrate how the tenant can live and work in the home. If a vacant unit does not contain any furniture before it is occupied, then landlords must sell the unit by explaining all the benefits that come with making the rental space a living and working space for the remote worker.
Keep track of increased wear.
Something that landlords should keep in mind is the potential for increased wear and tear in the unit. On the traditional workday, tenants would leave the unit five or even six days a week, often 10-14 hours a day. That corresponded to a lot of time when the unit was empty. But since remote workers spend most of their time in the unit, that causes more wear and tear on everything from floors and carpets to cabinets and fixtures. Landlords will probably have to be more diligent about keeping up with the maintenance of units and common areas to keep them from falling into disrepair.
Working with tenants to be notified of damage and repairs that need repair can benefit property owners in the long run. It’s already a bad idea to miss out on repairs and renovations, but with tenants spending more time in the property, new damage on top of old ones threatens to add to the cost of those improvements. That can have a negative impact on the bottom line of your rental company, so be on time and solve any problems.