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Google bets 2.1 billion that cities like NY, Denver, Atlanta, etc… are immune from WFH. What is Google saying with their actions on the future of work from home. Why are “superstar” cities unlikely to feel much impact from the future of work from home? How will WFH trends impact Colorado real estate in Denver, the suburbs, the exurbs, resort communities, and rural properties?
What does the data say about the future of Work From Home (WFH)
A decade ago, University of California at Berkeley economics professor Enrico Moretti wrote a book that in many ways came to define its era. “The New Geography of Jobs” described what Moretti called the “Great Divergence” between regions with large concentrations of highly educated workers in what he called the “innovation sector,” and the rest of the country. The divide first appeared in the 1980s and only grew in the decades that followed, with a few places in particular — the San Francisco Bay Area (which includes Silicon Valley), Boston, New York, Seattle — hogging more and more of the best jobs while rural areas and many smaller cities struggled.
Enrico, like many other economists, is predicting that these trends will remain anchored even after Covid. “ I think our link to the office will look a lot like in the past. There will be probably more work from home, but it might take the shape of one or two days a week, meaning that we still have to show up at the office three or four days. That’s fundamental because it means that for places like New York or San Francisco, if you want to have access to the types of careers and jobs and employers that are there, you still need to have a physical presence in the metro area. Maybe not next to your employer, given that you don’t have to commute every day, but in the same metro area.” (Bloomberg )
Google bets 2.1 billion the work from home trends noted above are not just anecdotal
Google just confirmed they are exercising a purchase option for 2.1 billion dollars for an office building in NY . Why would google spend big bucks on an office building in a high-density city if they didn’t think employees would occupy it? They would not! Google is led by several extremely bright minds that are betting on the future of the office that looks very similar to today.
Google is not just betting on NY, but also the Denver metro area. For example, last week Google recently bought a 125k foot office building in Boulder. This adds to its growing presence in Colorado bringing its total square feet to over 600k feet in the Northern metro area. Furthermore with the purchase Google stated that office workers would come in at least 3 days a week. Google is joining many others with similar plans.
How will the Work from home trends impact real estate in Denver and throughout Colorado?
Denver: Denver was never really impacted like other larger metro areas like NY due to its much lower density. Therefore, the metro Denver market will continue to perform well as companies like Google continue to bet on the area. You will also see a trend of larger companies moving away from huge corporate campuses to regional offices which will benefit Denver.
Suburbs: The suburbs are going to be a huge beneficiary of the WFH trend. If employees are able to WFH several days a week, the commute is not as big of an issue if you only have to do it 2 or 3 times a week. Many workers will value the lower prices, more space, etc.. and opt for suburban living.
Exurbs: the exurbs will also benefit somewhat from the WFH movement just as the suburbs have. With less time in the office, farther flung commutes become more palatable. As the work from office accelerates, the exurbs will be hit first.
Resort communities: I think of areas like Winter Park and Breckenridge where you can get into Denver in a bit over an hour (assuming no traffic or weather). For high-net-worth earners, I could see where they almost flip flop the traditional real estate norms by having an apartment/condo in the city where they stay 3 days a week and then another place in Breckenridge or Winter Park where they spend the other 4 nights a week.
Rural properties: Rural properties are the biggest risk in the migration back to the office. Very few will work in rural environments forever as more face time will be required. The rush to country living will reverse over the next 18 months
If you watch the mainstream media, many are predicting that most workers will remain at home in their pajamas for eternity. Unfortunately, the media is grossly overstating the long-term impact of work from home. Companies like Google are voting with their wallets on the future of WFH and it looks eerily like pre pandemic. Real estate will follow the patterns of large companies and look eerily like pre pandemic with the one caveat that suburbs could outpace other areas.
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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