Regardless of all the talk of a recession, soft landing, or something in between. Many…
Facebook, Twitter, and other high-tech companies have announced plans to disburse their California workforces and allow many (in the case of Twitter all) of their employees to work remotely. This new trend will have lasting impacts on real estate, not just in California but places like Denver. What does this mean for Colorado real estate prices? Will they increase or decrease as a result of the new trend?
The California exodus
Tech companies in California and throughout the world have been forced to rethink their office strategy after the onset of Coronavirus. No longer are large offices with free-flowing floor plans desirable or conducive to the new requirements of social distancing.
These offices quickly emptied out with employees scattering throughout the country to work and ride out the pandemic. Overnight, this created the largest social experiment in history for companies. Could they effectively function with a disbursed workforce?
The experiment quickly proved that not only could companies function with a disbursed workforce, but in many cases the productivity of workers increased substantially without commutes and the distractions of a large office. This has led many companies like Facebook and Twitter to not only allow, but encourage workers to not come into the office and transition to a fully virtual workplace.
Without place as the limiting factor, cities throughout California and other expensive coastal destinations like New York, will no longer be as desirable for companies and workers. These coastal cities have high housing prices, expensive commercial leases, and considerably higher costs of living as opposed to places like Denver. The social experiment will force companies to rethink their office strategy going forward.
With workers no longer tethered to a desk in an expensive market like California, cities like Denver become very desirable. The cost of living in Colorado is much lower than the coastal markets and the front range is already ripe with highly educated tech workers. This trend was happening before the virus and will likely accelerate with the flexibility given by new companies. This will not be limited to just the Denver front range as I’m seeing this trend already happen in places like Aspen, Vail, and Steamboat.
I don’t see this “office revolution” as a blip. Companies were forced into the experiment of remote working and it worked. Costs for the employers goes down and worker productivity goes up. This is a win-win that will have long lasting impacts.
Facebook and others have recently announced that employees that relocate will have their salaries adjusted for the local cost of living. For example, someone making 100k in San Jose, might make 80k in Denver adding to the companies bottom line. This will somewhat limit a massive outflow from California, but still lead to a substantial number of relocations due to quality of life choices.
Impact on real estate
With Colorado continuing to be very attractive to knowledge workers, look for prices on real estate in the front range and resort communities to continue to outperform many other markets. There continues to be very limited supply so each additional relocation will ensure that prices remain strong in Colorado.
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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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