While most people have resumed their daily normal lives following COVID-19, the impact of the pandemic is still being seen and felt across multiple industries. Social distancing led to a drastic increase in remote work, and many companies found that employees were more productive when they worked from home. As such, commercial and residential real estate has changed in ways that continue to impact investors in 2023.
Less Demand for Commercial Space
As of 2020, the average cost for an office space in the United States was about $35 per square foot – a huge sum of money. In big cities like New York, metro-area offices topped out at a whopping $81 per square foot. Prior to the pandemic, bringing employees to the office to work was not only acceptable – it was expected. During lockdowns and social distancing, though, many companies found that they could get by with much less office space. As a result, these companies sold their large properties (or didn’t renew their leases) in an effort to save money.
Still today, the demand for office space has fallen sharply, so prices remain incredibly low. Real estate investors who own this sort of property aren’t likely to see much profitability if they sell or rent it as office space, but they might be able to convert the space and use it in other ways. For example, some investors have decided to turn their office buildings into coworking spaces. They rent cubicles or even private offices for an hour or a few hours at a time. This way, they can rent each space to a different company or individual and enjoy much higher profitability.
New Demands for Residential Space
Just as the work-from-home movement has changed the way investors see office space in the United States, it has also changed the way professionals use their residential space. For example buyers and renters alike increasingly seek single-family homes or apartments with an extra bedroom that they can convert into an office space. Would-be homebuyers are particularly intrigued in detached spaces, such as modular offices, lofts above garages, and even guest houses converted into offices.
Real estate investors who buy properties in up-and-coming cities – or those experiencing exponential job growth – may want to consider converting a room or space into an office in their single-family (and even two- to four-unit multifamily) homes. These spaces are more appealing to potential buyers than they have ever been in the past, so making an office part of your home staging efforts could help you sell your properties for more.
The peak of the pandemic is well behind us in the United States, but it has had a lasting impact on the way Americans work. The New York Times reported about a Stanford study that found 27% of paid full-time days were still being worked from home in early 2023. Real estate investors who want to appeal to potential buyers and renters will do well to accommodate remote work with comfortable, inviting office spaces.