April 09, 2021 | 13:48
Will Remote Work Stick?
Will Remote Work Stick?
For most office workers, working from home has been part of their normal routine for the past year. Many, including those moving far away from the office, are now wondering how much of the shift will last once the pandemic ends, while businesses want to know the likely impact on productivity, office demand and urban areas. With several surveys and studies now available, we can start to draw some early, though tentative, conclusions.
More than a third of workers have the ability to work remotely and many are still doing so. Statistics Canada says that 32% of Canadian employees (age 15-69) worked most of the time from home in early 2021, compared with just 4% in 2016. Facing generally lighter restrictions than in Canada, 21% of the U.S. workforce was teleworking in March 2021 due to the pandemic, down modestly from the prior month, according to the BLS.
Remote work is fairly popular among workers. They still want to go to the office sometimes to collaborate, train and socialize, but also prefer to work part-time at home (or the cottage) to reduce commuting costs and better juggle work-life duties. A recent Statistics Canada survey found that 80% of new teleworkers would like to work at least half the time from home when the pandemic ends. A recent Gallup poll found that 44% of U.S. remote workers would prefer to keep working remotely, compared with a lesser 39% who want to return to the office. A PwC survey of U.S. office workers in late 2020 found that 28% prefer to work entirely from home and over half (54%) want to do so at least three days a week. A study (Barrero et al.) of over 30,000 U.S. workers in late 2020 found that teleworkers expect to work about 2 days per week from home after the pandemic .
However, many companies are less eager than their staff to embrace remote work. Although telework appears to have little adverse effect on productivity, at least in the short run, executives question its sustainability if corporate culture and morale deteriorate over time. Still, a PwC survey of 133 executives found that 55% plan to allow staff to continue working remotely at least part of the time. A McKinsey poll in August 2020 found that executives plan to reduce office needs by an average of 30%, and a recent KPMG survey found that 17% of CEOs intend to reduce office space. Ford recently told its 30,000 global office workers they can keep working remotely when the pandemic ends, using offices mainly for meetings and face-to-face interaction. JPMorgan Chase and PwC say they plan to shed large blocks of office space, while HSBC said it expects to eventually reduce its needs by 40%. However, Amazon recently signed office leases in several big cities, and few companies plan to allow workers to fully work remotely.
Surveys of workers and bosses suggest part of the shift toward remote work will last. The degree will depend on its impact on productivity, and here there is some reason for optimism. A recent Statistics Canada survey found that 90% of new teleworkers said they are at least as productive now as in their former workplace, while a third claim to be even more effective. The earlier-cited Barrero study finds that remote work could lead to a one-time 4.7% boost to labour productivity. However, most of the lift comes from less commuting time, which increases output but doesn’t raise per-hour efficiency. In theory, productivity should benefit from a better matching of positions and skills over a wider geographical area. Government support to expand and improve broadband access will help here, as per Canada's Universal Broadband Fund and the proposed American Jobs Plan.
A hybrid teleworking model implies less demand for office space, which could raise vacancy rates further (Chart 1). However, even if many workers spend a day or two each week at home, companies will likely need to keep a buffer for when the staff is in the office at the same time. This could limit the decline in office space, perhaps to less than 20% of pre-pandemic levels. As companies (and governments) re-evaluate their office needs, few will rush to sign extended leases. Some will shift to a hub-and-spoke model that retains a (smaller) head office in large urban areas, while providing a few satellite offices in less expensive areas. While office demand will shrink, the impact will be tempered by repricing and repurposing of space. Lower rents and extended concessions may be needed to entice companies to sign long-term leases. Some office space will be converted into multi-unit housing and warehousing to support online distribution.
The likely shift in office needs will favour buildings in regions with lower rents, easier commutes, and more affordable housing. Older buildings in large, pricey cities could suffer. This would hit demand for in-person services in urban areas, as even a small percentage change in the office/commuter population could have a meaningful impact on firms that cater to this crowd. Still, large cities aren’t going away. Young people are drawn to urban amenities, while companies benefit from clustering effects associated with access to skilled workers and diverse suppliers and customers. Dr. Richard Florida, an urban expert at the University of Toronto, believes remote work will allow cities to transform themselves into better living areas, say by converting some office buildings into affordable housing or green space.
One of the more profound impacts of telework has been on residential real estate, both in terms of property size (roomier is better) and location (cheaper is better). Accordingly, detached homes in more rural locations are seeing the hottest action. A key risk now is that this trend could reverse if buyers have overestimated the persistence of telework and, hence, underestimated the toll of a two-hour commute even a couple days a week.
Bottom Line: Part of the shift toward telework will stick and many employees will likely be given the option to work from home perhaps one or two days a week. The shift will leave a permanent mark on the demand for office space, housing markets, and urban regions, though it may not radically transform them. This is a tentative conclusion and a firmer verdict awaits until after the pandemic.
 Barrero, Jose Maria; Bloom, Nicholas; and Steven J. Davis. “Why Working From Home Will Stick”. April 1, 2021. https://static1.squarespace.com/static/5e2ea3a8097ed30c779bd707/t/6067860dbaa85b54546746c5/1617397263367/WFH_Will_Stick_V8.pdf [^]