As Millennials start having children and wanting different things out of life, many find suburban living more appealing. This trend started before the global pandemic forced everyone to distance from one another, but there’s no denying that COVID has considerably sped up the process.
Today, many Millennials want to live away from the city’s bustle, in places they’re more likely to have a yard, access to parks, and good schools nearby. They’re also finding suburban properties more affordable.
At the same time, this generation wants shops, restaurants, and other essential services within an accessible distance. And soon, employers who set up offices in suburban neighborhoods could become more appealing, especially when people return to the office after the release of a successful vaccine.
The challenge is determining whether this movement from the cities is transitory or marks a lasting decentralization of the workforce. If it’s the latter, moving to a hub-and-spoke living and working environment could make suburban offices a far more valuable commodity.
Many factors are coming together and encouraging people to leave cities.
First, there’s the cost, as an apartment within the downtown area of a market like New York or Miami is prohibitively expensive. When buyers and renters can get far more living space at a lower price, suburban living becomes very appealing.
Living in the city is also a challenge because you’re unlikely to have any private outdoor areas. COVID has made this lack of space almost unbearable, forcing city-dwellers to either spend their time indoors or head to public outdoor areas and risk infection. The suburbs have yards and quiet streets, both of which are advantageous during a pandemic.
Buying in an urban area also involves far higher property taxes, despite owning less space. Millennials aren’t seeing value living in the city and are looking to stretch their real estate dollar a little further.
Of course, the current work-from-home opportunities are partially driving this trend. Those moving to the suburbs don’t have to worry about commuting because they’re working from home. However, we don’t know if these people will want to stay in the suburbs once they fight traffic on their way to a downtown office.
COVID-19 has brought numerous challenges for businesses of all sizes, not the least of which is keeping employees safe. For many companies, this means allowing workers to stay home.
Some companies, such as Microsoft, are turning work-from-home into a permanent solution. The company will allow most of its employees to stay home about 50% of the time post-COVID, with some individuals being eligible for full-time remote work with manager approval.
Microsoft’s headquarters are in Redmond, Washington, a suburb of Seattle, with other offices in smaller cities like Albany, New York, Bellevue, Washington, and Alpharetta, Georgia. The company also has a location in a suburban section of Austin, Texas, with its lone big-city urban office sitting in downtown Atlanta.
If the movement away from the cities continues, we could see more companies following Microsoft’s lead. More businesses may set up shop in less-populated cities and suburbs, allowing employees to work-from-home at least part-time.
If the workforce wants to remain in the suburbs, there’s a good chance commercial real estate values will follow the same trend. After all, the whole reason why many headquarters relocated to the cities in the first place was to attract Millennial talent that lived and played in those urban centers.
With a large percentage of the workforce now looking to escape the cities, it makes sense that companies would relocate again to give employees a shorter commute, which could potentially attract talent to their organizations.
There’s no telling if the move away from the metropolis is permanent. Once we have a safe and efficacious vaccine, individuals could realize that they miss the city and migrate back to the high-rises they abandoned in 2020. But they also may like the re-imagined suburbs, and permanent part-time-remote arrangements will mitigate the inconvenience of a long commute.
This trend creates an interesting CRE opportunity. A fundamental shift in the location and type of office space companies are looking for will, of course, impact the values of specific properties—and smart investors will be watching.
For more information on current CRE trends and the ever-changing market, call Morris Southeast Group at 954.474.1776. Ken Morris is also available directly at 954.240.4400 or by email at firstname.lastname@example.org.