There is no doubt that working and learning remotely is here to stay in some form or fashion, but workers and students will return
When we see familiar and new faces, there will be upward pressure on rents but until then, landlords have to wait it out and allow the Bay Area to breathe, to rebuild and re-set its cost of living.
There has been a shift in attitude when it comes to working at a remote location, from both company management and workers alike. Take, for instance, a KPMG survey that revealed that, in August 2020, 69% of CEOs said they plan on cutting back on real estate. Fast forward to today and only 17% share that view. A meager 30% said they expect to have a majority of staff working remotely two to three days a week.
We have observed a similar change of heart for workers who overwhelmingly favored working virtually at the outset of the pandemic. It seems that after cabin fever has taken a toll, there has been a complete reversal with most workers expressing a hunger for the connection, camaraderie, and innovation that comes from in-person teams. The consensus is there is tremendous value in blending a mixture of working in the office and from a remote location.
Closer to home
We have researched the stated policies of Bay Area tech companies on remote work and how they plan to adjust to the new normal of a nomadic lifestyle. Our findings can be summarized in this PDF.
In a nutshell, while telework communication technology and remote teams are here to stay, companies are phasing in office employees now with September being the target date for offices to return to some semblance of a full in-person workforce.
In yesteryears, most employers would have balked at the concept of employees working on a regular basis from home, escaping the prying eyes and supervision of workers and supervisors. The concern for a lack of productivity has now been debunked and there are indicators that remote workers are even more industrious than their office-based counterparts.
While our research has been limited to a handful of iconic tech companies, there is evidence other employers that are not household names are taking the same approach of slowly transitioning workers into the office with a blend of remote work and the requirement of showing up at the mothership.
Surely, when the labor force returns, there will be upward pressure on rents.
What about higher education?
We also looked at a handful of universities and found that while they are taking a wait-and-see approach, all are planning to hold in-person classes during the Fall 2021 semester.
In Berkeley, the University never really had enough housing for all students to begin with, hasn't built enough housing to meet their pre-pandemic enrollment numbers, and intends to limit the occupancy within student housing. What this means is that the private market is getting more action by filling the void.
While there was some initial hesitation by UC Berkeley students in believing that in-person classrooms will open up, it seems all but certain that campus life will return to normal. This has created mounting pressure for rental units, but some owners are giving away the store.
With a glut of University-supplied housing in Berkeley, the competition has been high. Some rental housing owners in Berkeley are taking a haircut by accepting steep rent discounts out of panic, but we might recommend taking a more cautioned approach.
In the words of Krista Gulbransen at the Berkeley Property Owners Association, "the more seasoned professionals are holding out and only decreasing their prices 10% or less, rolling the dice because California still woefully lacks housing but there is an expectation that eventually things will pop back up."
She points out, though, that rents for students are not expected to tick back up to pre-pandemic levels for at least another two years.
As the Managing Director of Bay Property Group and your success coach, Ethan Brown is dedicated to maximizing the cash flow of your rental properties and optimizing your real estate investments while taking good care of tenants.
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