How Work from Home Can Kill Real Estate Industry?

Key Points:

• Remote working reshaping real estate rules
• Location effectiveness
• Investment in suburbs
• Downside of the statement

The year 2020 has brought drastic alterations in every aspect be it personal or professional life, things seemed change with the passage of time. However the working scenarios have taken a U-turn after COVID-19 which shook the world. The system of work from home introduced everywhere in the world. Now with the technology advancement the resources have expanded to work from home but physical appearance in the office is also the requirement. People now don’t have to burn fuel and drive miles for a job in big cities.

As the impact of work from home has influenced every sector, one of the business that also caught under is the real estate. The rules of real estate will be reshaped because of the mixed environment of work from home and work from office.

If we talk about the importance of location then what are the top three factors that increase the worth of real estate of any area?

These are:

• Center of cities
• Amenities
• Security

Amenities/Security

One cannot prefer the area without amenities and when it comes to security, the priority is considered. Area which is fulfilling the basic needs stays on top in terms of demand. Nobody wants to come out from their comfort zone and compromise on fundamental essentials. The more facilities, locality is offering such as school, hospital, educational. Institute, shopping malls and many more, the higher the worth of an area will be. The same rule apply for security because the circumstances of Pakistan especially Karachi demands the safe and secure living. So, the security matters and people have serious concerns to have reliable accommodation for their family.

 Value of Location

What aspects increase the worth of any location? The demand of any area depends on how people look for it. If the area comes in the center of the city and is offering all the amenities and also meeting the requirements of standard living then the value of an area automatically will increase. But after pandemic, citizens do not prefer the location demand instead they switch according to their budget as work from home is applying everywhere so why would one buy expensive property in the center of the city? He would prefer affordable projects in the suburb as now he does not have to appear in the office daily.

Due to work from home, the commute expense is saved. For example, if a person has to report in office for two days a week and his office is located at Shahra-e-Faisal then buying a home in the surrounding or nearby will be heavy on his pocket. He will think to move far from the city as he just has to be there for two days a week which is completely fine and hassle-free because his time and traveling expense is saving plus he can buy high-standard projects in the suburbs offering quality life with all luxuries in decent price as compared to the city demands.

This will devalue the property worth in the middle of the city because the investment activity will happen more on outlaying districts. The migration rate will also be decreased which is on the constant rise since years. Karachi having the strong economic base, number of migrants from different regions are moving here and the population is increasing by 5% every year. Approximately 45,000 migrant workers from different parts of Pakistan come to the Karachi city every month. So, this will have an imperative impact on the city’s investment. Working remotely will disrupt the growth of real estate market in between the city while the suburbs that were too far for a daily commute from Karachi are going to boom.

Growth of Dormitory Areas

The work from home change is going to effect a lot of things. It has already started in many companies and people have already downsized their homes offices because of the fact they can work from home so efficiently that there is no need for them to be in the office 5 days a week. At most organization says employees might be in the office 4 to 5 times a month. Every single listing real estate market have has sold with an abundance of offers and almost all of those have been from main city buyers. It's happening here in a big way and the locals are playing catch up price-wise, resetting their barometer for what they think local real estate is worth. People have assigned more value to their principal residence also (having to spend more time there) so they're looking for bigger places and more land.

The house costing 2 to 3 crore in the downtown would be available in less price far from the city. Once they have moved the only people left in the downtown core are senior executives having to justify the expensive office space that they locked into for years and junior level staff. Most people have limited desire to commute again via a busy transit system, busy streets and slow highways to finally arrive and be stuck in a crowded office.

The Other Picture of the Side

When the influence of remote working giving boost to the suburb, it carries the pitfalls for some reasons but that cannot be measure in one scale as it varies timely. The proportion of land in suburbs relative to cities is exponentially bigger. It’s true the demand will go up but the amount of land relative to what is leaving the city is not enough to impact suburbs much.

However, as far as people leaving cities, yes that small area of real estate will suffer from a lower demand. Think about the area of a small circle (city) versus the area of a big circle (suburbs). There’s an exponential difference.

A renowned American entrepreneur and author Gary Vaynerchuk has shared his thoughts about how work from home will mold the real estate rules.

With COVID-19 the desire for personal outdoor is now top priority. What’s your opinion and what do you think 20 years will bring to the table of real estate market?