The pandemic changed many economic realities around the world but perhaps none have been as persistent as the role of remote work.
According to a recent survey of 25,000 individuals by McKinsey & Co., 58% of Americans say they have the opportunity to work from home at least once a week.
This taste for remote work coupled with pandemic concerns and the change in the nature of work has resulted in a significant increase in the number of Americans who are now working remotely and infrequently using the office.
Between 2019 and 2021, the number of people primarily working from home tripled from 5.7% (roughly 9 million people) to 17.9% (27.6 million people), according to recently released results from the 2021 American Community Survey (ACS) by the U.S. Census Bureau.
At the state level, ACS estimates that 18.8% of workers in North Carolina worked from home, which is 0.9 percentage points higher than the national average. These changes have affected commuting, public transportation and perhaps most glaringly office use.
While travel, restaurant bookings and attendance at live events are all either near or back to pre-pandemic levels, office occupancy still lags.
According to Kastle Systems, a company that tracks office occupancy using swipe data, they find that as of February, office use is only 50.4% of pre-pandemic levels.
Even as some firms become more determined in bringing people back to the office, the remote work trend seems to be persistent, which raises questions about the demand for office space going forward and whether an increasing number of companies will be re-evaluating this expenditure.
In addition to the disruption to office life, the Federal Reserve’s quest to fight inflation has come at the cost of higher interest rates that have affected both the residential and commercial real estate markets.
For commercial markets, the cost of borrowing will likely influence transactional activity in 2023.
Economic headwinds along with the potential structural change in office culture will likely disrupt the traditional office.
This, however, does not mean that commercial spaces are going to be sitting empty.
That is because another trend caused by the pandemic may serve as a strong factor in counteracting these changes.
That trend is reshoring, which refers to the process of returning the production of manufacturing goods back to the company’s original country.
The supply disruptions experienced during the past two years have made many companies revisit where they source their products, the reliability of that sourcing and whether bringing some of the production closer to them may be beneficial.
Last year, for example, Intel announced that it was bringing two new semiconductor plants to Arizona, and General Motors revealed that it was reshoring its battery production to Michigan.
These changes do not seem to be isolated and are driven by a combination of supply chain concerns, international tension and a desire to have more control over production decisions.
While office life and office use might be on the decline, the reshoring trend will likely boost demand for commercial spaces as more companies re-evaluate their supply chains.
Commercial space needs are likely to look different in the future than they do today, and it will therefore be important to remain flexible in the face of the sea change we are observing.
Mouhcine Guettabi is a regional economist with UNCW’s Swain Center and an associate professor of economics in UNCW’s Cameron School of Business.