With the rise of telework, also known as work-from-home, remote work, and hybrid work, the way people work has shifted, often dramatically. But what has been the impact on the real estate industry? From office space to residential homes, the real estate market across Alberta has been altered by ongoing telework practices.
With funding from the Alberta Real Estate Foundation, the Southern Alberta Institute of Technology (SAIT) and RFS Energy investigated changes taking place in Albertan communities as more people work from home – with a focus on commercial & residential real estate market trends and related implications to suburban areas and downtown cores.
Throughout 2022, we conducted several surveys with participants from across Canada to gather information on the current state of telework. The results reaffirm that many people are looking to buy or rent homes that better accommodate their new telework lifestyles.
Extra space, not necessarily bigger space
One of the more notable trends in the real estate market has been an increase in demand for homes with extra space for offices; interestingly this did not necessarily mean larger homes. While many people found that working from home requires more than just a laptop and a kitchen table, what they were looking for was not size but a dedicated workspace with minimal distractions.
This led to many buyers and renters looking for buildings with extra bedrooms or converted spaces that can be used as a home office or a homeschool room. People were also spending more time at home and looked for ways to enjoy the outdoors without leaving their property. Houses with outdoor space have become more desirable and often command higher prices. And this can mean moving to a location further away from their previous homes or offices.
Shifting priorities, shifting plans
Another interesting trend observed over the past few years was an increase in clients looking to review their real estate assets and changing long-term plans. The uncertainty brought on by the pandemic led many to reassess their priorities, with some considering downsizing or moving to a more affordable location, while others are exploring investment opportunities.
With the real estate market experiencing significant fluctuations, many clients are seeking expert guidance in making informed decisions about their building assets. As a result, real estate professionals are seeing an increase in clients looking to review their portfolios, strategize for the long-term, and adapt to changing market conditions.
More homes offices, fewer downtown offices
The increase in telework and hybrid work arrangements continues to have a profound impact on the demand – or lack thereof – for commercial real estate and office space. According to a The New Age of Hybrid Work - a report released by Colliers Real Estate Management Services in early 2023, many companies are adopting telework policies and embracing virtual meetings as the new normal.
This in turn means there has been a significant decrease in demand for office space; the national office vacancy rate will peak at around 15 percent by the end of 2024.
The trend towards telework has also led some companies to rethink their real estate needs and consider downsizing their office space or relocating to more affordable areas. However, it is important to note that the impact of hybrid work is more pronounced in larger primary markets – with dense population and long-established commerce and industry – compared to smaller secondary markets, where small businesses are less likely to adopt hybrid work.
As a result, there is a higher availability of commercial real estate and office space on the market, with some landlords offering lower rental rates and more flexible leasing terms to attract tenants. While the long-term impact of hybrid work on the commercial real estate market is still uncertain, the shift towards more remote work is likely to have a lasting impact on the demand for office space.
There is also a conversation happening in the media across North America about what to do with offices no longer needed due to the rise of remote work. These now extraneous spaces could become schools, data centres, medical clinics, or research labs, all attractive options for building owners looking to make up for lost office rent. Some argue that in cities with acute housing crunches, unused offices should be turned into affordable housing units.
The take home message
It’s readily apparent that the shift towards telework has had a significant impact on the Canadian real estate market for both commercial and residential industries. While the demand for homes with specified work areas and outdoor space has led to higher prices in some areas, it has also created opportunities for both buyers and sellers. As telework is poised to become a more permanent fixture in many industries, it will be interesting to see how the real estate market continues to evolve.
Keeping in the know
Check out our blog series Home is Where the Work Is? based on our research on telework in Alberta. Through these blog posts, we will cover topics such as:
Understanding how remote work is changing the real estate industry
How telework led people to move from the downtown core to suburban and rural areas
Green tips for working-from-home
How telework has changed how we design and use spaces
Find all our resources – and all our blog posts in this series – at www.AlbertaTelework.ca. Presented by the Southern Alberta Institute of Technology and RFS Consulting, and funded by the Alberta Real Estate Foundation.