How Remote Work Is Affecting Urbanization

In the early part of the 2010s, economists around the world heralded what they thought would be the “decade of the city.” Census data showed that more people were moving into cities as they sought out more work opportunities. 

In fact, the UN was predicting that 60 percent of the world’s population would be living in large cities by 2030, since that is where the best jobs tend to be. 

However, according to research from the Brookings Institute, the growth of cities has been slowing over the last few years.

With the onset of COVID-19, many more workers began to cast a critical eye at their work environment and home environment. Through this lens, city life didn’t have quite the same sparkle to it anymore. Urban dwellers stayed locked inside small apartments for a year. High population densities made disease transmission more likely. And with most workplaces adopting remote work arrangements, living inside a city to shorten a commute was no longer a factor. 

As a result, professionals began fleeing their cramped urban quarters for the suburbs and beyond. 

This migration is having several interesting effects on housing markets, tax revenues, infrastructure projects and the roles cities will have in the future. 

Over the past several years, housing shortages in cities like San Francisco, New York, Los Angeles, London and more, have caused home values and rental rates to skyrocket. For instance, in 2018, an average 1-bedroom flat in London cost about half of an average worker’s take home pay. 

But with more remote workers leaving dense cities, more housing inventory will come onto the market, leading to a fall in rental rates and opening opportunities for people seeking accommodation. 

Smaller localities will see benefits, too. More residents buying into new neighborhoods means more tax revenue for cash-strapped municipalities. That means more money for infrastructure and public works projects. 

More working adults moving into a community also means an increase in consumer spending for local shops. It also means an influx of knowledge capital to smaller localities. 

Plus, with opportunities to remotely work far away from a top employer, smaller towns could experience less “brain drain” from top young talent leaving for greener concrete pastures. 

Does this all mean that darker days are on the horizon for cities? After all, nearly 14 percent of office spaces in once-bustling Midtown Manhattan sit empty, according to the New York Times. Plus, filings for new builds in the city are down 22 percent. 

It may take several years or decades for this supply to be met as many companies consider shrinking their office footprint. 

According to a Swedish government report, it is expected that most companies in the Nordic country will nearly halve their office square footage from 15,000 on average to just 7,900. 

Don’t think that this radical shift in worker locations is without its downsides for small locales either. 

Many of these migrating workers, who are able to work remotely and visit the office as they choose, tend to command higher salaries. So, while housing values may start to go down in urban areas, they may very likely shoot up in suburbs and small towns. 

Researchers have already dubbed this effect on small towns “Zoom Towns” – reminiscent of the boomtowns of the gold rush days. Affluent residents flock to new, more rural locations in hopes of a slower life with more leafy views. This can lead to big changes for a small towns economy and cause some long-time residents to be quickly priced out of their own markets. 

This isn’t the end of suburban or city living by any stretch of the imagination though. For cities, with workers living in close proximity to their employers, to become completely irrelevant, remote working would have to be adopted on a scale even more widely than it is right now. Plus, lots of anecdotal evidence and hard data are emerging that shows workers don’t want to be stuck in a purely remote situation forever. 

Instead, business leaders and workers are looking to create hybrid models. 

According to research from the University of Essex, two groups of remote workers are likely to emerge post-pandemic. One group will include workers who visit the office once or twice a week. The other group will prefer to visit the office for one week each month — and to use that time for intensive brainstorming or conference gatherings. 

The Future of Work Institute also spoke to several business leaders directly about their plans for approaching a hybrid / flex office model for post-pandemic life. 

According to Van Goodwin, Managing Director at the consulting firm Van Allen Strategies, the right hybrid mix will be specific to each business and will present unique challenges.

“We’re a consulting practice,” Goodwin said, “and it was relatively easy for us to move to a digital business, compared with some other models. We are the call to become a fully virtual team permanently, and plan to stick with it.”

Their transition hasn’t been with its challenges, though. 

“Our biggest challenge has been business development,” Goodwin continued. “which previously relied on so much face-to-face time with decision makers. To address that, we’ve started finding digital methods of engaging with potential partners without selling to them, such as inviting them to be experts or guest authors on our company blog.”

Employees at Van Allen Strategies seem to be embracing the change as well. According to Goodwin, while employees were once concentrated in the Washington, DC metro area, they now spread across three time zones in the US and Mexico.