K-12 Tax & Spending Climate: Cities and regions are betting that working from home is the next big thing in economic development.

Steven Malanga:

After decades of expert predictions that technological change would reshape the nature of employment, in just ten months the Covid-19 economic shutdowns have made full-time corporate employment from home a reality for tens of millions of American workers. Just how many of these workers will remain employed at home after the pandemic ends remains an open question, but it’s clear that many workers have become convinced that there’s little reason to go back to the old model of everyone in the office all the time. In a Gallup poll in the initial stages of the shutdown last April, 46 percent of workers said that they were working full-time out of their homes. Millions have since gone back to the office, but 33 percent of respondents told Gallup that they were still working from home last fall. More to the point, about a third of all those who worked remotely told Gallup that they would like to do so permanently, even after the pandemic. In another poll, taken by the consulting firm PricewaterhouseCoopers, 29 percent of workers said that they wanted to work permanently from home.

Many of their bosses agree. Fewer than one in five executives recently told PricewaterhouseCoopers that they want to return to pre-pandemic office arrangements. Others said that they expect to have employees working from home at least several days a week. But 13 percent of executives went further: they are ready to ditch the office completely. Behind their attitude is the growing success of remote work. Some 83 percent of executives surveyed said that the shift to at-home work had been successful. More than half claimed productivity had improved. And seven in ten said that their companies would be investing more in tools to support remote work.

The implications for office space in major cities are enormous. In markets like San Francisco and New York, as few as 15 percent of workers have returned to offices. While return rates are higher in markets like Dallas, among big cities nationally the average occupancy rate for offices remains only about 30 percent. The pandemic has begun crushing real estate markets, as firms delay or cancel plans for new space. The official vacancy rate for Manhattan’s office market, for instance, rose to about 15 percent at the end of 2020, up from 10 percent a year ago, though much of the officially “occupied” space is actually empty. Places as different from one another as Phoenix, Salt Lake City, and Boston have all seen vacancy rates rise as office leases expire and tenants decide not to renew, or to reduce their space.