Improving Resilience in The Real Estate & Title Industries

improving reslience

Several trends emerged during the global pandemic that will have long-lasting implications for the Real Estate and Title industries. While it isn’t immediately clear what the new “normal” will look like, most agree the long-term impact will be significant. The challenge for the Real Estate and Title industries is that things may change several times before market equilibrium occurs. For organizations to successfully navigate this time of hyper-change, it is necessary to adopt strategies that lead to improving resilience in processes and systems to stay viable.

The Disruption of Remote Working

Remote work is an employment arrangement whereby employees do not commute to a central place of work. This type of arrangement is also referred to as work-from-home (WFH) or telework. This concept can be traced back to the 1970s. Technology was developed back then that linked satellite offices to downtown mainframes. Connectivity was achieved through “dumb” terminals using telephone lines as a network bridge (source).

Since those humble beginnings, broadband internet, affordable laptop computers, and a global pandemic set the stage for remote working to go mainstream. According to the U.S. Bureau of Labor Statistics, 24 percent of employed people did some or all of their work at home back in 2015 across a variety of different industries (source). Today, that figure has doubled to 58.6 percent (source) with 41 percent of those workers being fully remote. According to data scientists at Ladders, 25% of all professional jobs in North America will be remote by the end of 2022. Wow! This significant megatrend will continue to disrupt Real Estate, Title, and many other industries.

This trend has not been seen as good news for everyone or every organization. Companies that have significant investments in office buildings now face high expenses for vacant or partially used assets. Other changes include a loss or shift of the corporate culture or the ability for managers to keep a close eye on their employees. While some organizations simply can’t operate remotely, such as those in the business of performing public, healthcare, or government services, a majority of businesses can support some level of remote working.

Ripple Through Effect on the Real Estate Industry

One of the surprising first impacts of the remote working transformation is how quickly workers relocated. Employees had new freedom to work away from large urban employment centers. In a matter of months, there was a considerable exodus to more affordable and rural areas. Workers sought more living space at lower housing costs, moved closer to family, or more natural and socially distanced environments. The result has been improved quality of life and work/life balance.

In the aftermath, government, businesses, and individuals now find they must adapt and evolve in light of this de-centralization. Some regions experienced rapid population declines while others had a large infusion. Repercussions on city infrastructures and delivery of public services have been radically altered. Former high-density urban environments now have underutilized environments – with the exact opposite in rural areas. These shifts placed new pressure on improving resilience to change how public services can continue to be delivered.

A recent study from Columbia University and NYU estimates a tremendous devaluation of U.S. office buildings resulting from the rise in hybrid work. The study estimated a 32 percent decline in the value of U.S. office buildings in 2020. These estimates were extrapolated from the detailed study of the New York City office market where it is estimated to experience a $49B value decline by 2029 (source).

Some believed that once the global pandemic had subsided, things would get back to normal. Workers would move back to urban central business districts, and Real Estate usage would be reset. This might have occurred if it were not for the shift in labor markets that also occurred.

The Great Resignation

In today’s competitive labor market, companies must retain existing—or attract new—employees by now accommodating remote and hybrid work. The Great Resignation hit hard. Worker mobility is on the rise. Apple employees and more recently Google Map subcontractors sent a petition to company leadership to urge a continuation of their ability to work remotely after being ordered into the office. Most surveys indicate that the majority of workers favor approximately 2.5 days per week in the office with a strong preference for Mondays and Fridays at home (source).

What is emerging is a new hybrid work model where some workers will commute, but only on specified days. Others will continue to work remotely. This is a completely new model, which is forcing the Real Estate industry into rethinking best-use scenarios that can help with improving resilience to change.

As companies consider a reduction in their Real Estate footprint to help retain employees, one consideration might be to adapt offices for mid-week peak occupancy rates while trying to incentivize employees to spread the peak so reduced space can be better utilized (source). Employers will need to consider how different work functions can be performed at specific locations. Greater reliance might be placed on shared and co-working spaces.

With these changes might come new ownership structures. Shared models might be deployed in how space is leased or owned. Each of these changes has the potential further to disrupt both the Real Estate and Title industries.

For insights into how Real Estate contracts may be impacted by new ownership structures, be sure to read this article, What is the Future of Smart Contracts?

Improving Resilience to Business Disruption from the Great Decentralization

Organizations operating in the Real Estate and Title industries must now adapt to new business models. Real Estate markets are changing in how assets are utilized and what locations are now deemed more desirable. With these changes comes a need for greater resilience in business systems, culture, and how business gets done. There is no way to know what the next change will be or how long this equilibrium will last. The best strategy is to plan for change across your organization.

As an organization operating in the Real Estate or Title industry, it is paramount that your systems infrastructure is highly agile. Investing in digital systems that can be readily changed as often as needed will help the next time a big shift occurs. Becoming a data-driven enterprise will help you make the best future decisions impacting how your business operates during the next shift. Building flexibility into how processes are performed – with intelligence – is a winning formula.