Do you invest in office space? New York and San Francisco might not be your go-to investment spots anymore -- or at least not for the near future. The office vacancy rate is a whopping 16.7% in the Bay Area and 15.1% in the Big Apple. Find out the better bets regarding office locales for this year and some reasons people are leaving big cities.
People have been complaining about the high cost of living and high taxes in New York and San Francisco for years, but the coronavirus pandemic has spurred office executives to act. With more people working remotely from home, there is less reason for businesses to maintain expensive office space. And if workers aren't working onsite, why do they need to live near the office in a hyper-expensive city? The answer is, they probably don't.
Data from the U.S. Postal Service shows that almost 16 million people moved out of big cities in 2020, with New York City experiencing the largest exodus. Over 25% of those moves are intended to be only temporary, however, so people might (or might not) move back. Regardless, more than 30 big financial institutions are looking at properties for a possible relocation.
The top five cities people are moving from are the following:
- New York (almost twice as much as any other city, with over 110,000 people leaving)
- San Francisco
- Los Angeles
What businesses are likely to do
A poll conducted by national consulting firm West Monroe found that 25% of businesses across the country are considering moving their operations, 4% already have moved, and 71% say they aren't considering a move. But if almost 30% of offices are considering a move or have already moved, it's fair to say a significant change is taking place.
The reasons given for relocating a business are the following:
- Cost of talent/living: 39%
- Taxes: 21%
- Real estate: 16%
- Regulations: 8%
Another change businesses face is whether to switch to remote work.
Here's what businesses that answered the poll indicated:
- 43% will split the workforce between remote work and onsite work.
- 38% will have mostly onsite work, with some remote work.
- 9% will be mostly remote work, with some onsite work..
- 9% will be fully onsite, with no remote work.
- 1% will be fully remote, with no onsite work.
Where businesses are moving
The top five states businesses are locating to, according to the West Monroe poll:
The top five cities people are moving to are the following:
- Katy, Texas
- Richmond, Texas
- Frisco, Texas
- East Hampton, New York
- Georgetown, Texas
The Millionacres bottom line
People have been fed up with big-city life for a while now. Yes, it's exciting, and yes, people can make it big in places like New York and San Francisco. For those reasons, people swallowed the high housing costs, high taxes, and high crime, along with other challenges of city life. But there comes a time when enough's enough.
The coronavirus has apparently been the straw that broke the camel's back. Many people want to leave big cities in order to social distance to avoid getting the virus, and at the same time, lockdown mandates have taken away all the advantages of urban life. For reasons old and new, urban residents are leaving -- at least for the time being.