Working from home has been a major culture shift for many people during the pandemic. Some have renovated their space to accommodate both a home office and study space for their families. Apartment dwellers especially have struggled to find a way to make it all work in limited space -- and some are going to extremes to draw the line between their work and living spaces.
In New York City, there's a growing trend of deep-pocketed tenants renting or buying other apartments in their buildings to give them more breathing room to work from home. According to a report from Douglas Elliman, studios made up the largest share of Manhattan apartment bidding wars at 7.9%, some of which are apparently being turned into home offices and school rooms.
If you're a landlord with vacancies, this might make you consider renting units out as work-from-home space. Is it a good idea?
A growing need for more space
For many people, the work-from-home life is here to stay. Companies are reducing their office space in favor of virtual offices, and some employees are opting to stay home until they feel more confident their offices can safely handle the return of staff. If moving to a bigger space isn't an option, renting or buying additional space is desirable.
To be clear, this isn't about converting residential space into commercial space. This real estate trend involves people who simply want to keep their living space for living and have a space to escape to -- even if it's just down the hall -- during the working day.
Many landlords have been struggling with vacancies left by tenants fleeing the city for more space in the suburbs and other less populated areas. Others have seen a decrease in cash flow because of tenants lagging behind on their rent. So could this trend benefit apartment investors?
Short-term leases for the short term
If you haven't thought about short-term leasing, now might be a good time to reconsider. By renting out a unit on a monthly basis to someone working remotely, you can continue marketing the apartment as a residential space. If you find a residential tenant, give the current WFH tenant notice that you will not be able to renew their monthly lease.
Here's some good news: By renting to someone who already lives in the building, they've already been vetted as a suitable tenant. Additionally, they should be inflicting less wear and tear on the unit because they're working and not living there, so it will be easier to prepare the unit for the next tenant.
That said, it's imperative to set guidelines as to what your WFH tenant can and can't use the unit to do. If the unit is a co-op or condo, the board will likely have some strict rules about not bringing in clients to the space to avoid additional foot traffic in the building. You might also want to put limits on the tenant's use of the kitchen, for example, to preserve the appliances. Just as with any lease, get it in writing.
The bottom line
Even as some employees return to the office, there are many whose companies will allow them to continue working from home. While reopened co-working spaces might alleviate cabin fever for some, many are looking for an even shorter commute -- down the hall or up or down a few floors. By offering an additional work-from-home space to tenants you already know, it could be a win-win situation for both of your bottom lines.