The Next Great American Migration
Work From Home Changes Everything
A while back, I wrote an article on the very specific, very short term impacts the COVID pandemic is having on the rental housing market and it got me researching and thinking about what the long term implications might be.
In doing so, I’ve come to the conclusion that we’re on the cusp of a massive shift in American society and culture: the next Great Migration.
Let’s talk history
For all of us living today, all we’ve ever known is migration to the cities as we moved away from an agrarian economy to an industrial and then a service-based economy.
In fact, this is just one of many Great American Migrations. Others include the Gold Rush to California beginning in the 1850s, the Dust Bowl migration to the West in the 1930s, and the African American migration to the North in the first three decades of the 20th century.
Each of these migrations fundamentally changed how the United States is populated, shifting population from the South to the North, from the East to the West or from Rural to Urban.
These Great Migrations are long term trends. So long term, in fact, that it’s hard to see them as trends. When a trend happens over the course of a generation or more, it’s hard for us to imagine that it can end, but end they always have.
At a fundamental, cultural level, we Americans are a people who move, and we’re about to start a new move, a new Great Migration.
Why do we move?
We move because of an idea, almost always an idea about how we can better our lives. That idea takes different shapes: freedom to practice our own religion; a magical land of sunshine where gold runs in the rivers; new levels of personal freedom; dramatic economic opportunity.
Urbanization as we know it today was born of the industrial revolution, at a time when the idea was that machinery could create a massive increase in individual productivity and workers could be freed from the land. This idea caused us to migrate to the machinery. That meant company towns and cities where groups of like-minded companies clustered. Furniture in North Carolina, the defense industry in Southern California, finance in New York City, oil refining in Houston.
Communication technology was rudimentary, and the means of production, record keeping and all manners of work were physical. Even if you weren’t working a machine, you had paper files or a need to sell in person. It was absolutely essential to locate yourself physically close to the people you worked with for most of us.
Work has changed, the culture hasn’t
Many of those factors still exist today. There are still production machines, though they need far fewer people to operate them. Zoom has been a lifesaver in the pandemic, but is still no great substitute for in-person contact.
However, for so many of us, those tools are now good enough for us to be able to pick our location. In the course of this pandemic, our team here at Dwellsy has been as productive as I could have ever imagined us being if we were working together in person.
And in the midst of a terrible pandemic, the benefits of working remotely have been wonderful. We hired amazing people from across the country that we never would have met without full remote work. We had more time in our days because we weren’t commuting. A change up in a kid’s schedule for the day was a bump in the road, not an emergency that required a day off. And, we’re not paying for office space.
This change has been earth shaking for me. I’ve always managed teams who worked in offices. I’ve always assumed that would always be the case.
COVID has shown that assumption for what it is — an assumption shaped by cultural norms, not a fact-based decision to optimize for team productivity and happiness. There are tradeoffs, but the benefits of WFH are real and concrete and the benefits of being in an office are amorphous at best.
And with that, we have a new idea to prompt a new Great Migration: we are free from the need to live close to the machines.
The boom in working from home changes everything
Work from home levels are extraordinary; at 40% or more. It’s now something of a parlor game to predict where WFH levels will land on the other side of the pandemic.
My take? I think we’ll see work from home at a new level well above where we were before the pandemic. Something in the 20% range vs. 8% before the pandemic, but well below the current 40%.
This in itself is not that interesting. What’s interesting is the implications of this change.
Think about it for a moment. Going from 8% to 20% of workers working from home means more than 18 million people who no longer go to an office every day. That’s more than one out of every four office workers.
That’s 18 million people who no longer commute in the morning. Who are not in an office park or a downtown core for lunch. Who are no longer struggling to figure out how to get the kids to and from a six hour school day when they need to be at work for 8 hours.
Instead, they’re at home. They’re eating in their kitchen or in nearby restaurants. They’re not driving as much, not taking public transportation as much. They’re not consuming as much fuel. They have an extra hour of time available to them each day to work more — or play more. They don’t need as much child care.
Critically — they’re freed from the requirement to live somewhere close to their work. They can now live anywhere they want.
And, they bring their consumption with them to those new places. More on that in a moment.
Increased WFH will change where people live
Coders can work from rural Georgia; exciting tech companies in the Silicon Valley mold are hiring across the country and the world. Bankers can transact from Vermont; they don’t need to be a tower in Manhattan. Accountants can manage oil company financials from New Mexico; they don’t need to be in an office park in Houston.
Sure, some (likely most) people are still going to want to live where they’re living now, whether New York, San Francisco or Houston. But for many, freed from the need to live close to their work, they’re going to live elsewhere.
Where? Small, interesting cities are going to be the biggest winners, particularly those with colleges and universities or state capitals that are accessible to the big cities and are relatively affordable today. Places like Albany, NY, Sacramento, CA, and Asheville, NC.
Cities that are interesting and expensive, but far less expensive than New York and San Francisco will also fare well — Boulder, CO and Austin, TX, for example. Many will also move to rural areas and places where they have familial ties, regardless of how closely they resemble the cities that they come from.
Internet quality in a town or neighborhood becomes as important as a good highway system once was. Cities and towns like these that have made sure their residents have great internet infrastructure will see disproportionate growth and benefit.
Increased WFH will change how people spend their time and money
Those remote workers relocating to other places bring their spending power. While they may work with people who are far away, they still consume locally.
They will want restaurants to go to, entertainment venues for fun, haircuts and nail salons and all manner of other services that can only be delivered in-person.
WFH will cause a secondary opportunity boom in these places, as the sector serving remote workers grows to meet their demand. This will mean a ton of new service industry jobs — in places with lower costs of living, which will be good news for many. Much better to do a window washing job in Albany where your commute is 10 minutes from an affordable rental than in New York where you either commute 90 minutes each way or pay unaffordable rent.
Increased WFH will change office nature and demand
Offices are going to get crushed. There’s just no way to gloss over this fact.
In the near term, there will be plenty of adjustment and adaptation that will slow the pace of change, but you can’t get rid of one out of every four office workers and not see big changes.
As a small scale example, let’s think of how this unfolds for an accountant’s office. Today, our accounting firm has four people in an office. Two partners and two junior accountants, one of whom also managed the office. Office space is expensive, and, as it turns out, unnecessary.
Post-pandemic, the two partners are now working from home full time and there is no permanent office. The junior accountants? They always wrestled with the cost of living on their salaries, so now one now lives close to family in another state and works fully remotely and the other is still in the area, but has moved to a different part of the city that’s easier on the budget since she doesn’t have to worry about her commute anymore. And, there’s no office to manage anymore, so the one who was managing the office can do more accounting work and less office management — allowing the company to take on more clients without adding staff.
The accountant and her partner maintain a membership at a flex office space that’s in a central location in case they need to meet with clients in person. They used to take 4–6 meetings with clients in person per week, but now that everyone’s used to Zoom, they find they only need half those meetings. So, they book 10 hours per week of a private office in a WeWork-style space with a receptionist to help them receive guests.
Every few months, they bring the whole team together at a larger conference center for an offsite. This helps them build and maintain in-person relationships with each other for the long term, but most of the time, they’re working in their own spaces and talking via Zoom, Slack, and email.
This same concept scales up for larger organizations. A Bank of America or a Twitter might maintain a dramatically downsized space for their employees in a central location when teams need to get together, since they can justify a full-time space. Other mid-sized companies may use conference centers far more extensively.
And, for employees who are unable to work productively at home, there will be workarounds and support. Help getting the home office equipped or offices at flex office spaces close to the employee’s home as a benefit, for example, if the employee wants to use it.
(I’m not alone in imagining this— who wants to build it?)
Increased WFH will change housing demand
Location, location, location has always been the real estate mantra, but the WFH Great Migration will change all the “right” locations.
At the city level, big cities will see slower growth than in the past and at worst, stagnation or shrinkage, while smaller cities see growth, development and renewal.
Within cities and towns, commuting patterns will change as WFH becomes an attractive alternative to a challenging commute and many choose to work from home or in their local coffee shop or a nearby flex office location. With that option, will the same neighborhoods that have easy commutes still command the premium they’ve historically gotten?
Single family homes will be the most favored home type, since for many, the move to a smaller and more affordable community will be about getting more space. WFH brings its own space needs, causing further growth in home size.
With remote workers spending more daytime hours in their neighborhoods, demand for local services will increase. Homes and apartments close to suburban downtown areas will be more valuable than they were previously, and it’s likely that new retail and entertainment cores will form as smaller cities sprawl.
New high-density housing development in major cities will lag substantially. All those offices will need to get used, and when office demand has cratered and the rent paid for an office is demonstrably lower than for other uses for an extended period of time, it will start to make sense to convert those office spaces — primarily into new residential.
Increased WFH will bring new challenges
Great for the environment that there will be less commuting and congestion, but not great that we’ll all need more personal indoor space and that more land will be given over to more low-density housing.
Great for lower income Americans that many will be able to get good, “big city” jobs while working from more cost-effective locations, but many will not have access to those jobs and it will be harder to build the relationships necessary to get them.
Great for those with the space and quiet to be able to work from home productively, but many don’t have that luxury. Will companies be willing to repurpose some of their savings from closing or reducing their offices to help with that? Will that help be enough? Or will those people be forced into professions that they have to do outside their homes?
Great for companies that they’ll be able to reduce their office costs, but they’re not going away — they’re just shifting from the company to the employee. Even for employees who can afford the additional cost, it will be just that, an additional cost. They’ll have to provide additional space to accommodate their working life, their own work-quality internet and more more in other utilities. Will the savings on the costs of being in an office make up for those new expenses or should companies have a role in helping their employees with these costs?
Great for remote workers who are able to take their big-city salaries with them, but some will not. Companies are already looking to reduce pay for some who relocate to other places. Will this lead to a new national talent market if companies can hire employees anywhere? If so, what’s the implication for folks who are left behind in New York or San Francisco? If they have to compete for the same jobs with people in much lower cost markets who are willing to work for less, how can they sustain their standard of living?
These are just a few of the massive ethical quandaries we’ll have to wrestle with in the years ahead.
How does the Great WFH Migration start?
Assuming the pandemic has run its course by the end of this year, we’ll start to see this unfold in 2021 and pick up speed over the coming decade.
I’ve spoken to many, many office workers who have relocated to new places due to COVID. Some are happy with those places, others are not. Many will return at the end of the pandemic, but some will not.
Those that stay will start building new lives in their new places. For those that return, they’ll find the rhythm of their old life changed. Perhaps their company no longer has an office for them to go to. Perhaps they find their neighborhood has changed with many friends now departed and unknown crowds at the local coffee shops and restaurants.
With that kind of change comes optionality. Faced with an inability to resume their “old lives,” they may choose to be elsewhere, since they don’t need to be at their office in person anyway.
The move to the big city that is a right of passage for many small town Americans, and historically some have stayed, growing those big cities for the long term. Increasingly, many will not relocate to big cities in the first place. If you can get great “big city” jobs right where you are, then the need to move for opportunity declines and you’re able to deepen your roots and relationships in the place where you already are, rather than find that new place.
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It’s rare in this life that something happens that fundamentally shifts how we live and work.
The Coronavirus pandemic has been one of those rare events, and historical precedent tells us that we should expect significant and lasting change as a result.
The Great Work From Home Migration is one of those changes and, like it or not, it has already begun. Let’s hope that it turns out to be a benefit for as many Americans as possible.
