How the property landscape has forever been changed by working from home

Don’t count on Millennials wanting to return to the office in the coming decade while they have young kids.

On a Tuesday in Sydney, I walk around Martin Place. After passing maybe a dozen cafes I realise that a certain cohort of people is missing from the picture.

Anyone with skin in the commercial or residential property game will want to understand where this group has vanished to.

We are talking about Australia’s largest population cohort. People I estimated to be aged between, say, 35 to 44 were hard to spot while folks that I guessed to be younger or older were everywhere.

The few people in that age group I spotted were almost all males.

If they are not in the city, where are they? They must’ve just stayed home. But there’s no need to assume such things as census data can tell us exactly what happened.

Pandemic restrictions ensured that a whopping 29 per cent of full-time employed workers clocked in from home on Census Day in 2021 (that compares to less than 5 per cent pre-pandemic).

By now these restrictions are long gone but the working-from-home trend is still going strong. I would expect maybe half the workers who worked from home on Census Day are still working from home on any given Tuesday, Wednesday, or Thursday. Mondays and Fridays might still see close to pandemic-level working from home figures.

Maybe half the workers who worked from home on Census Day are still working from home. Picture: Simon Bullard.

It’s fair to assume that the same groups of people work from home today who did a year and a half ago on Census Day.

The Census allows us to split the workforce into parents and non-parents. To keep things simple, we are only looking at full-time workers for this exercise.

Working from home in non-parents (we are not differentiating by gender for today’s exercise) peaked at 36 per cent at age 36. After this, a smaller share of workers stayed home all the way to retirement age.

From age 65, working from home sees another boom simply because the relatively few workers who haven’t retired yet are much more likely to work in knowledge jobs that are easy on the back rather than in physical jobs that necessitate retirement.

The general shape of our working-from-home curve stays the same when we look at parents. Fathers under the age of 45 are less likely than non-parents to work from home. The peak is reached at 40 years of age at 32 per cent. After 45, fathers are just as likely to work from home as non-parents.

It is mothers who really drive the working-from-home trend. Throughout their careers mothers work from home at a rate that is around 8 percentage points above the rate of fathers.

At age 39, more than 40 per cent of full-time working mums stayed home on Census Day. Put differently, mum is 25 per cent more likely to work from home than dad. In the crucial early parenting years mums are 50 per cent more likely to work from home.

One reason for that trend is the type of job that mum likely holds. On average, women (and therefore mums) are more likely to have a knowledge job than men. Since knowledge jobs lend themselves to remote work, we would expect women to work from home a bit more frequently than men, no matter the family care arrangements.

Earning capacity and traditional division of labour probably play a bigger role.

Assuming that in most straight couples the man still earns more than his female partner, it isn’t surprising that he goes to the office while she stays home with the kids – all the while working full-time in our example! This is probably the most economical decision for the family unit under current circumstances, as physical presence in the office is probably still increasing the likelihood of a promotion or pay rise.

Back in the olden days we’ve seen mum leave the workforce during the child-rearing years. If the household couldn’t operate on dad’s income alone, mum took on part-time work. With today’s rising costs of living, households increasingly need two full incomes to pay the bills. Working from home allows households to have two full-time incomes even during the early child-rearing years.

Let’s look at the working from home trend through the property lens now.

Before their first child, the couple lived in a one or two-bedroom dwelling in the inner suburbs to shorten the soul-destroying commute to the office tower. Now a young family, they moved to the urban fringe or even a regional city. The young family paid an arm and a leg for their three or four-bedroom dwelling that they just recently moved into.

The motivation to go back to the office couldn’t be lower. They are now facing a much longer commute since affordable housing wasn’t available in the inner or middle suburbs. They only commute to the office tower when it’s unavoidable.

On the residential property front, larger dwellings drive demand. The big Millennial generation only just got started in family formation. They’ve easily got another 12+ years of baby making in the tank. This means the whole generation transitions bit by bit from couple-sized dwellings into family sized dwellings.

Since Millennials tend to work in knowledge jobs, they require a Zoom room (a separate room with a door to keep the kids and cats out of their video calls), a bedroom for mum and dad, and one bedroom for each kid. Four bedrooms is what they want; if that’s unaffordable, they will manage with three bedrooms – but no fewer.

Workers will do as much of their solitary tasks at home while they will do their interpersonal tasks in the office.

Since their Baby Boomer parents aren’t thinking of downsizing, almost none of the existing family-sized housing stock in the middle suburbs will become available in the 2020s. Millennials therefore must move to the urban fringe where new stock is added. That means, longer commutes.

Don’t count on Millennials wanting to return to the office in the coming decade while they have young kids.

With Millennials working remotely, organisations must formalise internal knowledge transfer. The current cohort of graduates will still learn from their Millennial managers but opportunities for casual or incidental learning are declining. Expect more formalised team-wide learning days.

Co-working spaces and short-term leases on fully furnished offices should be in high demand in the outer suburbs. Such compromise locations could help to bring parts of the team together on a more regular basis and provide decent work setups to those workers that don’t have the room to do so at home.

Inner-city commercial property will suffer for a little longer. Rest assured that pre-pandemic numbers will easily be reached again though.

Melbourne will grow at about 120,000 people a year, Sydney close to 100,000. While a smaller share of knowledge workers will come to the office every day, the sheer mass of new workers means that the CBD fills up eventually. It’s easy for me to say since I don’t have billions invested in inner-city offices.

The type of work that we do in the CBD is changing, too. Workers will do as much of their solitary tasks (emails, programming, reading, proofing) at home while they will do their interpersonal tasks (brainstorming, discussions, meetings, knowledge transfer) in the office.

The office of the future is a much more sociable, collaborative, noisy, creative and exciting place.

The whole CBD stands to benefit. Every worker in the CBD on any given day will be more likely to meet clients or colleagues. This means more lunches sold, busier cafes, and more after work drinks.

Organisations and workers will never perfectly split their work tasks in to from-home and office-based but the trend will go towards a specialisation of sorts. This will be reflected in office design favouring meeting rooms, collaborative spaces, and larger common areas over simple workstations.

Even in this new world of work, the 35-44 cohort will be hard to spot around Martin Place or any other capital city street. May these young parents enjoy their family years on the urban fringe before they come back to the office more frequently when the kids are all in school.

Simon Kuestenmacher is co-founder and director of research at The Demographics Group