The Biggest Winners and Losers From the Work-From-Home Revolution
Remote or hybrid work has become the new normal for millions of people. We are only just starting to see the impact.
4 min
The fivefold increase in working from home ushered in by the pandemic is perhaps the largest change to hit U.S. labor markets since World War II. It has touched just about every manager in America, reshaped industries including real estate and business travel, and led to an exodus from city centres to the suburbs.
And working from home is here to stay—at least in a hybrid model where a commute to the office is limited to just a few days each week. Tracking detailed survey data, we see working-from-home levels were rapidly dropping from 2020 to 2022. But by early 2023 they stabilised and have remained flat ever since. Hybrid working has become the new normal for millions of professionals and managers across America.
So, it’s time to tally up the impact. Looking ahead to 2024 and beyond, who are the biggest winners and losers from the work-from-home revolution?
Start with the losers
The biggest losers are likely city-centre office and retail property owners. The massive shift to home working has created a doughnut effect in major cities around the world. Millions of employees are no longer commuting every day, leaving many offices half-filled and retail stores struggling for customers. The owners of this real estate—often pension funds, family firms and endowments—have collectively lost hundreds of billions of dollars of investments.
In the long run, the sector will slowly recover as supply contracts. New construction has slowed, some empty buildings are slowly being converted to residential accommodation, and some lower-quality offices will be torn down. But recovery will take years to complete. Winter has come for the office sector. One forecast that a major leasing company shared with me was it would take until 2033 for occupancy to recover to pre pandemic levels in San Francisco—perhaps the hardest hit city.
Another loser has been mass-transit rail systems. Ridership has dropped by 30% nationally as commuters shift from a five-day commuting schedule to two or three days a week. These commuter rail systems have high fixed costs due to inflexible track and train costs, alongside rigid union-controlled labor expenses.
Large drops in ridership revenue translate into larger budget deficits. To date these deficits have been bailed out by pandemic-era federal and state subsidies. But the fear is unless public transit costs can be right-sized, once these subsidies run out they will see devastating service cuts or outright closure.
Growing up in Britain, I heard about the infamous Beeching cuts of the 1960s, which cut station numbers by 55% and devastated rail travel. I fear something similar happening to U.S. transit for 2024 and beyond unless operators and unions can align cost with revenues.
The third big loser has been big cities. American cities occupy surprisingly small spaces. For example, San Francisco is less than 50 square miles, comprising just the tip of a peninsula. So, when city-centre residents fled for the suburbs, they took their tax dollars with them.
As we know from the experience of New York in the 1970s, cities can adjust by cutting expenditures. But this will be painful and risks a hollowing out of city centers if key services like police and education are cut. Indeed, bond markets have already cut the prices of many city municipal bonds, providing an ominous signal of the budgetary struggles ahead.
But there are winners
It isn’t all gloomy, particularly for the biggest work-from-home winners: the workers. In national surveys, employees report they value the ability to work from home two or three days a week as much as an 8% pay increase. Multiplied across the roughly 70 million Americans who are currently working from home, this is a perk valued at roughly $500 billion a year. This vast dividend has benefited employees through less commuting and lower stress, alongside more personal, leisure and family time.
One recent study highlighted how the typical U.S. home-working employee spends 40 minutes more a week on child care from the time saved from avoiding the daily commute. This will have longer-run effects ranging from higher labor-force participation rates—possibly pushing up growth rates—to potentially even a fertility dividend as parenting becomes somewhat easier.
Another winner is the environment, thanks to reduced travel and energy needs. A recent study found working from home two days a week reduces pollution by about 15%. This comes from lower commuting emissions alongside additional savings from lower office energy bills. A double dividend is the reduced congestion on emptier roads, with traffic speed data from Inryx suggesting the morning commute is 10% faster.
And perhaps the biggest work-from-home winner are companies. Research finds that hybrid working three days a week in the office has a net neutral on employee productivity, while allowing firms to save on recruitment and retention costs. Firms can save money by trimming office expenses while using remote working to lower labour costs by hiring employees outside major cities.
U.S. firms made about $1 trillion higher profits in 2022 than in 2019, an increase of almost 50%. While many factors likely contributed to this, including the strong economic growth, it is notable this happened alongside the fivefold surge in working from home. Indeed, the mass adoption of hybrid working by millions of firms across the U.S. and Europe is perhaps the strongest evidence of its positive impact on profitability.
Looking further out, the biggest change will almost surely come from the new technologies we use to work remotely. When I first started working in the 1990s, working remotely meant conference calls and emailing files. Now we telecommute and share files on cloud networks.
The future likely heralds similarly large changes. In discussions with startups and tech firms, I hear about systems for holographic meetings, wall-size screens and global connectivity. This technology means working from home hasn’t just stabilised but is now moving into its longer-run phase of expansion. Ten years from now we will look back at 2023 as the beginning of the long bull market in hybrid working.
Nicholas Bloom is a professor of economics at Stanford University.
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The federal budget has rattled property investors. But the biggest mistake isn’t the tax changes, it’s the conclusion many are drawing from them.
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The recent budget has forced a reckoning for property investors.
Negative gearing now restricted to new residential builds, the CGT discount gone and on paper, the numbers look different.
And many investors are responding by pivoting toward yield, prioritising cash flow over capital growth in a way that property strategists say misses the point entirely.
“The debate has shifted to yield versus growth as if they are opposing forces,” says Abdullah Nouh, founder of Melbourne-based buyers’ agency Mecca Property Group. “But that framing is itself the mistake.”
Nouh, who works with high-net-worth families and investors on long-term acquisition strategy, argues that capital growth remains the primary driver of genuine wealth creation and that the post-budget environment has made quality assets more important, not less.
The numbers make his case plainly. An additional $500 per week in rental income is welcome. A prestige asset appreciating by $1 million over a market cycle is transformative.
These are not equivalent outcomes, and portfolios built around yield at the expense of location and land value tend to generate income while wealth stands largely still.
The more nuanced shift Nouh is seeing among sophisticated investors is a move toward assets where both outcomes can be engineered simultaneously – established homes on substantial land in quality locations, where the existing dwelling can be repositioned, rental returns improved, and the underlying land value compounds independent of what sits on it.
For investors with existing equity, commercial property is also entering the conversation in a more serious way.
Prestige industrial assets, medical centres and long-leased essential retail offer income profiles that residential property in most capital city markets cannot currently match: longer lease terms, tenants covering outgoings, and greater predictability than the residential tenancy cycle.
“The investors who build lasting wealth are rarely the ones who chased yield or growth exclusively,” says Nouh.
“They are the ones who built a strategy they could sustain – one that generated enough income to hold quality assets through multiple cycles while those assets compounded in value.”
The budget has changed the settings. It has not changed the fundamentals.
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