[Choi Jun-young's Urban Pilgrimage] Remote Work and Changes in the City

Expansion of Remote Work Due to COVID-19 Spurs Changes in Urban Spaces and Housing Types
Increased Preference for Church Areas in US and UK... Moody's Forecasts Vacancy Rates in Major US Cities to Remain in the 20% Range
Workers Accustomed to Telecommuting Question Need for Daily Commute... A Challenge for Management

People and society ultimately adapt to unexpected shocks and changes. As the impact of COVID-19 has continued for over a year, many things have changed. A representative example is the spread of remote work, such as working from home. Due to the nature of COVID-19, which spreads more easily in dense environments, office spaces have become risky places. Many people have begun to question whether the mandatory and essential daily commute is truly necessary.

With the COVID-19 vaccination campaign that began in early 2021 progressing mainly in developed countries after many ups and downs, many nations are preparing to return to normal. More companies are pushing for a return to the office instead of prolonged remote work. However, office workers who have become accustomed to working from home over the past year are refusing return orders and even demanding the right to choose their workspaces.

Systematic and long-term analyses of the impact on productivity have not yet been objectively conducted. However, at least unlike in the past, unconditional five-day-a-week commuting is unlikely to be taken for granted.

In mid-last year, when COVID-19 was raging, many experts predicted changes in urban spaces and housing types due to the pandemic. Increased preference for large residential spaces due to the spread of remote work and a decline in commercial real estate prices due to avoidance of large offices are representative examples. In fact, in the United States and the United Kingdom, preference for suburban areas increased instead of the previously favored city centers. Office buildings in city centers faced great difficulties due to increased vacancy rates caused by decreased demand.

Last month, the office building vacancy rate in New York City reached 17.1%. This is higher than 16.5% the previous month and 10.3% in the same month last year. Contrary to some expectations, this suggests that returning to the past may take a long time. According to global credit rating agency Moody’s, vacancy rates in major U.S. cities may remain around 20% until next year. The International Monetary Fund (IMF) reports that a 5% increase in vacancy rates results in a 15% decline in building valuation over five years. The crisis for office buildings is not over yet.

Global credit rating agency Fitch predicts that if the trend of commuting to the office fewer than three days a week continues, the value of office buildings could drop by nearly half. Changes in work styles due to COVID-19 and changes in urban spaces such as office buildings are ongoing.

Historically, the vertical expansion of office buildings and the growth of office workers have closely influenced each other. In the United States, until 1880, office workers accounted for only 5% of the total labor force, about 180,000 people. However, with the advent of reinforced concrete, steel frames, and elevators, it became possible to concentrate many people in one space. Such revolutionary advances in construction technology, along with the emergence of office equipment represented by typewriters and telephones, boosted the productivity of companies and office workers. As a result, by 1910, the number of office workers in the U.S. had increased to 4.4 million.

The expansion of office workers and company sizes led to increased demand for office buildings and the emergence of high-rise buildings. The image of many workers commuting daily to factories and offices at fixed times became a common symbol representing industrialization and urbanization beyond capitalism and socialism.

In the 1980s, as computers and information communication networks developed in earnest, futurists like Alvin Toffler predicted that remote work would increase, office spaces would become unnecessary, and existing office buildings would be converted into residential spaces or warehouses. The rapid spread of the internet after the mid-1990s further supported these predictions.

However, reality was the opposite. With the development of information communication networks enabling 24-hour operations worldwide, more companies and personnel concentrated in several major cities. As office workers’ tasks became less fixed and repetitive and more new and variable, close communication and idea sharing through face-to-face contact became more important. Edward Glaeser, a world authority in urban economics and professor at Harvard University, explained the reasons for this phenomenon in his bestseller The Triumph of the City.

This seemingly eternal trend was shocked last year, as everyone experienced. The unavoidable long-term experience of remote work, along with advances in remote video conferencing technologies represented by various messengers and Zoom, showed that at least for certain sectors, it is possible to work freely without being tied to a physical space. If work can proceed without the cost and time waste of daily commuting, what fundamental reason remains to gather again in the office? This question now presents a major challenge for management.

Physical damage caused by war or natural disasters is restored over time. However, the perceptions of people affected and social systems change. History shows that things do not simply repeat as they were in the past.

COVID-19 has socially forced many experiments that could not be attempted before. Just as the development of high-rise buildings and office equipment 100 years ago changed cities...

Legal Expert, Yulchon LLC