LONDON (Reuters) - In the advanced economies, the coronavirus epidemic is likely to accelerate long-term structural changes in the location of work and accommodation and the transport systems that link them.
But the rate of change will be tempered by enormous inertia in real estate and transit systems to accommodate a widespread shift in work from central cities to the suburbs and secondary cities.
The current distribution of land use is the product of the railways in the 19th century and the automobile in the 20th century, which allowed people to travel much greater distances from home to the workplace.
While many executives and professionals can afford to live in central areas of large cities if they want to take advantage of networking opportunities and cultural facilities, most workers are forced to live in suburbs and satellite communities where housing is cheaper.
The result is a twice daily commute from home to work and back that is expensive in terms of money, time and energy - especially in megacities and other primary cities - and also exacts a significant penalty in terms of physical and mental health.
Over the last three decades, however, improvements in communications technology - including email, instant messaging and cheap video-conferencing - have made remote working more feasible, even for service sector firms which rely on contact between colleagues and between suppliers and customers.
WORKING FROM HOME
In Britain, the proportion of the workforce working remotely had been increasingly steadily, albeit from a low base (“Coronavirus and home working in the U.K. labour market”, Office for National Statistics (ONS), March 2020).
Even before the coronavirus epidemic, 5% of Britain’s workforce was working mainly from home, according to the ONS survey, with 12% of respondents saying they had worked from home at least one day during the week prior to the survey, which was conducted in 2019.
Full-time and part-time home working was most common in the traditional commuter regions of London and the South East, as well as among older and more senior workers, and those in the highest-paid occupations.
The implication is that working from home, at least part of the time, to reduce commuting or avoid it altogether was desirable, and many more employees would have liked the option if it was available.
More widespread use was held back by stigma, with remote working seen as a privilege reserved for high-status individuals and experienced workers nearing the end of their careers.
Enforced working from home for many office employees during the epidemic, however, has proved it is technically feasible and has lowered the barriers to its social acceptability, which is likely to speed up more widespread adoption.
London’s workers spent an average of 1 hour 32 minutes travelling to and from work every day in 2019, compared with an average of just under 1 hour in the rest of the country.
As a result, London’s workers spent an extra 140 hours per year travelling to and from work compared with their counterparts in other regions (“Transport Statistics Great Britain”, U.K. Department for Transport, 2020).
The longest commutes of all were into central London, with round trips averaging 1 hour and 48 minutes per day, with those travelling by rail taking journeys averaging a lengthy 2 hours and 18 minutes.
Like other megacities, London relies on public transport to shuttle millions of workers between the centre and periphery as well as satellite towns (“Coronavirus and travel to work”, Office for National Statistics, 2020).
Before the epidemic, two-thirds of Inner London’s workers used public transport (rail, underground and buses) to get to work compared with just 15% in secondary cities and less than 10% in the rest of the country.
Public transport is far more energy-efficient than private cars, which helps explain why London’s per capita energy consumption for transport is less than half of that in other regions of Britain.
Nonetheless, commuting still imposes a heavy penalty in terms of fares, energy consumption and time absorbed, as well as impacting adversely on physical and mental health.
Even before the epidemic, researchers had identified that crowded public transport accelerated transmission for respiratory diseases such as influenza.
LAND USE AND TRANSPORT
Transport improvements over the 19th and 20th centuries transformed the size and shape of cities. Now improvements in communications technology are likely to remake them again.
Increased remote working implies a reduction in the need for central offices and their ancillary services, with a partially offsetting increase in demand for working space in the suburbs, secondary cities and rural areas.
Much of this increased work space will be located inside dwellings, translating into pressure for bigger homes with more rooms, often further from megacity centres.
The principal constraint on the more widespread use of remote working is likely to come from the relative inflexibility of the real estate and transport systems.
There are roughly 24.4 million dwellings in England, with an average of just 180,000 new dwellings created each year over the last 10 years, an increase of just 0.7% per year.
In the short and medium term, therefore, the increased demand for working from home outside central cities will have to be met from an existing housing stock that is essentially fixed.
The inflexibility of the housing stock explains why the epidemic has depressed central city home values and rents while sending prices and rents in other areas surging.
Commercial real estate faces a similar problem. There is an emerging oversupply of work space and services space in central cities, with not enough in other areas.
Conversions to non-commercial use in central areas and the construction of more space in other areas will take years.
WORST OF BOTH WORLDS?
In response to the epidemic and pressure for more remote working, commercial real estate owners and employers have promoted the concept of “hybrid” working.
Business surveys show employers envisaging workers spending 60% of their time in the office, while employee surveys generally show a preference for working in the office 40% or even just 20% of the time.
Hybrid working is often portrayed as a compromise that offers the best of both worlds. But it could easily provide the worst of both.
Employees would still need to live close enough to the central workplace to commute two or three days each week, foregoing the advantage of relocating further away in search of cheaper accommodation and more space.
Employees would also have to find more space to work from home, pushing up their housing costs, while continuing to pay commuter fares at least some days each week, which would probably work out more expensive.
In a hybrid model, employers would see their need for office space decrease by 40-80%, but only if they can implement a “flexible working” model (i.e. hot-desking), which will be controversial after the epidemic.
Commercial real estate owners would still see demand for space decline significantly, with the oversupply of space likely to persist for years, depressing rents.
Finally, transit system operators would see a big decline in the number of daily commuter journeys, reducing their economies of scale, and probably pushing up fares per journey.
The epidemic and enforced working from home have shown the potential for a revolutionary shift in the location of work and accommodation, but the enormous inertia of the real estate and transport systems may delay much of the shift.
John Kemp is a Reuters market analyst. The views expressed are his own.
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- Megacities after coronavirus (Reuters, Aug. 25)
- Must the metropolis mutate for the virus? (Reuters, Aug. 13)
- Coronavirus is dark side of an urban interconnected world (Reuters, May 22)
Editing by Susan Fenton
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