The census bureau will release new home construction figures for August tomorrow. An earlier prediction of a 6.6% contraction for 2020 is dire but new residential construction is already rebounding since April with rising prices buoyed by low supply and mortgage rates. Nevertheless, commercial real estate, especially on the retail side, is projected to suffer due to a surge in eCommerce activity, home offices and overall safety and quality-of-life concerns in crowded cities.
Now that many of us working adults have worked remotely and experienced the advantages as well as the trials and tribulations of this set-up for the first time, let’s take stock of what will likely be life and work-at-home in 2021. The added complexity of having children partially or fully engaged in distance learning as mandated by their school district only adds to this conundrum. To make a perfect trifecta, let’s also throw the depressed job market for recent college grads into the mix. With all this, things will change dramatically next year. We already see some glimpse of what is to come to a degree or another thanks to Covid-19.
Below are a few trends we recently got insightful data points for. They can be summarized in one main idea; the pandemic has accelerated the trend of people leaving the city, living longer at home and being more dependent on remote services than ever before. As a result, companies removing friction in this transition for consumers and other businesses thrive.
1. The Economist recently highlighted that the number of people working from home shifted from 1-in-50 to 1-in-3 in the early months of the
pandemic. While this figure is not likely to remain that high in the long-run, the commercial real estate market already has the jitters what it means for available space, prices and lease terms.
2. The need for workers to congregate in a physical location, often in a city, is a concept born during the Industrial Revolution allowing human resources to take advantage of central machinery located on a factory floor. To maximize return-on-capital equipment, its productive time needed to be increased requiring 9-to-5 attention. The modern workday was born. Pre-Industrial Revolution, actual output, not time-on-the-job, was monetarily rewarded. We see this return to output in the gig-economy today. With the real economy contracting and predictably only slowly returning to its pre-pandemic state in the distant future, empty mall and business park space from bankruptcies and recurring lock-downs makes commercial real estate in Beijing, Hong Kong, London and New York upwards of $150 per sqft highly unattractive. The way around this are more, smaller-sized, suburban offices, which align with the general trend for affluent families to move to the near-city countryside, away from the mega-metropolis. This shift creates an opportunity to expand hoteling schemes.
3. This Stadtflucht, or exodus from the city and its office space, often by highly-skilled and paid knowledge workers, directly impacts the hours and locations of five-or-more supporting “routine” production jobs, a term coined by former Secretary of Labor, Robert Reich.
4. As these creative types will increasingly stay away from the city center of cities like Los Angeles, DC, San Francisco and New York, the infrastructure of suburban areas like the counties north and west of DC, for example, have to ramp up public and commercial infrastructure even more rapidly. Also, smaller cities like Asheville, NC, and Boulder, CO, are poised to become the next hot thing combining the beauty of country living with the cultural and transportation infrastructure of a much larger city.
This move to the country combined with remote work will maintain and possibly even increase productivity previously locked up in long work commutes and financial disenchantment. As Vanessa Tierney, CEO of Abodoo, points out in a recent CNBC interview, it also allows employers to give added flexibility to employees.
5. This flexibility is crucial. As women are disproportionately affected by the downturn due to their predominantly customer-facing, front-line service jobs, their work-from-home will be much more difficult to combine with distance-learning requirements of their children. Women are historically also more involved in elderly care, which presents another challenge. Catering to this home-office challenge creates a unique opportunity to create long-term relationships not just between employer and employee but even within the family as dynamics around conflict resolution change. Jessica Bruno’s blog “Four Generations One Roof”, illustrates how such a living arrangement works wonders for resolving disputes. In one of her posts she says, “When we lived alone (prior to moving in with my parents), I wouldn’t have left a heated conversation, I would stay right in it and looking back, I think it made it worse.”
6. Fostering an esprit-de-corps amongst remote employees will become harder in remote work environments but after a year of this, knowledge workers especially will expect and demand a lot more of it. Organizations able to maintain or transition to a new, more supportive culture effectively will attract superior and a higher number of talented people.
7. Continuing high unemployment above 10%, rising loan delinquency rates by 75% to around 3.5%, consumer risk adversity, investor cash hoarding and tighter lending standards will continue to make living with parents very attractive for young adults. Zillow reported that in the first three months of the outbreak close to 3 million adults 25 years-and younger moved home.
8. Pew Research indicated that student debt and a bleak job market, much worse than the Great Recession, forces increasingly more 25-to-34 year-olds to live at home. The rate fluctuated since 2008 but it went from 10% to 17% in 2018. Builders have already invested in intergenerational living arrangements with over 300 such communities in 2016.
This means that about 2 million were living at home then ten years prior. In March, April and May 2020, alone 1 million made the same decision. Like other shocks to a system, the pandemic accelerated aspects like the cultural perceptions of marriage, the continuing need for costly education and the difficulties of living with (solo)parents and even siblings in a space vacated years earlier.
Personalization for the new home (office) location
By now it is clear that home (office) services enabling us to work from home, often crowded with bodies requiring different levels and types of work and leisure engagement are doing extremely well. Just from recent personal conversations I can report that these items are still hard to come by or flying off the (virtual) shelves: fitness equipment, hiking shoes, fishing rods, bikes, webcams, virtual learning courses, office furniture, hot tubs, refrigerators, puppies, security cameras, personal grooming products, firearms, domestic vacation rentals, board and video games. If you add the legions of newer home delivery, maintenance, advice and financial planning services, it becomes quite obvious that in order to succeed in 2021, companies need to rethink their product portfolio, features, pricing, delivery and messaging. Knowing who is already living in a household, its demographics and who will likely be next given local economic and pandemic trends will be the secret sauce for months or years to come. Identifying similar addresses following a set of given household formation journeys will allow optimization of relevant offers and services.
As consumers increasingly save more; congregate in smaller-feeling homes away from mega-cities; don’t travel overseas (EU travel ban for US citizens); pursue often home-based, non-organized leisure activities; and are experiencing a transition from a temporary holding pattern to a more permanent life-style change, ubiquitous device use will surge.
With screen-time increasing 50-500% during the lockdown, companies need to shift priorities. Surveys and re-segmentation based on new decision factors such as the number and type of household communication devices, number and type of apps, number of children and type of occupation need to be combined with state and local ordinances and weather data. This triangulation going beyond typical demographics and historical purchase and website cookie patterns, needs to inform when and what to offer consumers. Depending on the customer segment, this may result in offering fewer or more feature or price variances of a product or service. It can also be a hyper-individualized special only available on a specific day, a location or channel.
Firms may even target consumers who previously abandoned a cart or only clicked on a link for a special re-engagement offer based on a reopening of a state park or beach or increasing barometric pressure because their algorithms realize that outdoor activity will increase the odds of a purchase. In case of non-discretionary items, these environmental triggers should kick-off reminders to set-up a subscription. If an interval-based fulfillment is already set up, then it could launch a how-to or FAQ reminder to maintain brand engagement. Companies may also utilize real estate website traffic, municipal occupancy permit or construction license databases indicating a higher interest in a specific zip code or housing type, which in turn may drive a timely need for new home services and equipment.
What works for consumers, also works for B2B
Similarly, businesses need to build tighter and more localized distribution strategies and align their supply chain accordingly. This starts with having a clear understanding of customer as well as vendor spend, which is often distributed across multiple ERP and CRM systems and customer IDs making purchase order and invoice consolidation difficult. Harmonizing these and enriching them with other data concepts would allow organizations to be more data-driven. I recently worked with a large telecommunications company to tackle this problem because their approach of funneling these documents into a massive data lake too twice as long as anticipated and still did not have the required data quality to be useful.
If done with data quality in mind upfront, the results could manifest themselves in reducing project delay and achieving the savings associated with implementing such a system designed to lower annual vendor spend by 3-8%. Finance departments may even realize that tier-2 and 3 suppliers now increasingly ship more frequently from government-subsidized (PPP, SBA loans and whatever is next) local facilities or value-added-resellers, which offer more affordable, quick turnaround and personalized service.
Vendors may even become more involved in lifting their customers’ work culture by co-investing in morale-boosting activities. They may also be able to engage with contacts via Zoom on weekends for educational and operational reasons, which was deemed impossible before a work-from-home culture. Mom’s especially may appreciate this added flexibility. Ultimately, vendors should play a much more involved role helping their clients to make life for their employees easier, especially their key contacts and decision makers.
On the sales-side, the new data could render insights how B2B customers procure products and services based on their local markets’ infection predictions, reopening changes, and weather patterns and how local governments in their market directly or indirectly invest in the required infrastructure to support the earlier mentioned trends. Up the value chain, it could then dictate vendor consolidation and discount optimization. Here organization, possibly through industry associations, may actively alert customers about earlier outlined legislative or demographic changes and what it means for their business.
Whatever the ultimate scenario may be, the key is that selecting new and the right data sources will not only boost the odds that a customer interaction will occur, which will ripple through the value chain; they will also make it more predictable when it will occur on a much more individualized level.