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Remotely Competitive

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Remotely Competitive

Cities and regions are betting that working from home is the next big thing in economic development. February 1, 2021
Economy, finance, and budgets
Cities

I visited Bentonville, Arkansas, for the first and only time in the early 1980s, when, as a young financial reporter, I went to write about Walmart, then a rising regional retail chain led by folksy genius Sam Walton. I couldn’t get a direct flight from New York, so I transferred at Oklahoma City, flew to Fayetteville, then drove the next morning in a snowstorm on what I would describe as back roads to the Walmart headquarters. Back then, Bentonville was a town of just 8,700 people known for little beyond the legendary Big Sam and his company.

Today, 55,000 people live in the city, which has grown astronomically along with Walmart, now the world’s largest company, whose offices sprawl over some 20 buildings throughout the town. Bentonville in 2021 has become big and diverse enough, in fact, that the city aspires to be known as more than just the Walmart HQ. It’s now trying to entice young, educated residents who can work remotely from wherever they please. Local development officials in Bentonville are betting that some of these workers will choose to come to northwest Arkansas, known for its compelling Ozark Mountain scenery, magnificent hiking and biking trails, and a culture that combines global influences with rural southern appeal. That effort got a big boost recently when Common, a firm that designs residential buildings to accommodate remote work, chose Bentonville as one of five cities in which to construct “remote work hubs”—residential living complexes with workspaces integrated into them. Bentonville’s bid for remote workers is quickly becoming one of the hottest trends in economic development.

After decades of expert predictions that technological change would reshape the nature of employment, in just ten months the Covid-19 economic shutdowns have made full-time corporate employment from home a reality for tens of millions of American workers. Just how many of these workers will remain employed at home after the pandemic ends remains an open question, but it’s clear that many workers have become convinced that there’s little reason to go back to the old model of everyone in the office all the time. In a Gallup poll in the initial stages of the shutdown last April, 46 percent of workers said that they were working full-time out of their homes. Millions have since gone back to the office, but 33 percent of respondents told Gallup that they were still working from home last fall. More to the point, about a third of all those who worked remotely told Gallup that they would like to do so permanently, even after the pandemic. In another poll, taken by the consulting firm PricewaterhouseCoopers, 29 percent of workers said that they wanted to work permanently from home.

Many of their bosses agree. Fewer than one in five executives recently told PricewaterhouseCoopers that they want to return to pre-pandemic office arrangements. Others said that they expect to have employees working from home at least several days a week. But 13 percent of executives went further: they are ready to ditch the office completely. Behind their attitude is the growing success of remote work. Some 83 percent of executives surveyed said that the shift to at-home work had been successful. More than half claimed productivity had improved. And seven in ten said that their companies would be investing more in tools to support remote work.

The implications for office space in major cities are enormous. In markets like San Francisco and New York, as few as 15 percent of workers have returned to offices. While return rates are higher in markets like Dallas, among big cities nationally the average occupancy rate for offices remains only about 30 percent. The pandemic has begun crushing real estate markets, as firms delay or cancel plans for new space. The official vacancy rate for Manhattan’s office market, for instance, rose to about 15 percent at the end of 2020, up from 10 percent a year ago, though much of the officially “occupied” space is actually empty. Places as different from one another as Phoenix, Salt Lake City, and Boston have all seen vacancy rates rise as office leases expire and tenants decide not to renew, or to reduce their space.

The trend is strong enough that some investors and cities are starting to bet on the transformation to remote work. Bentonville had already gained an edge in the competition for remote workers before the pandemic, when economic development officials in northwest Arkansas began offering remote workers $10,000 and a free bike (to take advantage of those biking trails) to move to the area. Other metros, many small or midsized, are joining the trend. Alabama’s Shoals metro area—consisting of the communities of Muscle Shoals, Florence, Sheffield, and Tuscumbia—is offering up to $10,000 for workers earning at least $52,000 a year to come live in their towns and telecommute. Among the attractions are low housing prices: the median price of a home is about $100,000, according to the Census, and taxes are so low that you would pay less than $500 a year in property taxes on that home.

Workers in the mood for somewhat larger cities have choices, too. Tulsa is offering $10,000 to 250 tech workers to move in and work remotely. The median price of a home there is under $150,000, and you’ll pay about $1,500 in property taxes annually at that price. Savannah has also jumped into the game. It’s offering less—$2,000 per worker for moving costs—but the city is one of the jewels of the South and boasts an attractive culture and restaurant scene that itself offers a compelling reason to move. Other places trying to attract workers with cash offers are Topeka, Kansas, and Hamilton, Ohio. Expect the trend to grow stronger as remote work expands.

Meantime, Common, a company founded in 2015 that creates combined living/workspaces for remote workers, is capitalizing on the work-from-home momentum. Aside from Bentonville, the company chose to build remote work hubs in four other cities: New Orleans; Ogden, Utah; Rocky Mount, North Carolina; and Rochester, New York. While these places are quite different geographically and demographically, they all share a desire to diversify their economies. That used to mean offering big incentives to companies to relocate to the area. Now it means providing workers with incentives to do the same, regardless of where the company stays. The payoff can be big. Simply filling one new 200-unit apartment building designed for these workers—as New Orleans is planning to build—can attract tens of millions of dollars in new income to a city.

“Remote” is clearly the new word in economic development, and we haven’t heard the last of it.

Photo: borchee/iStock

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