In the age of remote work at scale, droves of professionals are moving to Austin. The relocations could transform real estate, hiring and infrastructure for years to come. But at what cost?
With the switch to remote work, quantum considerations like time, space and place have been reimagined as a newly untethered remote workforce hits the open road. Over the last year, so-called Zoomtowns boomed as telecommuters flee cities and trade their downtown dwellings for a little extra elbow room elsewhere.
Austin, Texas, was a perennial tech hub well before the great work-from-home experiment and has been a prime relocation destination over the last year. As droves of remote workers descend on the City of the Violet Crown, the moves could transform real estate, company culture and infrastructure for years to come. But at what cost?
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On the move: All roads lead to Austin
Over the last year, a number of tech companies have relocated to the Lone Star State, leading to speculation that Austin's Silicon Hills could become the next Silicon Valley. With the shift to remote work, Austin ranked as the top U.S. relocation destination, according to LinkedIn's July Workforce Report, with the bulk of these workers coming from the San Francisco Bay Area, Los Angeles and the Big Apple.
Neha Sampat, CEO and founder of Contentstack, moved to Austin's Silicon Hills from San Francisco in 2019. Much of the migration she's seen involves people relocating from the Bay Area and New York but said the "reality is that it's a city growing in popularity for people in tech roles" around the country.
Overall, the Contentstack team grew as a result of the pandemic, Sampat explained; partly due to offering more Austin-based roles and hiring employees relocating from other cities. Adopting a hybrid work framework has also allowed the company to attract talent from outside the city.
"The beauty of the hybrid model is that we can source talent from anywhere they live and still use a hub like Austin as a regular gathering place for meetings, events and team offsites," Sampat said.
"Given the appeal of the city, I wouldn't be surprised if more of our remote team members feel drawn to the idea of relocating to Austin," she continued.
While Austin remains a perennial landing spot for top tech talent, there are drawbacks to the surge in relocations.
Traffic, company culture and excess office real estate
When we previously spoke in December, Sampat shared some of the downsides Austin has compared with Silicon Valley; specifically noting the infrastructure and challenges associated with getting around town. However, the switch to remote work diminished some of these logistical challenges.
"I think that flexibility also alleviated some of the traffic challenges. Not everyone is on the road at the same time, and you can plan your schedule for 'in-person' meetings around rush hour," she said.
While these transportation bottlenecks may have been temporarily eased, Neha said Austin will still need to enhance its existing infrastructure due to the "influx of companies and talent" moving to the area.
Similarly, a representative for Austin's chamber of commerce made note of decreased traffic with the switch to remote work, but identified other drawbacks, including companies downsizing office space and the "impact on small businesses who thrive from having workers in office locations."
Additionally, they said "training and culture are obstacles that companies are looking to overcome" in a remote setting, adding that companies have to be "creative on how they maintain a sense of culture for their employees."
When Contentstack's Austin team meets in person, Sampat said the event "leans more social than work," adding that the team will often meet at an outdoor venue to watch a colleague's band play and she discussed an outdoor gathering she hosted at her house.
"We left the 'meetings' for Zoom and the 'fun' for in-person," she said.
Companies are also finding clever ways to use their sprawling pre-COVID office spaces in a hybrid world. James Trumbly, the owner of the Austin-based HMG Creative, said his company needed to "find creative ways" to use its newfound extra office space with part of the team working remotely and opted to sublet the additional area.
While the company had an agreement pre-COVID giving it the option to sublet, Trumbly said, "in a COVID world, it's in a property owner's best interest to offer options and flexibility."
"With so many businesses either closing their doors or going fully remote, property owners are going to need to be open-minded about creative ways to keep offices viable," he said.
Lockdown and life in perspective
During the coronavirus pandemic, the line between work, school and home blurred for many families as organizations went virtual. On short notice, the home pulled double- and triple-duty as an office and virtual classroom as well as private living quarters, with lockdown restrictions only adding to these proximal challenges.
Taylor Rhoads, creative director at Ayzenberg Group, moved to Austin last December with his wife and son. Before relocating to the area, Rhoads and the family were living on the east side of Los Angeles in a small neighborhood during the onset of the coronavirus pandemic.
"After spending nine months sheltering-in-place in Los Angeles with our 4-year-old son, we knew we needed to make a change for our collective physical and mental well-being," he said.
Having previously visited the area on multiple occasions and his wife being a University of Texas graduate, Rhoads said he "frequently entertained the idea of relocating" to Austin. Then, due to the shift in remote work and support from his company, he said the move "became a real possibility."
For Rhoads, the biggest relocation challenge has been working in a different time zone, as the bulk of his clients and team are located on the west coast. Although there are benefits to telecommuting time travel. On a typical day, Rhoads said he has time to wake up, have coffee, exercise and spend time with his son before his west coast colleagues log on for the day.
"The adaptation to life in Austin has been incredibly smooth and has offered us everything we were seeking–a quieter, slower-paced, more fulfilling quality of life, room to stretch out and a more manageable cost of living."
Discussing his upbringing in Los Angeles County, college and nearly a decade in San Francisco and what he described as "a couple of very fast-paced years in NYC," Rhoads said Austin has "experiences akin to each of those cities," while making note of the "warm, inviting culture unlike any that [he had] experienced before."
"I don't find myself searching for the things I've left behind, and I'm completely enamored with the new things I've discovered," he said.
Quality of life and the state of real estate
In October, Upwork published a report titled "Remote Workers on the Move," highlighting forecasted relocations across the U.S. At the time, up to 23 million U.S. workers were planning to move due to work-from-home flexibility; a fourfold increase compared with normal near-term migration rates, according to the company.
For people considering a move to a new city, quality of life and cost of living are key relocation factors. Among Upwork respondents who were planning to relocate, one in five were based in major cities and more than half of respondents households were looking to move into a space "significantly more affordable than their current home."
Jolene Weinstein, head of sales at Realty Austin, discussed some of the ways remote work and related migrations have transformed Austin's commercial and residential real estate market. Without the hassle of the traditional commute to and from the office, Weinstein said "the focus on where one lives has become more about lifestyle, amenities within the home and neighborhood" rather than the proximity to work.
"Employees are now visualizing how their home will accommodate them while working, exercising, and how they spend their after-hours with friends and family," she said.
At the same time, people are also looking for specific features in new Austin properties as a result of the switch to remote work, according to Weinstein, including extra bedrooms to function as offices and gyms, larger outdoor spaces for pets, grills and patio amenities.
Turns out, people are looking for bigger spaces after a year of lockdown. Now that the home serves as a workspace and living quarters for many, standard metro studios seem to be cramping remote workers' style, and the suburbs are suddenly chic again.
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Goodbye studios. Hello, suburbs
In May, realtor.com released its latest monthly rental report detailing housing prices and year-over-year fluctuations for cities around the U.S. At the time, rents were lower in larger tech hubs such as San Jose, San Francisco and Seattle, with declines of 12.5%, 10.9% and 7.3%. At the time, these rental price declines were "lessening, especially for larger two-bedroom units," according to the company.
Realtor.com chief economist Danielle Hale said the company is still "seeing rising rents for two-bedroom units" in six of the 10 tech markets realtor.com tracks, adding that "declines are lessening" in areas "where rents were still declining."
"The accelerating growth of monthly rents for bigger units suggests that people are still seeking out these larger living spaces," Hale said.
The search for these larger spaces could reshape areas outside of major cities, as urban residents trade in their old studios for the 'burbs.
"Perhaps the greatest signal of tech center recovery is the recovery of studio units, which saw the largest dips in urban areas," Hale said. "Studios, which tend to be localized to the most dense city centers, saw rents plummet as the demand for space drove renters out of the city."
Long-term stays or Zoom town rentals?
In recent weeks, businesses have started to bring employees back to the traditional workplace after a year of remote work. As more companies plan their office reentry plans, Hale suggested this could signal "potential shifts in workforce movements."
To illustrate this point, she explained that year-over-year studio rents dropped 23.9% across the San Francisco metro area in April but noted that this percentage dropped to 12.5% in June.
"Nearly every tech market is seeing studio units recovering quickly, with the exception of NYC," Hale said.
As one would imagine, not all employees are equally enthused about the prospect of returning to the office and their daily commute after a year of remote work. So, as companies attempt to corral employees back into the office, will workers subsequently leave their remote Zoom town retreats, or are people relocating to Austin for the long haul?
"The interesting thing about the data is that it doesn't really tell you about people's intentions," Hale said. "One tip that suggests some of these workers may be moving to stick around is that we see similar trends among homebuyers."
"Because home buyers tend to need to stay in an area for five years or so to make the costs of buying, seeing these trends among home shoppers could suggest that they're lasting and not just temporary," Hale said.
In the second quarter, about half (46%) of people shopping for homes in the Austin area were from elsewhere, according to Hale, and while "many of these shoppers" were from areas like Houston and Dallas, she said the data also shows a "notable" share of shoppers from Los Angeles, New York, San Francisco, Chicago, San Jose and Atlanta.
"This suggests to me that some of these Californians are looking at Austin as a home for at least the medium term," Hale said.
The inrush of new Austinites could have implications for Austin's affordability; ironically recreating the same economic situation many people are relocating to escape. Hale warned that home prices could outpace wage growth with the influx of outside residents; "especially if supply is constrained."
"In the longer run, I would expect to see price growth slow as builders do a better job of meeting demand, and we may also see in-migration slow as higher home prices eat away at Austin's current affordability advantage, but I think we have some time before this is likely an issue," Hale continued.
Hybrid work tradeoffs: The unanswered commuter question
In tandem, these shifting rental patterns, relocations from high cost-of-living areas and long-term remote work could impact the types of properties developers build inside and outside of cities. But, at the same time, an interesting logistical consideration remains unclear as companies shift to hybrid work arrangements: How much time are people willing to dedicate to their weekly or bi-monthly commute compared with their previous daily trip to the office?
In 2019, the average commute time rose to 27.6 minutes each way; a new record, according to the U.S. Census Bureau. Based on these averages, employees were spending nearly five hours each week traveling to and from the office pre-COVID. But, could people be willing to travel greater distances if they only need to be in the office a handful of days each month?
"Remote work has tended to push people nationwide to suburbs, exurbs, and smaller, less dense cities," Hale said. "At the same time, Austin could buck that trend as company headquarters draw workers in."
Much of this development will depend on "employer and worker preferences" and the level at which remote work is offered in the future, according to Hale.
"The more remote work, the further out I'd expect workers would be willing to commute, and vice versa," she added.
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