11-05-2024
An enduring legacy of COVID-19 is the persistent shift to remote work. Researchers are beginning to uncover its wide-ranging economic effects, from changes in housing and commercial real estate markets to impacts on public transit and worker productivity.
In her paper “The Impact of Work-from-Home on Brick-and-Mortar Retail Establishments: Evidence from Card Transactions,” assistant economics professor Lindsay Relihan studies how the transition to working from home affected the location of retail businesses. She worked with James Duguid, Bryan Kim and Chris Wheat from the JPMorgan Chase Institute to build a panel of retail goods and services establishments using billions of debit and credit card transactions between 2017 and 2022.
The study shows that retail establishments have mirrored the migration pattern of many remote workers from larger cities to smaller ones and suburbs. That movement has important implications for the affected cities and commercial real estate firms.
Commercial firms may have to reassess property acquisitions, tenant strategies, and development plans as they adapt to the shifting consumer demand driven by remote work. As workers continue to migrate out of big cities, commercial development is likely to follow them to less densely populated areas, which could further trigger more migration to those areas.
“Cities may lose substantial sales and property tax revenue if residents spend less time shopping in those areas,” she says. “Another possible effect is a worsening of existing disparities. Black households, which are predominantly based in downtown areas and underrepresented in industries adaptable to remote work, may face increased job mismatches and reduced access to retail opportunities.”
But all is not lost for cities. Relihan points to policy solutions like flexible zoning, redevelopment grants, and taxes on extended vacancies to combat the negative effects that remote work has had on large downtown economies.
“I’m bullish on cities in general,” she says. “Every time a new technology is invented people love to predict the death of cities. Through all of these technological innovations cities as a whole have just gotten bigger and denser and have taken up a larger slice of pie of the American economy.”
Relihan, who teaches Real Estate Fundamentals at the Daniels School, is an affiliate of the Dean V. White Real Estate Finance Program and the Purdue University Research Center in Economics. She further discusses remote work impacts on this “Densely Speaking” podcast.
