Austin - Tech Sector: Remote Work 2021/22 & RE impacts?

8 Replies

I decided to make a post that specifically focused on the long term effects of remote work (wfh) in Austin [particularly from the tech sector]...

Questions to discuss:

  • Since this is being talked about all across the country, what do you think will happen here in Austin in 2021 and beyond? And how will this affect the real estate market here?
  • Will many of the tech companies move to permanent WFH? And if so, people looking for homes may no longer feel the need to be in Austin itself (maybe cedar park, round rock, leander instead)
  • Or will more people move INTO Austin since they are moving out of NYC and SF?
  • What about other businesses like music venues around downtown that are permanently closing? I assume eventually another similar business will eventually open up in their place? Or will they move as well?

My overall guess at this point is that it will be somewhere in the middle. Their will be more options for WFH but it won't be 100% of the time for 100% of employees. Maybe they will have to come in once a week or once a month for important meetings? Although large majority of meetings can be done online. Will it be enough that people move out of the city? I'm not sure, maybe not.

Research I've done

Most of the information I have found is about tech companies in general, but not specific to Austin. For example: Article from July 2020: ( https://www.cnbc.com/2020/07/2...

I have also tried looking on job sites like Glassdoor and Indeed. I found an array of options listed, including:

  • Some fully remote (although some companies are not even in Austin)
  • Some part time
  • Some remote for some people
  • Some have office but can be remote

Article from July 2020: ( https://www.bizjournals.com/au... .)

Current Knowledge:

INDEED: WFH till July 2021

Guesses:

APPLE: I figure Apple, since they are spending $1 Billion on the new campus will want employees to come into the office :).

Facebook, Google, Amazon, IBM, and PayPal all have offices in Austin, so perhaps their global policies will be the same in Austin as well?

Article from May 2020: ( https://techstartups.com/2020/... .)

Article from May 2020: https://news.crunchbase.com/ne... )

CNBC from June 9th: "Why Coronavirus may change how Big Tech works": https://www.youtube.com/watch?v=RoN2nGMltfw
And many others...

More people are going to move to Austin for the awesome quality of life, entertainment and relatively affordable cost of living compared to other cities like SF, NYC, LA and Seattle. Home prices and rent are still cheap in Austin! My sister pays teh same to rent a 3 bed in RR for a small room in Brooklyn. Work from home doesn't change wanting to live in a fun area. People moving to or living in Austin aren't going to change their mind and move to Omaha because it's cheaper. There are far more reasons than just Google to move to Austin. If anything population increase will ramp up because people don't have to live in high priced cities anymore for work.

@Andrew Bissada I agree with @Jordan Moorhead . We're seeing TONS of people moving to Austin from higher-priced communities around the country for Austin's lower cost of living (comparatively), while still maintaining the big city culture they are used to. If anything will push people out of Austin and into the suburbs, it will be a lack of top-rated schools in some parts of the city compared with the suburbs (long-term trend) and more recent trends regarding our growing homeless challenges and the "defunding" the police movement. We'll have to see how the latter two issues affect Austin's growth over the coming years. Policies can always change. I can tell you the demand in Austin for SFH and small multi-family is sky-high right now, plus Jordan and I both bought investment properties in Austin this year.

@Andrew Bissada I think it is a valid consideration, but I believe the impact will be quite low overall.  You may see the larger impact be in commercial space leasing and development and some niche markets such as music venues.  However, the onus is on those respective spaces to adapt their models to thrive in the current times not just survive.  @Jordan Moorhead makes a good point on why people move to Austin, that is a broad level attraction and I do not see it diminishing significantly at all. @Ryan Kelly 's point on suburb development is also solid.  That may actually be underrated and need to be bolded and italicized.  Consider current housing inventory.  Austin as a whole has 1.7 months and Williamson County (North side of Austin) has 1.5 months*.  And with current affordability indexes for home purchase price and rental prices, the Austin MSA is a strong competitor.  

*https://www.abor.com/statsjul2...

Hi Andrew, I think you're asking some really good questions. Full disclaimer, I'm new to real estate investing and the market in Austin. However, I have lived in Austin for over 5 years and have worked as a software engineer here for 3+ years. What I can offer is my experience living and working in tech in Austin.

The company I work for has less than 500 total employees, and even though we have gone completely remote, there are still reasons for us to not go completely remote. A dedicated office space is not something everyone can or wants to afford in their residence. Also, being able to communicate in person is better for meetings and building friendlier work relationships. For these reasons, I don't think working remote will cause every tech company to abandon their office space.

A possible reason for big companies like Google and Indeed to mandate remote work is because they are big, they aren't as flexible to go back and forth on physically returning to the office. It's simpler to ask everyone to work remote until there's more evidence of this pandemic subsiding.

I have no idea if more people will move from NYC and SF to Austin, that's just out of my knowledge.

In my opinion, music venues will be one of the last businesses to come back. And even when they are allowed to open, I think it will still be slow until the majority of concert-goers feel it is safe.

I have lived in Austin since 1998.  I must say that for the last 6 months I have enjoyed driving the roads in Austin.  Whereas before I was hating the driving , I welcome the drives with passion.  It is because more people are working from home and also the schools shut down.  That will be changing in the coming months but at least for the short term foreseeable future (6 months minimum) the traffic should be enjoyable.  My son works for Amazon as a programer and has worked from home for the last 5 months.  I don't see him having to go back to the office at least on a regular basis any time soon or maybe ever.  

He lives in Leander, but strange enough he also owns a duplex off of Braker close to the Domain.  He tells me that many of his co-works rent!  Sounds strange to me but that is because many have come from high expense areas and they rented there.  I think this WFH will make those rethink their decisions and actually result in those buying property but possibly moving to the burbs for more affordability.  

I don't think it will have much of a negative affect on rental rates as Austin is growing in population at an accelerated rate. I expect property values to continue to climb along with rental rates. The only thing that will derail this Austin economy is if we have a GLOBAL recession that is deep and long. Austin is diverse enough and still affordable compared to other high tech cities that it will easily handle a short, shallow recession if need be.

I expect this Corona 19 issue to fade after the election and we will be back to normal, but hoping the roads remain somewhat fun to drive.  Cheers.

@Andrew Bissada , it seems like in all these Austin posts @Jordan Moorhead , @Ryan Kelly , and I are all in lockstep, and since they almost always beat me to the punch, I usually don't bother to repeat what they've said. That's true in this case too, but I will add one thing; we're all in residential real estate. I do expect there to be a reduction in the demand for large-scale office space in the Austin metro area in the coming years. How that will manifest itself will be interesting to see.

I personally view the world for the long term. In that world the pandemic is a speed bump vs a sinkhole. As a former tech executive and now tech investor I am thus bullish on Austin just as I am bullish on SF, LA, NYC and Seattle. I think Austin will keep standing on its own and keep churning out great companies and new jobs. Short term there will be all sorts of questions with regards to remote work etc, but if the world is fighting tooth and nail to figure out opening restaurants, bars, schools, opening offices and seeing more and more people show up in them won’t be too far fetched in the next 6 - 12 months. In the middle of a crisis a lot of doomsday stories get circulated. You can look at the previous recessions and see the dire predictions made that did not materialize.

Thanks everyone for your feedback, it sounds like everyone for the most part is of the belief that this won't have a (significant negative) impact on the RE market here in Austin, that is great to hear! I appreciate yall's individual perspectives and experience.