How Remote Work Will Affect the LA Real Estate Market
I’d like to do something a little different for this article and start by asking a question to my fellow Angelinos: When you first moved to LA, what were your first impressions? Think about that for a second….(and yes….this does tie into real estate:)
I can remember mine pretty well……they were (in no particular order):
- ALL the stereotypes are true…..the good, the bad and everything in between.
- Why do people who used to live in LA bag on it so much? This place is great!!! (Hint: a lot of people who leave LA, leave bitter).
- Wow….a lot of bed mattresses on Fountain Ave. Can’t you at least spring for the bed bug cover so the next artist can actually get use out of it?
- A lot of New Yorkers here who say they love to visit NYC but are happy here and would NEVER move back.
Some of these are more self explanatory than others but the relationship between New York and LA is an interesting one. Nobody likes to talk smack about LA more than a New Yorker. There’s a sense of pride in becoming successful in NYC and as Frank Sinatra said, “If you can make it there, you can make it anywhere.” but here’s the truth that many people won’t say out loud……You’re not truly successful in New York until you can make the move to LA. Don’t get me wrong, there are exceptions, but as a whole, the lifestyle in LA and the weather are much easier and it’s hard to pass up. In fact, Linkedin reported that Los Angeles is by far, the #1 city change for business professionals previously living in New York. In contrast, New York doesn’t even crack the top 10 for people moving out of LA. According to this data, people were literally more likely to move to Bangalore, India than to New York if they resided in Los Angeles. In short, LA has only become more desirable to move to in the eyes of business professionals residing in large cities.
People will argue that current statistics show that people are exiting all large cities especially LA and San Francisco. That may be true for San Fran but it’s not for LA…..at least not permanently. The reason is, industries in places like San Francisco thrive on remote work. It’s a completely efficient way to operate in the tech industry and we’ve seen plenty of growth in that sector prior to COVID. According to a study by Global Workplace Analytics, telecommuting has gone up 115% in the last decade and tech dominates this space. Back in May, Mark Zuckerberg announced to employees that up to 50% of Facebook employees could be working remotely in the next 5–10 years with Geek Wire calling it “a reckoning in the industry.” In contrast, the entertainment industry does not lend itself to remote work as well. Studios have movies and TV shows to shoot, events and premieres will eventually need to take place again and also people need to network and stay in front of each other in entertainment more than any other industry. Even gaming companies have shown increases in remote work in recent years and with companies including Playstation and EA anchored in LA, this is an industry that will only grow in our area. Right now content is king and these industries won’t be waiting on the sidelines forever.
Summary
We’ve shifted from a sellers market pre-covid, to a buyers market during covid……bidding wars are now taking place so the argument can be made that we’re shifting toward a seller’s market because the demand is now technically larger than the supply. If that’s the case, why is it a good time to buy? Currently, we’re in a recession and money has never been this cheap. In addition, the largest economic expansions typically happen immediately following recessions (see Milton Friedman’s “Plucking Theory,” as featured in https://www.bloomberg.com/opinion/articles/2019-11-04/milton-friedman-s-plucking-theory-of-recessions-looks-right ). Aside from recent events, this has been the largest economic expansion in the history of our country at 128 months and while there are a lot of outliers, I don’t think it’s completely over…..at least not in Los Angeles. Certainly some parts of our country have been hit harder than others and unfortunately that won’t change for less stable economies. That said, the forecasts we’re seeing for LA County are an even market and according to Zillow, desirable areas including Beverly Hills are projected to show increases of up to 1.8%. While I anticipate more short sales and foreclosures popping up than usual, the demand is expected to counter the discount that those types of sales offer. In short, this is a great time to strategize, get to know the markets you’re looking in so that you can spot a good opportunity when one hits the market.