Antonin Bergeaud, Jean Benoit Eymeoud, Thomas Garcia, Dorian Henricot 18 January 2022
As employers and employees established ways of working remotely to limit physical interaction during outbreaks of Covid-19, teleworking became increasingly routine. This column examines how corporate real-estate market participants adjusted to the growth of teleworking in France, and finds that it has already made a noticeable difference in office markets. In départements more exposed to telework, the pandemic prompted higher vacancy rates, less construction, and lower prices. Forward-looking indicators suggest that market participants believe the shift to teleworking will endure.
One of the primary hysteresis of the Covid-19 pandemic on the organisation of work is probably the dramatic take-off of telework. Forced by circumstances, employers and employees had to implement new ways of working remotely to limit physical interactions during the acute stages of the outbreak. This experience prompted companies to invest more in computer equipment and to adapt their management practices. Teleworking has thus already become a standard practice for many workers and is likely to endure (Barrero et al. 2021).
The polarisation of economic activity has led to a significant increase in real estate prices in dynamic areas. Office real estate is no exception, and the cost of corporate real estate is increasingly weighing on firms’ bottom lines (Bergeaud and Ray 2020). Companies taking advantage of teleworking to reduce office space demand could induce a structural downturn in the corporate real estate market. In the US, Bloom and Ramani (2021) show that the pandemic and the rise of telework is already having a substantial impact on the spatial dynamics of city real estate, producing a ‘doughnut effect’. In a recent study (Bergeaud et al. 2021), we look at the first signs of such an adjustment in France.
Local heterogeneity of the propensity to telework
We first define an index that measures exposure to the deployment of telework at the county (département) level. The index is the product of two components. First, we use the indicator constructed by Dingel and Neiman (2020) at the occupation level and apply it to the local composition of labour in France. We interpret it as a maximum potential for teleworking. However, this upper bound is unlikely to be reached in practice (Bartik et al. 2020). Also, we introduce frictions (quality of the internet infrastructure, average commuting time, number of families with children) that prevent the full use of the telework potential. We extract a principal component from these frictions and combine it with the maximum potential to construct a single index that measures the actual propensity of teleworking by county.
This indicator is presented in Figure 1. While it naturally shows some strong correlation with population density, we found that it remains positively correlated with actual teleworking intensity after being residualised. The bottom map plots this residualised geographic distribution.
Note: The top map shows the telework index by county. The bottom map shows the telework index purged of density effects. For both maps, counties with the darkest index have the highest telework capacity.
Adjustments in the corporate real estate market
We analyse the differential evolution of corporate real estate in counties with different propensities to telework, and show that stronger corporate real estate market adjustments are occurring in areas with higher propensities to telework.
On the quantity side, the top panel of Figure 2 shows the evolution of actual office space built since 2018 (dark blue line) and …….