Teri Ooms, executive director at The Institute for Public Policy & Economic Development at Wilkes University.

Teri Ooms, executive director at The Institute for Public Policy & Economic Development at Wilkes University.

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WILKES-BARRE — The 2021 Indicators Report, compiled by The Institute for Public Policy & Economic Development at Wilkes University, takes a deep look at the implications of telework on commercial real estate.

Teri Ooms, executive director at The Institute, said COVID-19 has accelerated several major economic changes, including:

• Increasing use of telework across many industry sectors.

• Increased emphasis of e-commerce and a growing logistics industry.

• Automation and adoption of new technologies across all industry sectors.

• Rising residential real estate market activity amid signs of migration out of larger cities.

Ooms said the report also examined how trends that have emerged or accelerated during the pandemic are impacting real estate markets (commercial and residential) as well as economic development in Northeastern Pennsylvania — a question that impacts our economic competitiveness.

“How the region responds to these economic shifts will impact Northeastern Pennsylvania’s economic competitiveness as a post-pandemic economy comes into view,” Ooms said.

Long-term Implications for the

Commercial Real Estate Market

Ooms said there are vast implications for the office market in a post-pandemic world. She said changing attitudes about traditional office settings will result in differing office environments that promote adequate distancing and complement increases in remote employment.

“The shift toward remote work is perhaps to be the most prominent change in future work environments, facilitated by the rise of communication technologies, the workplace and the home has somewhat merged,” Ooms said.

A McKinsey research survey found that:

• 80% of employees working from home enjoyed doing so.

• 41% of those surveyed reported higher work productivity.

• 28% said they were just as productive as when they worked in the office setting.

“This shift comes with some risks, namely the inability for managers to judge productivity without face-to-face interaction, but will be more commonplace in the post-pandemic world,” Ooms said.

Of course, Ooms said, the pandemic has prompted changes to teamwork as well, with virtual collaboration and new management systems as administrators learn how to effectively facilitate operations.

“Ultimately, the workplace of the future looks entirely different from the workplace before the COVID-19 pandemic,” Ooms said. “The CRE market will rebound, but significant uncertainty remains around how many workers will return to full-time face-to-face work, and the rate at which vaccine distribution allows for an end to mitigation measures.”

Regional impact of telework

The report showed that comprehensive, local data is not available on the percentage of jobs or businesses that are operating remotely. However, a survey of businesses in Northeastern Pennsylvania conducted by The Institute in spring 2020, during more restrictive phases of the statewide shutdown, found that three fourths of those surveyed had at least some employees telecommuting.

Ooms said it is unknown to what degree many businesses will include telework on a permanent or semi-permanent basis.

“While some businesses will likely embrace remote work and reduce their physical office footprint accordingly, others may seek to resume pre-pandemic face-to-face work environments as soon as it is safe to do so,” Ooms said. “Still others may adopt hybrid practices, which may or may not impact their workspace needs.”

Ooms said a late 2020 McKinsey survey of 800 executives worldwide found that nearly 40% expect remote employees to work two or more days per week away from the office after the pandemic, nearly twice the share as seen in pre-pandemic surveys. However, a much smaller share expect remote employees to telecommute three days or more per week, suggesting this hybrid approach may be common.

The report shows that the degree to which telework continues to see long-term use after the vaccine is fully rolled out should be a primary factor in shaping the state of the market for office space nationwide.

“While the percentage of jobs that were done remotely during the pandemic that will convert to permanently remote is unknown, variations across industry groups are certain,” Ooms said. “Telework is most frequently associated with a higher wage, educated, white collar workforce.”

Ooms noted that separate sets of estimates published by McKinsey and the National Bureau for Economic Research showed that industries like finance and insurance, management, information, and professional and technical services have the highest shares of employees who can complete their work from home. She said regional data on jobs by industry were combined with the effective potential estimates above, in order to determine how many jobs in the region could potentially be done remotely given an area’s mix of industry sectors.

In Lackawanna and Luzerne counties, nearly 58,000 jobs are projected to have the potential for telework, representing 28% of Lackawanna County employment and 26% in Luzerne County. Ten neighboring counties — Bradford, Carbon, Columbia, Monroe, Pike, Schuylkill, Sullivan, Susquehanna, Wayne, and Wyoming — had lower rates of telework, ranging from 22% to 26%, and 23% overall.

Variances were also seen at the ZIP code level. The highest shares of potentially teleworkable jobs were found in the following ZIP codes:

• 18507 Moosic: 47%

• 18701 Downtown Wilkes-Barre: 41%

• 18706 Hanover Township & Surrounding Area: 37%

• 18503 Downtown Scranton: 35%

Ooms said geographic differences in the share of in-person jobs that will be permanently effected by telework will also impact other jobs and industries beyond those being performed remotely. In areas with high concentrations of heavily teleworked jobs, services catering to workers like restaurants, gasoline stations, coffee shops, and personal service businesses will be affected by long-term changes in demand corresponding to the level of these jobs that remain remote fully or partially.

“For the region’s downtowns, the implications are particularly notable, where fewer workers in offices has brought about a drop in foot traffic on the cities’ sidewalks,” Ooms said. “While increased adoption of telework will certainly shape the demand for office space, market conditions could weaken for some retail, restaurant, and service space as well, particularly in downtowns reliant on daytime office workers for economic activity and around business parks.”

Reach Bill O’Boyle at 570-991-6118 or on Twitter @TLBillOBoyle.