Workforce Innovation – Nimble & Dynamic

This is Part 3 of a multi-part series on the Top Trends and Market Opportunities for the 2020s. See Part 1 and Part 2 for context.

Job Growth – The Fuel of Real Estate

Job growth is the most important single driver of real estate demand that can be tracked. The linkage is simple, if a firm seeks to expand, it often needs to hire, if it needs to hire, then it needs space for that employee to work (such as office or industrial space). That new employee can now afford a place to live via the magic of household formation and thus demand for housing (rental and for-sale) rises; further, that additional earnings fuels higher retail sales and thus new retail real estate is demanded and even the ability to travel expands and thus the hotel sector grows as well. This article describes important trends and shifts in the nature of work, it will impact real estate, and how so will be the subject of future article.

Great Recession Destroys the Trust Paradigm

History will likely tell the story of the 2010s and late 2000s as one of dramatic, even violent metaphorically speaking, change in the nature of work, the workplace, and even the worker. This change occurred on several, somewhat unrelated fronts. First, the mass layoffs spurred by the 2008 Great Recession placed several million Americans unemployed and many other millions underemployed and/or needing to rethink their career and work-life strategy; the long term implication is that the average person has less faith in corporate and institutional employers than ever and this trust is very slow to rebuild. Those in their 20s and early 30s today will enter the 2020s never having the backbone of trust prior generations held in institutions, the ramifications of such will be more fully realized in this next decade.

Regulatory Changes Makes Freelance Fully Feasible

The Affordable Care Act (ACA) passed in 2010, while far from perfect, it offered to sever the connection between employment and health care with the creation of government backed exchanges for private coverage. This regulatory move is similar to what the Employee Retirement Income Security Act (ERISA) of ‘74 did to employee retirement plans that effectively curtailed pensions and spurred the direct contribution plans that are now popular (i.e. IRAs and 401k/403b plans). Now, people no longer need to rely on their employer for sustained work, retirement income, or healthcare. As the rollout of the ACA remains slow and politically unstable, it is difficult to measure the timeliness of mass adoption and penetration of this new reality; but, once again, it likely to occur in the 2020s. The rollout of association health plans may be the catalyst that keeps a substantially higher percentage of people working in freelance employment by choice for years to come.

Technology Accelerates the Transformation

Workplace innovation was fueled by technological innovation and cost saving goals that spurred trends in office hoteling, telecommuting (aka work from home), and enhanced freelance contracting (such as the use of internet platforms, like Fiverr, to connect contractors to firms). The past several years have seen firms of all sizes engage in experimental rollouts of these and other practices; in the next decade, best practices are likely to emerge and thus lead to even greater mass penetration and acceptance by more and more firms. Importantly, workers will be increasingly likely to accept and even desire such formats. By far, this work trend has the most direct impact on the utilization of commercial real estate. It is already felt in many office markets as firms increase the employee density by using new layouts and outsource their workplace needs to modern, tech-enabled providers such as WeWork, with the result being low rates of net absorption despite strong hiring in office-using sectors of the economy. There are and will be more impacts on the multifamily, hotel, retail, and industrial sectors; these are less clear today but likely to be more obvious by the early 2020s. The central themes of technology and automation augmenting, if not replacing, roles historically performed by humans will no doubt be exacerbated in the future and thus impact all sectors of real estate as well.


Changes in the nature of work will have direct and profound impacts for all sectors of commercial real estate. To date, this can be easily seen in the office market. Just tour a WeWork to see how, but that is just the tip of the iceberg. The nature of firms is shifting, read this case study on Peak Design, my personal favorite supplier of camera accessories and bags. Their story serves as an example of what may be common place in the 2020s.

Peak Design – A Case Study

Peak Design is a San Francisco based designer and manufacturer of camera accessories and bags that started via a Kickstarter in 2011 and has now completed eight crowdfunding campaigns raising over $20.2 million via Kickstarter funds alone. This is not counting the sales that occur online or via retail partners worldwide. What is unique about this company is that it never needed outside investors, has only 34 employees as of ‘18 per its website, and has accessed a full global supply and distribution chain by outsourcing from day one.

This story is amazing by this decade’s standards but could be common place for startups in the 2020s as crowdfunding and lean global supply chains allow for entrepreneurs and artists to get goods and services directly to consumers more easily than ever.

The implications for economic growth, employment growth, and real estate demand are staggering; however, in which direction remains to be seen. This startup was not possible in the 2000s, thus hard to say what can happen in the 2020s.

6 Comments on “Workforce Innovation – Nimble & Dynamic

  1. Pingback: Co-Living is the New Co-Working | Joshua Harris, PhD

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  5. Pingback: Regulatory Drag – The Hidden Hand Restraining Growth | Joshua Harris, PhD

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