Real estate is local in nature, with property values closely linked to economic drivers and characteristics of particular areas. While understanding the national home price outlook for 2025 provides valuable context, smart investors should focus on identifying cities and states with stronger growth potential. After all, beating the market is just as important as generating returns.
One compelling area to watch is which cities are seeing a higher percentage of workers returning to their offices. Since 2020, millions of workers have reaped the benefits of work-from-home policies, but there are growing signs that this trend is reversing.
As more companies seek office presence, cities with strong office-based economies and increasing workplace reoccupancy rates could see an increase in demand for housing. This shift may lead to a greater rise in real estate prices in these areas as workers move closer to their offices, revitalizing urban centers.
Investing in cities that go back to the office
Just as “Zoom cities” like Boise, Idaho, boomed during the remote work boom, cities that shift back to in-office work will likely see a spike in housing demand. While most workers prefer flexibility, companies pushing for a return to offices will drive demand in urban areas.
Show the latest data Bigger drops In fully remote workers in metro areas such as:
- San Jose-Sunnyvale-Santa Clara (35% fully remote to 16% in 2023 and declining)
- San Francisco-Oakland-Berkeley (35% -> 21%)
- New York-Newark-Jersey City (23% -> 14%)
- Boston-Cambridge-Newton (27% -> 18%)
- Seattle-Tacoma-Bellevue (31% -> 20%)
- Los Angeles-Long Beach-Anaheim (21% -> 15%)
- Washington, D.C.-Arlington (33% -> 22%)
Take a look at this more comprehensive chart compiled by Lance Lambert, book writer ResiClub Newsletter.
A common theme among the cities seeing the biggest shifts in returning to offices
A key feature of cities experiencing the strongest return-to-office trends is the inherent difficulty in adding new housing supply. Years of undersupply have primed these cities for increased competition, which will likely lead to bidding wars that drive up rents and real estate prices. As more workers return, demand for residential and commercial properties will rise, making these cities hotspots for real estate activity.
The transformation will not lead to an immediate boom. Initially, the existing stock will be absorbed as migrants and office tenants adapt to the changing dynamics. However, once return-to-office parameters stabilize, pressure on limited housing stock is expected to push prices higher. The interplay of strict land use regulations and low loan-to-value ratios amplifies this effect.
Take San Francisco as an example. Building new homes is notoriously difficult due to strict regulations and high construction costs. Obtaining a building permit often takes years, assuming the property is zoned for development. Then you have to build the darn structure! I have tried to get a permit to build an ADU in the past and gave up after six months.
As tech companies boom and hybrid work policies are imposed that require at least three days of office work, demand for housing in tech hubs like San Francisco, San Jose and surrounding areas is surging.
A sustained bull market creates significant wealth, which not only attracts more workers to these areas but also directs significant company capital into real estate investments.
The only way to truly enjoy your stock gains is to use them to buy something meaningful or satisfying. This dual effect – higher demand from employees and increased purchasing power from stock gains – increases competition for housing in these high-growth areas.
The return of big city real estate
Like many things—politics, social justice issues, education trends—the pendulum tends to swing from one extreme to the other. The Sunbelt and Midwest had their time in the sun from 2017 to 2022. Now, cities like Austin are facing a tailspin situation as construction workers review their inventory. Maybe in 2026 or 2027, it will be boom times for them again due to the lack of housing supply.
But over the next few years, I suspect real estate in major cities will start to outperform due to back-to-work policies. So, if you own a property in one of the cities with the highest return on office shifts, I would stick with it. If you’re thinking about building a rental property portfolio, you may want to buy before a massive wave of cash from technology and AI companies enriches tens of thousands of employees.
And if you’re a long-time landlord looking to simplify life and earn more pure passive income, it may be time to tap into the power and sell.
Employees and employers are rational actors
People who want to get paid and promoted will adhere to their company’s return-to-office policies. The vast majority of workers want to be paid and promoted.
At the same time, companies with senior management that once championed work-from-home policies are beginning to realize that enhancing in-person collaboration is essential to remaining competitive. They are driven by the allure of a multi-million dollar windfall. This is capitalism in action!
Yes, sadly the good times are over for many who have to return to their offices. But all good things must come to an end. At the very least, you can invest in companies that take work harder to bring profits and returns to you. Then you can also invest in real estate in the cities where those companies are located.
For lifestyle purposes, aim to work for companies that allow you to enjoy perks like playing pickleball in the middle of the day and still get paid. These opportunities will become increasingly rare, so if you find one, value it as much as you would an honest auto mechanic or a dependable handyman.
Retirees benefit from returning to their positions as well
For retirees, life becomes calmer. Reserving venues, going to trainees and walking around parks will likely become easier without the same crowds during weekdays. Errands will take less time, and your favorite places will feel less crowded.
As millions return to their fluorescent-lit offices in search of more money, your decision to step away from hard work will pay off even more – giving you greater serenity and freedom.
Psychologically, there is a reassuring feeling of satisfaction knowing that employees at your investment firms are doing more for you. While investment returns are never guaranteed, it is comforting to feel that the odds of maintaining a comfortable retirement are improving.
What a gift to see employees back at their desks and striving for growth again!
Readers, what are your thoughts on investing in real estate in cities where employees are returning to the office in droves? Do you think real estate in big cities is poised to outperform smaller markets that have benefited from the work-from-home trend? Share your thoughts below!
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