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Why Americans Are Traveling Further for Work
Longer commutes are becoming more common due to hybrid work and rising housing costs.
Jordan B. & Han-Gwon Lung
June 07, 2024
Together with
Good morning. Longer drives to the office are becoming more common and acceptable for many American workers. Plus, Starwood’s decision to lower withdrawal limits may have ripple effects for at least six months.
Today’s issue is brought to you by AirGarage—maximize parking revenue at your property.
Market Snapshot
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WORKPLACE
Why Americans Are Traveling Further for Work
Longer drives to the office are becoming more common and acceptable for many American workers, influenced by rising housing costs and the flexibility of hybrid work models.
Longer commutes trending: According to Stanford University, the share of super commutes, defined as 75+ miles, surged by nearly 33% since 2020. This shift is fueled by rising housing costs, prompting more workers to relocate farther away. Notably, commutes between 50–74 miles grew by 18%, while those over 75 miles rose by 32% as residents opted for extended drives to offset pricey urban living expenses.
Deciding to drive more: Research by Gusto indicates that younger and high-earning employees are opting for longer commutes, with average distances rising from 10 to 27 miles between 2019 and 2023. Workers in their late 30s have seen a 3x rise in commuting distance, to 29 miles. The movement away from urban hubs is also ongoing.
What Jack and Jill think: A recent survey by Fannie Mae and PSB Insights revealed that 36% of respondents considered home affordability crucial in selecting a workplace, while 22% were willing to endure longer commutes for affordable housing options.
Vacancy rate analysis: A study conducted by Moody's Analytics CRE in April 2023 also revealed a correlation between longer commute times and higher vacancy rates in examined metros. In other words, areas with extended commutes naturally saw higher office space vacancies.
➥ THE TAKEAWAY
Why it matters: The evolving commuting landscape in the U.S. has led workers to endure grueling daily journeys. Commercial real estate may see a shift in demand from urban office spaces to suburban and even rural locations. This trend could lead to increased development in these areas, including office parks, retail centers, and residential communities, as well as enhanced transportation infrastructure to support the growing number of long-distance commuters.
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✍️ Editor’s Picks
Slight uptick: The Green Street Commercial Property Price Index® rose 0.7% in May, up 1% for the year but still 21% below its March 2022 peak.
Hochul halts tolls: NY Gov. Hochul indefinitely halts the proposed $15 Manhattan congestion toll plan right before it was set to start, citing changed circumstances affecting NY’s recovery.
Redefining limits: Starwood REIT (STWD) lowers withdrawal limits, hoping for a 6-month cap benefiting 80% of shareholders, as it faces liquidity challenges.
Haves and have-nots: US investment income hits a record $3.7T, as rising wealth fuels spending despite inflation, and the debate over the longer-term economic impact ensues.
From cattle to condos: Bentonville, AK, saw its population grow from 36K in 2010 to 58K in 2022 and is projected to reach 200K residents by 2050.
Tequila titan: The heir to the famed Jose Cuervo empire quietly amassed over 5MSF of US real estate worth $1B across Miami and Chicago.
🏘️ MULTIFAMILY
Saving the day: Outpost Club begins managing 7 former Common co-living properties with 350 units in NYC after the latter’s bankruptcy and plans further expansion.
Occupancy stable: May 2024 showed steady US apartment market occupancy at 94.2% and 0.5% monthly rent growth. Both occupancy rates and rent growth have been in a stable range for 7–8 months.
Rental resilience: Downtown Chicago rent growth is slowing, but demand is still strong. With 2.4K units added in 2024, the city can expect a total of 3.6K units by 2024.
Affordable American Dream: Kian Investment secured a $24.4M loan from Century Housing to build a 136-unit affordable housing complex in LA’s Koreatown.
Not as sunny anymore: Florida apartment rents are mostly at slight discounts or premiums below 1% right now, down from double-digit premiums a year ago.
🏭 Industrial
Data Centers dominate: Investors are showing strong interest in data centers, with 97% planning more data center investments this year. Notably, the sector saw $4.8B in 2023 transactions.
Atlanta's evolution: Atlanta's industrial development surged recently, with a 12.3MSF pipeline, but faces challenges like Rivian's (RIVN) postponed $5B plant.
🏬 RETAIL
West Loop winners: CA-based buyers Zareh Michael and Melina Khalaj Issakhanian assumed a $5M mortgage for a $7.4M West Loop property.
Building greener: DC Partners secured a $46.6M loan for a Houston development, and $31M for the Thompson Hotel, enabling sustainable upgrades.
Dressing down: Victoria’s Secret & Co. (VSCO) reported $1.4B in Q1 net sales, down 3.4%, and plans to close up to 40 stores. But the retailer still owns 20% of the intimates market.
🏢 OFFICE
Officially burdensome: The delinquency rate for office building loans is up as prices keep dropping. Naturally, more pain is expected.
Explaining earnings: BXP CEO Owen Thomas emphasized the impact of interest rates and corporate earnings on the office market's divided performance.
Skyline dilemma: Austin may not be suitable for office-to-residential conversions due to debt-ridden, modern buildings with structural challenges.
🏨 HOSPITALITY
Riverboat to rooftop: Belle of Baton Rouge transitions from a riverboat to a land-based casino with a bold, $141M plan backed by GLPI. You don’t see that every day.
Business travel is back: According to hotel executives, business travel is ‘back’ in the US, but it looks different this time. Long-haul international travel is out, and shorter domestic trips are in.
📈 CHART OF THE DAY
According to CoStar, an increase in past-due commercial real estate loans has not yet led to more bankruptcy sales: South Florida bankruptcies rose in 2023 but have not spiked significantly.
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