Editorial: Digital nomads and real estate markets

Citation

Taltavull, P. (2024), "Editorial: Digital nomads and real estate markets", Journal of European Real Estate Research, Vol. 17 No. 1, pp. 1-3. https://doi.org/10.1108/JERER-05-2024-073

The labor market has undergone significant changes in recent years, a shift that emerged after the financial crisis but has accelerated since the pandemic crisis. Most of these changes are attributed to the ability to work from home, enabling individuals to relocate to remote locations without severing labor ties or positions. The ability to work from locations other than traditional offices or desks has spurred a growing movement of digital nomads spreading worldwide.

These transformations in the workforce are also reshaping other sectors and significantly impacting residential and office markets. The latter has garnered considerable attention in the literature, with doubts arising about whether office markets will regain the profitability peaks of recent decades and revert to diminished occupancy rates. This skepticism is fueled by widespread evidence indicating significantly higher equilibrium vacancies than in previous years. However, there is a lack of consideration given to the impacts of these new ‘GIG' workers on housing markets.

Existing research predominantly revolves around housing designs, emphasizing models with increased space to accommodate their function of replacing offices or desks. However, there is a lack of research on their potential to: (1) revitalize declining residential markets, (2) mitigate seasonality in tourist areas due to their nearly constant presence during off-peak seasons and (3) contribute to the observed rise in rental prices in major urban centers in recent years, among others.

Do we have an estimate of its market size? Various sources independently estimate the number of digital nomads travelling around the world. For example, Plumbe (www.plumbe.com) suggests that as of 2024, there are between 38 and 40 million digital nomads globally, with 17.3 million originating from the USA. Predominantly, they are workers within the age range of 35–37 years (millennials), with the majority (91%) holding higher education qualifications. A portion of them (between 30% and 64%, depending on the sources) maintain full-time positions within their respective organizations, and their income level is less known (and varies depending on the source consulted), but it could range from $80,000 (www.skillademia.com) to over $123,000 per year (https://www.demandsage.com/digital-nomads-statistics/). A significant portion of nomads hold authorization to reside away from the company that employs them (MBOPartners, 2023), indicating a global dispersal effect in the labor market. A growing percentage travels with their families and children; they are increasingly inclined to stay longer in places they prefer, many of which are European regions, with stays ranging from three to nine months in a country (see https://abrotherabroad.com/digital-nomad-statistics/#WHO-ARE-DIGITAL-NOMADS). This trend is especially noticeable in countries where they can obtain digital nomad visas.

The implications of this expanding group on the real estate market are significant. Firstly, they represent an additional source of residential demand, potentially leading to market tensions that may be challenging to identify due to their elusive nature. Secondly, available information suggests that they prioritize real estate investment as a primary avenue for retirement planning, making them active participants in the real estate investment market. Apart from considering the impact of this new trend on the office market, it becomes evident that the digital nomadism trend could have significant ramifications for the trajectory of real estate markets, necessitating thorough investigation. I extend a warm invitation to researchers to submit manuscripts that delve into these emerging market dynamics.

This issue of the Journal of European Real Estate Research addresses various relevant topics indirectly related to the previous debate. It begins with a study that discusses ethical principles and applied ethics. Focusing on the case of Sweden, Ingalill Soderberg evaluates the theory and application of ethical principles in residential transaction intermediaries, showing how, under certain conditions, these principles are pushed to the limit and can generate problems for the agents. The next four studies assess the effects on residential prices of the existence of particular attributes in housing.

Thus, Andriot, Larceneux and Simon construct a building quality index using subjective (or perceived) measures of building quality, including location, to assess their impact on appraisers' judgments of market value. By estimating their effects separately, the results reignite the debate about the role of location and quality in determining real estate values. In line with the influence of subjective perceptions on prices, Vasileiou, Hadad and Oikonomou also compute a behavioral real estate sentiment index for the residential market in Greece, utilizing Google Trend data, to examine how changes in sentiment can influence residential price trends. The findings reveal a robust relationship reflecting widespread risk aversion in the Greek housing market.

Furthermore, Van Overbeek, Ishaak, Geurts and Remoy present new empirical evidence regarding the impact of environmental building certification, specifically BREEAM-NL, on office rents within the Dutch market. Their findings unveil an average rental premium of 10.3%, which varies between 5.1 and 12.6% across the Dutch cities examined, indicating differing sensitivities of the green premium depending on geographical location.

Lastly, the insightful study by Protopsalti and Skouralis addresses the asymmetric effects of transportation cost reductions (specifically, the removal of tolls on the Severn Bridge connecting England and Wales) on property prices, which depend on income levels. Employing a differences-in-differences (DID) approach, they demonstrate a 5% increase in prices in areas with lower income levels, and conversely, a contrasting effect in areas with higher wealth generation. An intriguing conclusion drawn is that the removal of tolls enables a ripple effect across the two markets by reducing commuting costs.

Two additional manuscripts assess the effects of changes in the socioeconomic environment on investments and their impacts on the real estate market. Yudaruddin and Lesmana evaluate the reactions of real estate companies following the announcement of the invasion of Ukraine by Russia, analyzing a sample of 2,325 companies active in the real estate sector. The study describes the delisting from the stock market once the war started, not before. Ghaedrahmati and Rezaei analyze the push and pull factors determining the increasing flows of investment in the Turkish real estate sector from Iran. The results highlight the value of the differential economic stability between the two countries as an attraction-pull factor, as well as the attempt to avoid losses due to the declining value of Iranian properties.

The issue is rounded off with a compelling study from a professional standpoint concerning non-urban coworking spaces by Vogl, Orel and Appel-Meulenbroek, aligning with the remote work trend previously discussed. Through in-depth interviews with owners and managers, the article provides insights with substantial practical implications for investment decision-making in these non-urban locales, thereby providing pertinent information for the formulation of corporate strategies.

I hope you will find the contents of this issue enlightening and enjoyable to read.