COVID-19, teleworking, and the real estate market

The COVID-19 pandemic has drastically altered commuting patterns worldwide, primarily because of the rise in teleworking and the reduction in urban traffic congestion. These shifts may have decreased the demand for proximity to urban centers while increasing the demand for larger housing. Using large-scale rental transaction data, we test whether the bid-rent gradients with respect to urban proximity and housing floor space changed during and after the pandemic. We find that both gradients flattened, suggesting that teleworking reduced the value of urban proximity and enhanced the preference for larger homes. Furthermore, we show that increased teleworking, as measured by a mobile location-based index, raised local housing rents and was closely associated with the flattening of the rent gradient with respect to urban proximity. Our findings underscore the roles of teleworking and evolving residential preferences in shaping urban structures. JEL classification: R21; R31; R23; J60; I12