In many ways our workforce is changing, both due to COVID-19 and as Arlington’s economy continues to evolve.
As a community it is important that we study this impact on both our employment rate for our community’s personal economic vitality and our commercial office occupancy rate that contributes to 20% of our county tax revenue.
In the short term, on balance, Arlington’s economy is faring well compared to the D.C. region and nation at large. Arlington’s unemployment rate is the lowest of all counties in the region at 6%, compared to 11% nationally. In June, Arlington collected 95-98% of expected tax revenue successfully. It remains to be seen how we will fare this fall if we do not receive another round of stimulus.
Amazon continues to expand their office presence in Crystal City despite work from home policies, as we expect them to become the county’s largest employer and take up a significant amount of vacant office space. Hotel occupancy and revenue is significantly down from 76% occupancy at this time last year to 23% last month, which also means Arlington does not owe Amazon incentive payments that were tied to hotel taxes (a well negotiated clawback in my opinion).
In the long term, there is uncertainty on the future of our work culture. COVID-19 has forced over 95% of the American workforce to telecommuting practically overnight according to a recent Senate EPW Committee Hearing. Further, a recent Stanford-University of Chicago-Atlanta Federal Reserve survey expects work-from-home to quadruple from 5% to 20% even after COVID-19, and according to a PWC survey about 90% of employers expect about 1/3 of their employees to continue to work remotely at least one day a week.
How this might impact our office tax revenue projections still has yet to be seen. PWC’s survey is inconclusive on how employers plan to increase or decrease office space in the future, with half saying they plan to keep the same amount of office space or decrease their space and half planning to increase square footage citing remodels to create a more collaborative environment for the time that employees are actually in the office.
Of planned future office space, real estate services company JLL shows that in our submarket, the Rosslyn-Ballston corridor and Tysons currently both have the same amount of office space, but in the pipeline, Tysons has 13.5 million sq. ft. planned versus only 3 million sq. ft. for the R-B corridor. This is a shift in Arlington from commercial office space to commercial residential (apartments) that shows a far higher occupancy demand.
For that very reason it is important though that during this shift that we keep an eye on office occupancy and potentially create more flexibility for office to residential conversions to allow for the market rather than zoning to determine commercial best use for land development since they both bring in the same tax revenue per square foot.
In my opinion, this potential shift in the workforce to part-time work-from-home is a healthy and positive step in the right direction.
For the environment and time efficiency, this decreases commuting time and cars on the road including the 65% of Arlington employees who have a commute of 30 minutes or longer each way. For young parents, the ability to more easily manage a rotating preschool “cluster” among families is significantly cheaper than the outrageous average cost of $24,400 per year for a childcare center or $17,000 for a family day home in Arlington. For mental health, employees are spending more time with loved ones, and hopefully after a COVID-19 vaccine is developed, there will be availability to come into the office and interact with co-workers when necessary.
Now, more than four months into a global telework experiment, it looks like the experience will fundamentally reshape the future of where, when, and how people work. Change can be scary but in many ways this seems to just be just speeding up the inevitable.
Nicole Merlene is an Arlington native and former candidate for Virginia State Senate. She has served as a leader in the community on the boards of the Arlington County Civic Federation and North Rosslyn Civic Association, as an Arlington Economic Development commissioner, in neighborhood transportation planning groups, and as a civic liaison to the Rosslyn Business Improvement District.