How are digital nomads changing commercial real estate?

Its mission was to blend the local population with digital nomads, creating a key destination for global travelling workers while extending Madeira’s tourist-based economy. Two years on and more digital nomad villages have sprung up across the world, catering for the enormous post-pandemic growth in this lifestyle.

But the question is, will digital nomads have an impact on society, on the way we work and the way we use space? Will they remain outliers, a discreet footprint in the changing patterns of a post-pandemic world? Or are they indicative of a greater transformation that could ultimately change how we live, work and use our built environment?

Digital nomads have chosen to combine their career with travel, using remote internet technology to live a location-independent lifestyle. The spectrum of digital nomads is vast. There are self-employed millennial freelancers, people who work remote-only for corporations, purist nomads who move destinations every week, and others who spend a few months every year in a warmer climate. They have been globetrotting since the 2000s and are tied to a range of trends, such as the growth of mobile technology, internet cafes, coworking spaces, the tech start-up culture and the pursuit of health and wellbeing lifestyles.

But it was the COVID-19 pandemic that really opened the gates for the explosion in digital nomads. When the world shut down in 2020, employers suddenly had to embrace remote working, indelibly changing how we view work. Indeed, according to a study from US-based MBO Partners, the number of people describing themselves as digital nomads grew by 131% between 2019 and 2022, to 17.3m in the US alone. Perhaps more significantly, the number of US digital nomads with ‘traditional jobs’ has tripled since 2020 and now stands at 10.7m.

“What we saw in the wake of the pandemic was the opening up of new ways of working and that has increasingly crystalised,” says Paul Tostevin, director of world research at Savills. “There has been a structural shift in terms of what people want in life and are prioritising.”

Despite a call back to the office, many employers – with an eye on recruitment and retention – have maintained a remote-only working option. In a survey of 800 global organisations this year, Deloitte found that 35% now allow employees to work remotely from other countries, a figure that rises to 52% in EMEA businesses. Since Estonia launched the first digital nomad visa in 2020, more than 50 countries have followed suit, looking to boost their post-pandemic economies.

Tallinn Old Town, Estonia

But there are, of course, limits to this lifestyle. Not all professions or employers can support a nomadic existence. “There are branches of RICS work that can be done remotely,” says quantity surveyor and strategic advisor Kevin Ellis FRICS, who ran his Oman property company from Estonia for 18 months. “But when it comes to something physical like a construction site or surveying a building, you have to be in that location.”

That said, the ripples caused by digital nomads are being felt in numerous corners of the working world. Maureen Ehrenberg FRICS, president of the commercial division at US proptech firm, Lessen, says the rise in remote-only working models means companies have had to institutionalise it. “Employers have to ensure compliance, that there’s the right visa and the right taxes are being paid,” she says. “You can’t have a public company finding out it’s not compliant.”

Corporate digital nomads and their employers also have different real estate needs – and the market is responding. Ehrenberg points to US-based property investor and owner Tishman Speyer, which this year launched a global pass that allows its customers to use any of its offices and amenities across 41 locations in the world. Accessed through the ZO app, users can book coworking spaces as well as city-specific networking programmes. “Our customers are more mobile than ever before, and their life and work take them to destinations across the globe,” said EB Kelly, senior managing director at Tishman Speyer. “ZO Global Access gives them an instant community.”

For the $67bn firm it’s a major shift and a clear recognition that with new and alternative work styles, offices need to be more than functional – they need to be experiential. Proptech platforms like Flexspace have also emerged, providing online marketplaces to match flexible space providers to remote travelling workers.

At the higher end, the rise in ‘executive nomads’ is also impacting real estate markets in their favoured destinations. Tostevin compiles Savills' annual index of top destinations for executive nomads and says this group tend to change the dynamics of location markets. “It has certainly been a factor in Dubai’s success,” he says. “Dubai prime rents were up 5% in the first half of 2023, but up 23% year-on-year.”

Dubai was Savills' top destination for 2023, followed by Malaga, Miami, Abu Dhabi and Lisbon. Tostevin says this trend has also driven the growth in branded residences, a turnkey rental or sale property often provided by high-end hotel brands. The number in Dubai alone has increased by 400% in the last decade and by 150% across the world. Savills expects supply in this prime market to nearly double by 2027.

Dubai is Savills' top destination for executive nomads in 2023

Malaga

Abu Dhabi

Miami

Lisbon

Tostevin adds that digital nomads at different levels of seniority will diversify demand for goods and services in their locations. “It changes all sorts of factors, from people needing a home office – a trend we see globally – to boosting coworking markets in these destinations,” he says. “It changes what’s needed and what’s demanded.”

But for some, these changes aren’t all positive. In Portugal, digital nomads have become embroiled in the country’s housing crisis. Cities such as Lisbon, which saw a 13.9% rise in prime residential rates in the first half of 2023, are suffering an affordability and supply crunch. More than a decade of luring foreigner investors with its golden visas – open only to those with €500,000 to spend on real estate or start-ups – has contributed to distorting residential rental and sale markets. In response, the government is set to shelve golden visas and ban any new licences for short-term rental properties. Incidentally, its year-old digital nomad visa will stay.

In California, senators are attempting to introduce higher taxes on the short-term rental market to fund more affordable housing. For digital nomad proponents, this backlash is one of the driving forces behind creating more specific nomad villages like Madeira and the recently launched Cape Verde.   

Ponta do Sol, Madeira's Nomad Village

Despite these worries, it’s impossible to predict the future impact of digital nomads. “It’s such an emerging trend that nobody knows what the pros and cons might be,” says Paul Bagust, head of property practice at RICS. He adds that it’s a challenging period for the industry. “Real estate is very illiquid as an asset and we’re having to adapt quickly to new work styles and new expectations of employees. But also, the financial context can’t be underestimated, we’re in very difficult times.”

Tostevin says that while there are more locations offering digital nomads visas “all the time”, this way of working is very much tied up with employers’ approaches to hybrid working and the prospects for office markets. “It will be interesting to see how that develops, and clearly the trend so far is that some sort of hybrid has stuck and probably will continue,” he says. “But equally, we do see some pressure for getting people back to the office to collaborate.”

Ehrenberg concurs and says the only factor that would lead to “material change” would be a major increase in larger employers offering remote working abroad as an option. This, she says, is more likely to be tied to recruiting and retaining young talent. “That would help relieve the need for office space in one place, because now you've gone to a different structure,” she says. “And if it does that, it will begin to change the [long-term] dynamic because younger employees are going to make up 25 to 30% of the workforce.”

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