New Ways of Working and Infrastructure Improvements: Implications for Urban Markets

Distance and commuting costs are well-established as key determinants of location choice for place of work and place of residence. However, technological changes in recent decades have greatly affected these factors. Moreover, triggered by the COVID-19 pandemic, the widespread adoption of various forms of flexible working, work-from-home (WFH), and hybrid working, enabled by digital infrastructure and services, has been increasingly evident in our daily lives and appears to be prevailing even after the pandemic. As workers are increasingly able to choose residence locations farther away from the place they work, it raises a significant question: how are urban markets affected by the introduction of new ways of working and infrastructure improvements? In this study, a simple two-city model is employed for analysing the patterns of induced changes in aggregate population and employment levels and their impacts on property prices and rents. We also analyse the implications for productivity and the provision of local amenities and look at the possibility of the inequality gap widening due to varying levels of access to new work patterns. This research has substantial implications for policy-making and investment decisions.