high-speed internet

How Internet Infrastructure Impacts the Real Estate Market

high-speed internet

Many modern daily tasks depend on having a strong internet connection. Over the last few years, an increasingly large number of people have been relying on broadband internet to generate income, connect with friends, and complete schoolwork.

Unfortunately, many Americans are unable to access reliable internet and its opportunities, either because service in their area is slow or because service options are too costly. Recent legislation — including the newly passed Infrastructure Investment and Jobs Act — has focused on how to help close the digital access gap for underserved areas. 

All this attention means internet infrastructure has become a big conversation for consumers and property professionals alike. What does it mean for real estate? Here are five ways that growing demand for a stable internet connection is affecting the real estate market.

1. Changing Homebuyer Priorities

Traditionally, real estate customers have wanted to live in locations with strong infrastructure for transportation, water, and electricity. Although these utilities aren’t always available in rural areas, they are generally considered necessary for living a normal, modern life in America. 

As more people have started to work remotely, stable internet access has become an additional essential service for many new homebuyers and renters. Millennials, who are dominating the homebuying market, are especially likely to require an internet connection to access work and connect with family and friends.

Because internet use has become a huge priority for new homebuyers, real estate agents can expect to see growth in well-connected markets. The desire for home office spaces and connectivity for remote education will become essential for white-collar professionals in remote positions.

2. Affecting Property Values

Property values are also starting to reflect this change in demand. For example, a study conducted by Carnegie Mellon University and the University of Michigan found that adding a high-speed fiber-optic connection to a single-family home could increase its value by around $5,500. Of course, added property value depends on location, and some homes simply don’t have access to high-speed servers.

Because an internet connection is becoming so important for residents, some states such as Washington are requiring home sellers to report information on their internet service as part of home listings. This is just one example of how the impact of internet services on property values is starting to affect changes in state and federal policies.

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3. Driving Federal Spending

Traditionally, infrastructure has had a huge role in the real estate market. Areas that are highly connected to businesses tend to drive more sales for homebuyers, investors, and commercial real estate. Because the internet is a form of connection, a significant portion of the latest Federal bill for building American infrastructure focused on improving broadband connections.

Recent legislation has earmarked $42.5 billion for improving internet connections in rural areas and reducing the cost of internet access across all 50 states and U.S. territories. Creating internet infrastructure can be very costly, especially when it’s installed in rural areas with little economic return. However, investing in rural areas will increase their desirability in the real estate market and bring more economic opportunities to rural residents.

4. Growing Commercial Real Estate

To increase internet access across the U.S., commercial real estate will need to expand. For one thing, broadband infrastructure requires industrial warehouses to house the technology needed to support local networks. Access to the internet will create a cycle of growth by attracting more residents, then more networks, and then more residents.

Although remote work has been essential throughout the pandemic, many companies are going to want to reclaim in-person interaction with traditional office spaces. Survey data indicates that while remote work is very popular with American professionals, 55% of respondents want to return to the office either partially or fully.

This means office spaces aren’t disappearing any time soon. These commercial spaces may need to be redesigned to reflect post-pandemic values, including strengthening Internet connections to connect hybrid teams. Plus, the opportunity for commercial development will expand with Internet infrastructure — as broadband access increases, more commercial office spaces will be needed across the country.

5. Highlighting Low Service Competition

One of the weaknesses of America’s current internet infrastructure is a lack of competition even in highly connected areas. Internet service providers benefit from low competition because residents have fewer options, and prices for necessary internet service can remain high. Low competition is normal even in large urban American centers. 

However, residents and real estate agents benefit when their area has multiple options for a strong connection. This is because competition makes a good connection more affordable, attracting more residents and stimulating economic growth. As service providers come under scrutiny and more regulation, the real estate market may benefit.

Why Internet Infrastructure Matters for Real Estate

Access to a strong internet connection is a priority for many homebuyers, so the expansion of internet infrastructure will have major repercussions for the real estate market in the upcoming years. In addition to attracting residents, growing connections to the internet will drive economic growth and the expansion of commercial real estate and investment opportunities.

As internet infrastructure continues to change in response to legislation and organic growth, changes to the real estate market will reflect the opportunities increased connectivity brings to individuals across the nation. 

About the Author: Evelyn Long is the editor-in-chief of Renovated, an online resource for the real estate market. Her freelance writing has been published by the National Association of REALTORS®, Insights for Professionals and other prominent industry magazines.