Commercial real estate, and particularly the industrial real estate sector, began 2020 on fire and with no end in sight. Unfortunately, we were blindsided by COVID-19, and the seemingly endless optimism for commercial real estate in Dallas-Fort Worth finally ran out of runway. Now we’re left to ponder how long this recession will last and how bad it will be—my, oh my, how things have changed.
Texas has been at the forefront of the nation’s longest expansion period, checking economic indicator boxes with the same consistency as the sun rising in the east. For many reasons, the Lone Star State continues to be the most business-friendly state, and therein lies our hope for a relatively quick recovery.
Even recently, with the pandemic in full swing, Elon Musk expressed his frustration with the state of California and specifically named Texas as a potential relocation target for Tesla. The pandemic will slow us down, but not take us down.
We’ve approached a stop sign in the economic road that has forced the industry to pause and take stock of the situation. But, once the coast is clear, we can continue driving forward.
Our house was built on a solid foundation, the kind that can endure a storm.
Also, Dallas-Fort Worth has been a gold star within the state of Texas. Like other Texas cities, DFW benefits from its central location, its low cost of living, and its lack of a state income tax. But the addition of record job growth and economic diversity have combined to make DFW somewhat of a powerhouse over the past decade.
Texas remains a great place to be. Texas will fare well compared to other states as we work through the debris field of this pandemic. To borrow an accounting term, Texas was “Last-In-First-Out” of the last financial crisis, and for the same reasons referenced above. We have been here before.
The economic damage caused by COVID-19 was certainly not doled out evenly. It will take certain companies and some industries longer to recover than others, and some won’t survive. The core strength of our economy will see us through this, though.
One silver lining is that we will come out of this wiser, more aware.
It’s not necessarily a bad thing for individuals, small businesses, and corporations to re-learn how to tighten their belts–so to speak. There’s always fat to trim. It’s also a reminder that all good things come to an end, and that we don’t always see “the end” coming.
My specific discipline is industrial real estate. There will be problems in the supply chain, and many deals have been delayed or shelved, but there is also cautious optimism being displayed by tenants and landlords alike.
As we saw in 2008 and 2009, landlords, tenants, and their agents will work together to restructure the deals that need to be restructured, and we will move on.
Landlords are qualifying Tenants’ requests for relief, though, as tenants are not shy about asking, and Landlords are keenly aware of who needs it and who doesn’t. That all seems healthy to me.
In the end, Texas will be just fine. Texans are resilient. Texans are tough. And as they say, “Tough times don’t last. Tough people do.”
John Brewer is a Principal in the industrial division for Transwestern’s Dallas office.