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CRE Opinion

Greg Miller: Count on the Texas Economy to Lead the U.S. Post-Pandemic Recovery

"We’re at the beginning of the end of the pandemic and our economy is poised to take off," says the Henry S. Miller CEO.

History has proven that the U.S. economy is amazingly resilient to horrific events such as those that occurred during the past year.

According to ITR Economics, the recovery of the economy is progressing nicely — consumers are happy and businesses are buying capital equipment. However, there are concerns that excessive government stimulus spending will cause runaway inflation in the future.

Greg Miller, Henry S. Miller

There were lots of winners and losers in the pandemic. Industrial benefitted the most with the dramatic increase in e-commerce. Costar reports that the industrial market is very tight with low vacancies and increasing rents.  Demand for distribution logistics space is at an all-time high. More and more warehouse space is needed closer to the consumer.

The office market is struggling and may take years to recover as employees continue to work remotely until they have to return to work. Many Texas office buildings were already hurting with the struggling oil and gas market. Available office space is near record highs according to Costar.

While the office working environment may undergo fundamental changes, not everyone can work from home and office amenities and networking opportunities cannot be duplicated at home.

Retail real estate was hurt the most by the pandemic. Landlords spent much of the year negotiating rent deferral programs with struggling tenants.  However, some retailers fared better than others. Essential businesses such as grocers and home improvement stores thrived.

The U.S. Census Bureau reports that a record $788 billion was spent online in 2020, a 32 percent increase over 2019, and total annual retail sales (excluding auto, gas, and restaurants) grew by 6.4 percent to $4 trillion.

The International Council of Shopping Centers predicts that 62 percent of all online orders will be fulfilled in physical stores in 2021. Despite ever-increasing e-commerce, 80 percent of all sales occur in physical stores. Successful retailers must continue to increase their omnichannel sales capabilities to supplement their growing online business.

Also according to the U.S. Census Bureau, the population growth in Texas over the last decade far surpasses that of any other state. Furthermore, Texas’ population is one of the youngest in the Union. This is good news for the residential market, because this is the highest demographic for apartment renters, and they will begin purchasing homes in the coming years.

We’re fortunate to live in the great state of Texas. We remain the premier state for doing business, as evidenced by all the corporate relocations. Tesla, Oracle, Hewlett Packard, and CBRE, just to name a few, have recently moved their headquarters to Texas.

Our measured approach to the pandemic appears to be the right one.  We’re at the beginning of the end of the pandemic and our economy is poised to take off.  With one party in control of the executive and legislative branches of the U.S. government, things could become difficult on the national level. However, take comfort in the fact that Texas, if it were a nation, would be the world’s ninth-largest economy based on GDP as reported by the Texas EDC.

Greg Miller is Chief Executive Officer and president of Henry SMiller Companies.

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