For Now, Texas Real Estate Won’t Let The Numbers Kill Their Party
Some Texans groaned and some Texans cheered.
When Governor Greg Abbott announced his plans to fully reopen the state on March 10, the state’s commercial real estate sector was likely shouting everyone a mighty “yee-haw”.
And nearly a month later, that unbridled enthusiasm is still gushing – even if the early dates don’t quite do justice to the rose-tinged atmosphere that is still swirling around in hard-charged real estate circles.
“The impact I’ve seen reopening is probably the biggest impact of my 17 years of service,” said Marcus & Millichap, Senior Managing Director, Investments at Multi Housing Division Al Silva, when speaking about the response from apartment buildings the reopening in Texas spoke.
Greg Abbott, Texas Governor
Silva speculated that with more retail and restaurant workers – many of whom live in hourly-paid apartments – back to work full-time in March, Class B and C multi-family assets decreased in arrears, and general confidence in the space returned.
Silva admitted that it will be some time before official figures emerge to prove just how much housing demand and confidence rose after Abbott’s reopening in Texas.
But, he said, crime peaked last fall and “after the economy, restaurants, bars and everything else reopened, these people went back to work and paid rent, which restored confidence in the multi-family sector.”
Speaking to homeowners, property owners, and management companies, Silva said that Texas landlords believe people are able and willing to pay rent, which signals a return to normal sometime this year.
There is also optimism in the office area of DFW, although according to a new report by Cushman & Wakefield the absorption of space in the first quarter was minus SF2 million with a total vacancy rate of 21.4% in the first quarter.
In the same report, Robbie Baty, executive managing director of Cushman and head of office rental representation, reassured the market that expectations of a full recovery are rising and that the first quarter vacancy rate is just a lagging indicator of a slower 2020 caused by the coronavirus pandemic was caused.
Baty believes it will take a few more months for the vacancy numbers to even out, but added that “the numbers do not tell the story of the positive outlook for the DFW market in the second half of this year”.
In the same Cushman report, managing director Matt Schendle noted an increase in inquiries, tours and suggestions for offices in several DFW submarkets. He also noted the presence of an overwhelming pent-up demand in the market that Cushman believes will fuel office activity in the second half of the year.
Todd Hubbard, the newly appointed managing partner at NAI Robert Lynn and longtime president of its Fort Worth office, agrees that the office is on the rise and is expected to return in the second half of 2021.
Since the reopening, Hubbard said, many office tenants who were once unsure whether to return to the office or use a hybrid office model are gaining confidence in the vaccines and their eventual return to traditional office space.
“I think the biggest thing now is that the decision makers understand and feel comfortable about what I would call the playing field and that they are now able to make decisions,” said Hubbard.
“There have been many companies that have brought the can to their knees and tried to act on the short term until they figured it out. Now that we are seeing a surge in activity, they are more ready and confident to look for a renewal in their Can insert spaces for a typical renovation period. “
Hubbard said the positive impact of tenants buying office space in March after the economy fully reopens won’t be quantifiable until later this year.
“I would expect that from an absorption standpoint, you will likely affect the numbers in the third and fourth quarters,” he added. “Now everybody just makes the decisions again, so come back out and look into space.”
Perhaps the biggest surge in optimism after the Texas reopening has been in retail and dining.
Marshall Mills, CEO of Weitzman, said Monday that first quarter restaurant sales in his company’s real estate portfolio were 10% to 15% higher than last year as vaccinations and the governor’s reopening plan gave people more confidence to eat out .
According to Mills, retail pedestrian traffic has also increased. He said that newer retailers with innovative concepts are taking advantage of this period of optimism to find empty spaces in top-notch shopping malls that were cleared by failed retailers in 2020.
Comparing the first quarter of 2021 to 2020, the number of retail deals completed by Weitzman’s brokerage firm has increased a whopping 36%, Mills said.
“It all really started in the fourth quarter of 2020 because we are a business-friendly state,” said Weitzman. “Things were already starting to warm up and they just moved on.”
Retail rents also remain stable despite some vacancies in 2020 due to a limited supply of new builds, Mills said.
Weitzman brokers are also seeing signs of confidence in early 2021 as a large number of retail and restaurant concepts move into Texas for business.
“There have been a number of new tenants moving to this market. I think we are very optimistic for the rest of the year in terms of traffic, and not just for the buyer [side] but also [when looking at] Leasing in the market, “said Mills.