First up: some housekeeping
This article is about what Dallas might look like in five years because of COVID aftermath. We will do similar articles for Fort Worth/Tarrant and Collin County in the next couple of weeks.
Let’s start here: is commercial real estate dead?
Short answer: probably not, but it’s going to evolve a lot.
The entire “commercial real estate is dead!” discussion is tied to ideas about work and working from home. In Manhattan, for example, where places like JPMorgan own the most commercial space -- it was WeWork for a bit, ha! -- they are calling this a “real estate reckoning.” While there are commercial people tied to Dallas who are nervous, no one seems to be calling it a reckoning just yet.
You need to remember that only about 39% of U.S. full-time workers even can work from home. While some in recent years have called Dallas a potential “next Silicon Valley,” which means more and more tech jobs -- more on that in a second -- the number of potential WFH employees in Dallas is not higher than 50-55%. So, some people are already back at work, and some people will be headed back.
Will the office look different and feel different? Yes. But people will still need brick-and-mortar retail and brick-and-mortar offices, so commercial will not completely die.
About 130.6 million people work full-time, or at least that was the number in the USA in late 2019. 2%, or about 2.4M, worked full-time remotely. Another roughly 8%, totaling about 10.6M, worked remotely 2-3 days a week. So, the overwhelming majority of about 119M people were working somewhere, in some office or location, as a full-time job.
That’s too big a number to realistically shift overnight, even though the pandemic will have far-reaching implications in a few ways, yes.
That 2-3 day/week model is probably going to become more normative; companies might do “A” and “B” shifts. One of the reasons -- a big elephant in the work from home room -- is that while WFH employees are 13% more productive (good!), they’re also less likely to be promoted.
Remember when we had the whole discussion of “health” vs. “economy?” That was a macro-level discussion. The micro-level discussion might be “health” vs. “career stagnation.” Goods and services will only increase in price. If it takes being in front of your boss 2-3 days/week to ensure that you can eventually earn more salary income, many will take that trade-off.
Plus: whenever a scaled vaccine appears, which might be a while, these discussions change rapidly. The good news is that the tech stack was pretty far along, as was the cloud, so a certain percentage of workers have the ability to do this.
In five years, will downtown Dallas be barren? Probably not. But it might be oddly less populous on some days.
What about population?
This is an interesting one. We were supposed to get another 1.3M people between 2020 and 2029. No corporations are actively relocating right now, really, and very few will until Q2 2021, you’d expect. So that number might go down -- but when people do move, North Texas makes a lot of sense. There are jobs, there is an ability to spread out more than on the coasts (density issues), the cost of living still beats NY/CA, and the tax position is friendly to both individuals and corporations. We could see that 1.3M number go up.
The biggest implication here is probably political. Does Texas become “purple” as a result? It was already somewhat headed that way, and this might escalate it.
The second impact would be on housing sales. If you got out of a coastal city with a decent windfall on a sale and immediately put that into a Dallas-area sale, that could drive up prices here. That is possible. True story: a few summers ago, I did this horrible workout with some people at a parking garage. You run up nine stories, do squats and pushups, run down, run back up … like 10 total times. It was miserable. Anyway, one kid who showed up that day had just moved to DFW from Virginia. He got here on a Tuesday. He bought a house, in cash, on Wednesday. Capital gains! So that could happen more, and drive the sale market up a bit.
Overall the market was expected to be stable/bounce/come back anyway, but population shifts might drag some sale prices upward in 2021 and 2022.
What about retail?
Again, not everything can go e-commerce, as much sense as that might make. So there will still be retail. Will there be temperature checks and spacing and other concepts like that? Sure. Probably not in 2025 -- we should have a scaled vaccine by then, you’d reckon -- but in the next 18-22 months? Yes. Some people are fond of saying that certain trends were on the way, and COVID just accelerated those trends. Retail was in a tough spot already, and COVID just accelerated that. It will not disappear -- once this all feels better, people will want to be out and spending money and embracing normalcy -- but there will be shifts, of course.
What about gatherings and meet-ups?
This will take a little while, but the sheer fact is, there’s too much money in baseball, basketball, football, concerts, and the like to keep them shuttered forever. Right now there are debates about safety and TV revenues vs. in-stadium revenues, and those will be fought for another six months if not longer. But will there eventually be Cowboys and Rangers and Mavericks and Stars games with fans? Absolutely. There is no way those won’t come back. The initial form will be fanless, probably, but by 2022 if not sooner, you’d expect fans.
Is the iBuyer model dead for DFW and north Dallas?
Uh yea, probably. At least for the foreseeable future.
Will everything feel weird until 2025?
Nope. We’re already starting to “come back.” It might be good to avoid the “Plandemic videos” for a few more weeks, and we’re still broadly missing random conversations at bars and Luca’s first playoff run, but it will not be loss after loss after loss. We’re coming back.
So, Dallas in 2025?
It will look very similar in many ways to Dallas in 2019 -- overall, less might change than we think -- with more caution, potentially a more liberal population, and some days where downtown on a weekday morning feels a little desolate, but not abandoned completely.
What do you think about Dallas in 2025? Holler at us.