Cheer Up, North Texas: No Downtick in Office and Industrial Investment

by Colliers International
CandysDirt.com Special Contributors

Almost every news outlet throughout the entire planet, including this one, has focused its attention on the novel coronavirus. Although symptoms are similar to that of the common flu, the more rapidly contagious spread of COVID-19 has shocked nations as it has entered many countries within a short period of time. The global economy has been shaken by this and industries around the world have already been affected. One of these industries is real estate, from both residential and commercial perspectives.

There are many ways in which COVID-19 has already started to affect the commercial real estate industry.

Many companies continue to send their workforces home to prevent the spread of this virus through their offices. This will undoubtedly cause a slowdown in business operations. Just today, several businesses that office on the same street as Colliers International Dallas have already sent their employees home to work. We visited several business headquarters in the Dallas / Fort Worth area, including several executive workspace companies, and have seen an obvious decrease in the number of workers and employees onsite. This has also limited these companies from continuing their expansion of office and industrial space leases to target markets that they projected to complete in Q1-Q2 of the new year.

This will undoubtedly cause a slowdown in job growth and new lease activity, which will, in turn, cause a slowdown in economic growth in major cities.

Get Ready for Higher Steel Prices

We had a conversation with a developer today who builds industrial business parks and he had an interesting take on how Coronavirus has personally impacted his profession:

“I have seen a rise in steel prices due to China being such a large distributor of steel and other building products through import and trans-shipment,” he told us.

Apart from this, he also believes that they will have to prolong construction timelines on current projects due to slowed importation of materials and possible labor shortages.

Less Foot Traffic, More Online Shopping

The high foot traffic at thriving mixed-use centers is subject to the presence of customers who may be affected or exposed by COVID-19. We have all heard about the skyrocket in toilet paper sales, non-perishable foods, and water. Just recently, an uptick in hand sanitizer purchases has caused Amazon’s online supply to exponentially increase in price. Small containers of hand sanitizer have been seen online in some parts of the country for over $100.00. Sales are through the roof, and stores are experiencing a logistical challenge to keep the shelves stocked with these simple items. With this frenzy, the online presence will become a necessity for many consumers: keep an eye out for online sales to increase drastically. Some of the bigger box retail centers and fitness centers will see a decrease in foot traffic, as users have shown concern of contracting the virus in high traffic areas. Just this week a Large Franchise Gym we know has already seen a nearly 50% decrease in customer traffic.

With the Dow Jones down to draconian levels before the economic crisis, investors have flooded Treasury bonds to hedge their portfolios while the global economy reacts to the spreading of the virus through international territories.

Good News Too, Really

The great news for investors — yes, there is some — is the ability to take advantage of low interest rates and look at refinancing options for properties they own. With interest rates on the 10 Year Treasury at 0.88 as of March 12, re-financing may be in an owners’ best interest in order to reposition their portfolio.

And then there is this: we have had several investors call that have been pulling their money out of the stock market and using commercial real estate as an alternative investment.

We can tell you the buyer pool is still very active for investors looking at office and industrial investment buildings. Even though the stock market is taking a beating, we have not seen a downtick in pricing and activity in the office and industrial investment world. We are still dealing with a lot of buyers and sellers from other states including New York, California, Chicago, and others. They remain positive and active especially with interest rates being so low, it makes perfect sense to still invest your money in real estate.

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Dallas-Fort Worth holds strong as one of the top competitive metros in the country for CRE, which reflects on our healthy residential market. This is a first of a series of regular reports on that sizzle, from one of the city’s most tuned-in players: Colliers International. Cody Payne, Austin Edelmon, Blake McCool, and Michael Tran comprise the Capital Markets Group at Colliers International, Dallas.