We’ll Know This Year How Badly Office Was Hurt
The office sector is being hit by disrupted migration patterns, corporate location strategies, and the re-assessment of office footprints in light of future work-from-home trends. According to Moody's Analytics REIS, the national office vacancy rate hit 17.7% in the 4th quarter of 2020, a 90-basis point increase over the 4th quarter of 2019, which was the last clean quarter immediately prior to the pandemic. While the report notes the increase in vacancy is relatively benign compared to the Great Recession when vacancies rose nearly 200 basis points in 2008, it also notes that the office sector frequently lags other economic indicators and the true economic impact of the pandemic – specifically in the office sector – is yet to be seen. According to the report, office vacancies are expected to rise to 19.4% in 2021, peaking around 19.7% in 2022, which matches the historic high set in 1991 at the peak of the saving and loan crisis. REIS also predicts that asking and effective rents will decline by 4.9% and 7.4% this year, respectively; while these numbers are not record highs, they are nonetheless devastating.
Nearly Half of Workers in Dallas Are Back in the Office
As the city of Dallas relaxed its pandemic restrictions around in-office attendance, the City has seen over 40% of its workforce return to the office. This compares to just 13.4% and 15.9% in San Francisco and New York respectively. The State’s attitude toward the Pandemic, Dallas’ business-friendly culture, and the number of car commuters in Dallas all play a role in this; however, perhaps the biggest factor is the diversified job market in Dallas. Economic diversification within a market can mitigate the effects of an economic shutdown on specific industries, and the return-to-work trend is being seen across various industries within Dallas. Additionally, the fact that the trend is in-part employee driven bodes well for other diversified cities as well as the office sector.