COVID-19 hit the U.S. commercial real estate market (CRE) like a bomb. It was only natural that CRE sales and leases slumped in 2020.
There is a silver lining for North Texans, though. Of all the CRE markets in the U.S., North Texas was impacted least by the COVID-19 pandemic, according to Ryan Salchert of the Dallas Business Journal. Commercial property valuations held relatively steady. And while there was a notable decrease in sales, the slump was half of that experienced at other prime markets like Los Angeles and New York City. And for the first time, Dallas-Fort Worth (DFW)’s CRE has surpassed Manhattan.
Major corporations such as Toyota and State Farm have moved their headquarters to North Texas, creating thousands of jobs. Tech, financial services and defense remain the largest employers, but there are many support services (healthcare) and entry-level/retail jobs available. Demonstrating that a diverse workforce can weather economic downturn well.
DFW's Economic Diversity Proves Stability During the Health Crisis
For the last decade, DFW has been cultivating an impressive diverse workforce. From 2010 through early 2020, nearly 950,000 jobs were added, with six different employment sectors expanding by at least 30% in that time. This economic diversity alleviated the employment shock of COVID-19. While the market's unemployment rate momentarily reached double digits, as almost 410,000 jobs were lost in the spring, it remained below the national average.
Travel and hospitality, personal services, and indoor dining all felt the impact of COVID-19.
Then, the state's early reopening pumped employment recovery as 224,000 new positions added from May through September pushed the DFW unemployment rate back down to 5.4%, per Marcus & Millichap — and where there's growth, there's CRE.
In December 2020, Ryan Salchert of the Dallas Business Journal noted: "While total deal volume year-over-year has decreased by 28 percent in DFW, the region has seen $15.39 billion in commercial real estate deals close as of November."
To put that in perspective, the Manhattan metro has fallen to fourth place with just under $11 billion in total deal volume. That's a 56% decline year-over-year. Los Angeles is holding fast in second place, as it has since 2018, with $14.93 billion in deal volume, followed by Atlanta (another rising CRE star).
So, what does it all mean for commercial property investors in DFW? How can we prepare for the future? While the DFW CRE has weathered the extraordinary COVID pandemic well, more common disasters causing property damage are always a threat in Texas, so being prepared and properly insured is imperative.
Investors coming from the LA market may feel relieved at the availability of property insurance in Texas. California has been struggling with a volatile property insurance market for a few years, thanks to unprecedented brush fires but DFW is by no means free of perils. Texas also has floods, earthquakes, brush fires, and tornadoes. Twisters can manifest suddenly and do a lot of damage in one blow, so multi-peril insurance is a must!
If a disaster does occur, owners of CRE in "The Lone Star State" should be aware that they have the right to hire their own public insurance adjuster when filing a property insurance claim or if they are disappointed with the estimates provided by their insurance company’s adjuster. There is a cost (capped at 10% of the final claim amount, less deductible), but this freedom allows CRE owners to achieve the insurance payments they deserve after a covered loss. Oftentimes, the cost to hire a public adjuster to help prepare, estimate, negotiate and settle your insurance claim is offset by the increased settlement amount they can obtain from your insurance company. A public adjuster works for the policyholder, not the insurance company.
No one wants to imagine a catastrophe, but they happen. And that is why you have commercial property insurance in the first place: to make yourself whole again after a significant loss.
Connect with a Public Adjuster in Texas
If you're looking to expand your CRE empire in Dallas/Fort Worth, follow us on our LinkedIn page. or call our office to stay partnered with a public adjusting firm. Then, should you encounter fire, vandalism, or storm damage, you will have an insurance pro on your side.
Check out our blogs to learn more about CRE investing post-pandemic, and contact us today.