As we end the first quarter of 2021, it’s amazing to think about the abrupt shutdown we experienced around this time last year.
With the sudden closure of offices, schools, and retailers, we were forced to turn kitchen tables into offices and bedrooms into virtual classrooms. Work from home became standard practice for industries that had historically not operated virtually, causing us to rethink how we engaged with one another, toured spaces, and worked with our clients. One year later and we’re beginning to return to a new normal.
With herd immunity and the broad rollout of vaccines, pre-COVID activities are increasing by the day. Diners are filling restaurants, tenants are heading back into the workplace, and summer vacations are being booked. While the shift has been a welcome sight, the habits we fell into during COVID will remain engrained in us for some time.
It will be a messy ride for many companies to safely reopen their offices and entice their employees to come back into the office. We’ve seen the impacts of this in the increase in the amount of sublease inventory across DFW – an astounding 50 percent increase since Q2 2020! Couple with the 5.9 million square feet of negative absorption in the last year virtually wipes away the 5.7 million square feet of positive absorption we saw in 2019. This is the first time since 2010 that the DFW market has seen four consecutive quarters of negative net absorption.
Historically, recessions are slower in scale and do not bring with it an immediate halt to the scale that we saw with COVID. Office leasing activity, whether it be renewals, relocations, or expansions, was nearly non-existent. Seemingly overnight, our economy went from boisterous and healthy to what many viewed as crisis mode. Companies started laying off and furloughing their employees, retail and dining shut their doors, and we were all confined to our homes.
Even a year later, as things look brighter, can we realistically expect that the market will immediately follow? Even as a large part of office tenants look to re-integrate, going back to where we were at the beginning of 2020 will ultimately take more time than we would like.
We can’t deny that we are all coming off of a hard year – both professionally and mentally – and it’s not realistic to assume that the market would pick up where we left off, even as we keep moving beyond COVID. However, DFW has historically bounced back faster than other states in times of recession, and we are optimistic this time is no exception.
While there has been a big step back in demand, we see glimmers of hope on the horizon. As Texas opens back up for business, the DFW office market will too, but just not as quickly as we’d like.
Dan Harris is managing director of Stream Realty Partners’ Dallas office tenant representation team.