The Dallas-Fort Worth economy started 2020 strong and on track for a year of continued economic growth after leading the nation in job growth with 115,200 new jobs added in 2019. At the beginning of the year, Moody’s Analytics was forecasting job gains in line with historical averages at 72,200 new jobs. Since their forecast was made, the global economy has experienced two shocks that will pull us away from those baseline projections (1) the onset and spread of COVID-19, and (2) a nearly 70% drop in oil prices since the beginning of the year from $61.14 to $19.27 at the intraday low reached Monday March 30th. When adjusted for inflation, this price is below lows reached during the oil crash of the 1980s.
As this quarter closes, there is still great uncertainty about the ultimate scope and severity of the human and economic toll that the coronavirus pandemic will inflict. Difficult policy choices like stay-at-home orders and travel restrictions are beginning to curb the rate of infection in the jurisdictions that have implemented them. Unfortunately, social distancing measures leave many retail-oriented contact-intensive service jobs like food service workers, hairstylists, and salespersons at the highest-risk of disruption. Headlines of record unemployment claims are certainly jarring to see, but the best medicine for our national economy is to prioritize the health of our population.
With respect to office occupiers, all companies will likely experience stress in the coming months but small and midsize companies, who more often rent in Class B and C properties, may feel the impact more acutely. These firms often do not have substantial cash reserves or enjoy the same access to credit markets as larger companies. Landlords are already fielding numerous requests from existing tenants for rent forbearance and other concessions as companies try to keep afloat into the second quarter. The coworking market, with short-term leases and open environments not conducive to social distancing, is likely to face significant challenges in the short run. We will have to wait and see if this initial shock ultimately pushes tenants to seek more agile workspace in the future. The ability to work productively from a traditional office environment and shed excess capacity may become crucial to weathering the current crisis.