How a global pandemic inflicts pain on Houston’s economy
Houston’s sluggish office market had been seeing signs of recovery after the oil bust of 2014-16, which put an end to major corporate expansions and left new towers empty.
But now that the coronavirus pandemic has most people working from home and the price of oil has crashed again, the prevailing concern is: Will the people come back?
If a company has systems in place that allow its employees to work from home and be productive, it may reconsider the number of people who need to be at the office.
“We’re going to really have to work hard to get people to come back,” said Andrew Segal, chairman and CEO of Houston-based Boxer Property.
The same could be true for retail real estate. The longer consumers avoid shopping malls and neighborhood centers in favor of ordering what they need online, brick and mortar stores will suffer and many could shut down.
If retail landlords evict tenants that can’t pay rent, they may not be able to find new ones to fill the empty space.
“Owners will have to work with some of those groups because if they don’t, they’ll all go out of business,” said Tim Dosch, principal of Houston-based Dosch Marshall Real Estate.
Hotels have been especially hard hit by the global pandemic. Conferences and business travel have all but disappeared.
Properties in markets with “coronavirus-clusters” could see negative cash flows, according to a report from Fitch Ratings.
“Destination resorts, large conference hotels and those catering to inbound international visitation will see an immediate, outsized effect,” the report read.
On Wednesday, the head of Marriott International said demand at the company’s hotels has fallen considerably as COVID-19 affects the travel industry in unprecedented ways.
The company is reducing staff as it closes food and beverage outlets and, in some cases, entire hotels.
“I think there will be long-term changes that come out of this with such a significant disruption of the economy,” Dosch said.