HOUSTON – (Realty News Report) – Regional economist, Patrick Jankowski, is senior vice president of research at the Greater Houston Partnership and talks what’s next for economic recovery.
Jankowski oversees the department which provides data analysis and forecasting functions. He has worked for the Partnership, and its predecessor, the Houston Chamber of Commerce, for 36 years. Patrick Jankowski was a guest on THE RALPH BIVINS PROJECT, a new podcast hosted by Realty News Report, Editor Ralph Bivins. To hear the entire podcast Click Here.
Here is an excerpt of Jankowski’s appearance:
Ralph Bivins: Patrick Jankowski knows a lot about what’s happening in Houston. In 2020, the pandemic, hit the economy and Houston lost 350,000 jobs in just two months, April and May. It was the biggest economic hit we ever had. What’s next for this economy, Patrick?
Patrick Jankowski: Let me back up a bit. You said that since COVID set in, Houston lost 350,000 jobs. During the Great Depression, we lost about 122,000 jobs. In the oil bust of the 1980s, we lost about 220,000 jobs. During the COVID recession we lost more jobs than the two worst recessions combined. That’s unprecedented. Since that loss of 350,000 jobs, we have recouped about 215,000 jobs, so that leaves another 135,000 left to recoup. The jobs that have come back in finance, insurance, professional services, utilities, non-durable manufacturing, all are above pre-pandemic levels. Then look at oil, gas, oil and gas services, oilfield equipment manufacturing. They have not recovered any jobs, or they are still losing. Construction falls somewhere in between. What we see here is an uneven recovery. Some sectors are doing well, others will be struggling for years.
Ralph: You don’t bounce back from that instantly. It’s been horrible. Look at the retail sector.
Patrick: When you talk about the retail sector, you have to realize that COVID accelerated trends that were already in place. People were already turning to online shopping with delivery at their house. Let me run off a list of retailer bankruptcies that were filed in the last 14 months: Anne Taylor, Bealls, Brooks Brothers, Catherine’s, GNC, Guitar Center, JCPenney, Neiman Marcus, Lord & Taylor, Lucky Brands, Lane Bryant, Men’s Wearhouse, Pier 1, Stein Mart, Tuesday Morning, Papyrus, Francesca’s and Salsa Sunglasses. This will leave a lot of retail property vacant. And when we talk about retail, we are not talking about individual retailers. You and I know we may see other things going into these spaces, like restaurants, gyms, doctor’s offices, a bank, dry cleaners. You’ll even get churches to pop in there. But these will take a while.
Ralph: You make a good point. Many of these retail chains with brick-and-mortar stores faced competition from Amazon. But when the pandemic hit, then it really accelerated. Some malls may be better off being transformed into multi-family or industrial space.
Patrick: Here’s a classic example. Think of the Westwood Mall. It was built too close to the Sharpstown Mall which, at the time, was really a nice mall. Then, they repurposed it. Now, it has ample parking for employees and it’s a secure facility. One of the challenges: If you’re out driving, and you start on Westheimer at the Loop and go west, some of the strip centers are going very well, for others, there’s nothing in them. For some of these businesses, the best thing is to have them scraped and repurpose the dirt.
Ralph: Maybe you could put up an apartment building, houses for sale, condos, whatever, on the former mall sites.
Patrick: You know, retail has not suffered as much as offices. I see retail recovering a lot sooner than the offices market. I live in the Energy Corridor and I just saw one low-rise office building bulldozed. You’re going to see a lot of product that was built in the 1970s and 1980s becoming obsolete. The office market has been struggling since 2014. And there won’t be major growth in the energy industry, even in Houston. For the energy industry, the high point was December of 2014. More than 300,000 people were employed in the upstream energy industry, in all aspects of it. Now, there are fewer than 210,000.
Ralph: What happens next in the office market?
Patrick: I imagine some of those with vacancy problems won’t make their notes. Some may go into foreclosure. You’ll see bottom fishers coming in and buying property for pennies on the dollar. With the lower base, rents may not have to be high to meet the notes. In the office sector, five years ago, the availability rate was 24%. Now, it’s 29%. There was negative absorption last year and already, in the first two months of this year. You won’t see energy companies absorbing this. You’ll see negative absorption. I wish I saw a clear path out of this. But the office sector is the one I’m most concerned about.
Ralph: One of the things that Patrick does is a very accurate annual economic forecast. He’s come pretty darn close many times. So, Patrick, what do you see for 2021?
Patrick: As to my annual 2021 forecast, I am revising the figures right now. My forecast was a little on the low end. I thought we’d hit a maximum of adding 55,000 jobs. Houston has gone up to 100,000 jobs in a year only a very few times in its history. I’m quite sure we will get to 60,000 jobs. I haven’t finished with those numbers yet. We may even get to 80,000.
There are a couple of mitigating factors. The annual forecast (which was delivered in early December) was based on data that was available in October and November. At the time, the virus was driving everything, and it looked like the economy would be shut down in the first quarter of 2021. We expected COVID cases to spike in March. Actually, they spiked in early January rather than March. I came up with an awful lot about the stimulus package [which has passed in Congress and signed into law.] This has an impact on the recovery as well.
I feel a tipping point will come with the arrival of magic herd immunity.
Houston hit 100,000 jobs in a year back when the energy industry was booming. It’s not going to boom this year; in fact, it will weigh us down. Look at the restaurant business. Houston has lost between 1,000 and 2,000 restaurants. They are not there now. And retail bankruptcies will also be mitigating factors. I feel confident that we’ll hit 60,000 jobs. Jobs will be added in the second half of the year. I think that we have hit the bottom of the pandemic. People can see light at the end of the tunnel. The pent-up demand will show itself this summer.
March 18, 2021 Realty News Report Copyright 2021
File: Houston job growth. Economic Recovery Speeds Up. Patrick Jankowski. Greater Houston Partnership