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Thursday, April 30, 2015

Dallas: How Will Falling Oil Prices Affect the Dallas Commercial Real Estate Market?

By Greg Langston

In recent months, we’ve seen many negative consequences from falling oil prices on the overall health of the Texas economy. While Dallas seems to have fared better than most of the state in this regard, it’s important to analyze the effects this trend could have on the Dallas commercial real estate market.

Dallas remains more insulated to falling oil prices due to its strongly diversified local economy. While Dallas has a roughly average number of oil workers compared to other regions in Texas, it has a much higher concentration of white collar workers, limiting the effect that falling oil prices has on the local economy. On a similar basis, Dallas’ ability to attract out-of-state workers helps as well: according to the Dallas Morning News, DFW attracts more out-of-state workers than any other region in Texas.

Of course, many Dallas industries that rely on the oil industry can’t help but be affected. For example, the Dallas Morning News points to the business services sector as one that could be potentially harmed by continued low oil prices. On the other hand, there are plenty of Dallas businesses that benefit from low oil prices, as it reduces transportation and manufacturing costs--not to mention freeing up extra cash from consumers.

That being said, Texas as a whole will weather this storm. Richard Risher, president of the Federal Reserve Bank of Dallas, argues that Texas is not likely to fall into a recession due to falling oil prices. The state will certainly see an economic downturn, but with Texas’ economic indicators above most of the nation, this will only bring the state back towards the national average. Similarly, recent weeks have seen a slight uptick in oil prices, though this is mostly due to reduced production throughout the US.

Though falling oil prices have had a negative effect on the Texas economy, Dallas remains relatively insulated from the fallout.

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