The North Texas economy finished 2014 strongly, with December payroll jobs up 4.4 percent over the previous 12 months. The metro area unemployment rate was down to 4.6 percent in December and is expected to continue to fall through 2015. The ability of North Texas to attract companies from out of state remains a fundamental positive for the area. However, lower oil prices will weigh on the regional economy in 2015. A direct impact will be felt on employment in oil and gas production and well servicing industries along the eastern and western edges of the metro area. Local communities will also feel the indirect drag of lower oil prices as oil field activity eases. In Dallas and Fort Worth proper, lower oil prices will weigh on job and income growth, but are not expected to throw the urban centers into recession. A diverse regional economy, fortified by marquis industries will provide a buffer against a weaker energy sector.
Oil prices have recently stabilized in the low $50/barrel range. But it is premature to call for a bottom in the oil market. U.S. production is still increasing even as the drilling rig count plummets. We expect oil prices to firm moderately through the second half of 2015 as U.S. production begins to ease and global demand increases.
Commercial property markets in North Texas are supported by a broad range of industries, helping to cushion the blow from lower oil prices. Net leasing for North Texas in 2014 was approximately 5 million square feet, the strongest in 15 years. Downtown Dallas is perking up. In 2014, for the first time in more than 20 years, the Dallas downtown office market generated more leases than suburban markets. Still, downtown Dallas has not seen a new skyscraper since the late 1980s. That may change as plans progress on a 1.75-acre downtown tract purchased in 2013 by Ross Perot Jr. We expect North Texas to avoid a regional recession with the collapse in oil prices, continuing support for office space in Dallas in 2015.
Click here for the complete North Texas Regional Economic Update: NorthTexas2014_Q4.