Texas Is Riding A High, But Hiring Challenges Could Herald A Low For Future Development
Texas’ tight labor market could be a headwind for future economic growth and threaten the Lone Star State's status as America's corporate relo capital, some leaders of the state’s commercial real estate industry warn.
The pace of corporate relocations has slowed considerably so far this year, with just 12 companies announcing plans to move to Texas in the first half of 2022, far off pace from the 62 that came in last year.
While it is difficult to pinpoint exactly what is driving the decline, one factor could be that companies are concerned they will have trouble hiring once they arrive, Nuveen Global Head of Industrial Graydon Bouchillon said at Bisnow's Texas CEO Summit June 8.
“You’ve got to be able to know that you’re either taking the talent with you or that it’s going to be there when you need to recruit it,” he said. “As tight as our labor market is right now, that question is creeping into C-suites everywhere when they contemplate what a relocation looks like.”
The state’s labor market has tightened considerably since experiencing record-high unemployment during the pandemic, said Aaron Demerson, the commissioner representing employers for the Texas Workforce Commission. Today, Texas’ unemployment rate is tracking just a bit higher than the national average at 4.3%, and the DFW region is at about 3%, he said.
“We were doing the equivalent of one year’s worth of work in one month’s time frame,” Demerson said. “That’s how bad it got here in Texas.”
Recruiting new companies to Texas is important, but keeping those that are already here should also be a priority, Demerson said. The TWC recently launched Texas Interns Unite, an initiative that seeks to connect companies with the state’s up-and-coming talent.
“We need to make sure that we don’t have any organizations making the decision to move out of Texas because they can't find talent,” he said. “We need to be very creative and innovative.”
President of FC Dallas Dan Hunt said 42% of his company’s workforce were formerly interns. Keeping younger employees happy is key to talent retention, and Hunt said competitive pay is only one part of the equation.
“They have different wants and needs,” he said. “When we survey college graduates, the No. 1 thing they care about more than money is time off.”
Multifamily development is thriving in Texas, but labor challenges are a major concern for the industry’s future growth, Greystar Executive Director Stacy Hunt said. The skyrocketing price of homes in the Metroplex and beyond means Greystar needs more employees per each new apartment, a sizable task for a company with more than 4,000 units in development.
“It’s all about jobs in the apartment industry,” he said. “We used to say that it would take maybe six new jobs to fill one apartment — now it’s four new jobs.”
Certain cities in Texas find it simpler to attract companies despite hiring challenges. DFW has a fiercely competitive job market, but it also has a diverse base of industries, which means companies have an easier time filling multiple departments. Population projections show North Texas will grow at a pace faster than the national average over the next 10-15 years, which is also a feather in DFW’s cap, JLL Managing Director Torrey Littlejohn said.
“As [DFW] grows, and we have a lot of diversity in the types of employees we have here and their skill sets, we are seeing a lot of companies decide they want to either plant their flag here or expand in Dallas,” she said.
There is a lot of competition in the job market, and smaller companies have a hard time offering the same perks as bigger firms. But flexibility is a benefit any size company could and should offer, Trammell Crow CEO Mike Lafitte said.
“They’re not staying home because they’re worried about Covid,” he said. “Generally, they’re staying home because they like it, and they don’t want a long commute. They want flexibility.”
Long commutes could exacerbate hiring issues, CEO of The Howard Hughes Corp. David O'Reilly said. Workers in a post-pandemic world are less amenable to sitting in traffic for long periods of time, and in the absence of a strong public transportation network, this will be problematic for office buildings in less accessible areas.
“The development of the far-flung business park, where you drove a long way to get to the office and at lunch you got in your car and drove a long way to find any amenities are gone,” he said. ”Mixed-use urban centers that are highly walkable, that are safe and well-lit and well-amenitized, those are the ones where development should occur and will continue to occur.”
CORRECTION, JUNE 13, 8:31 A.M. CT: Tim Barton was misspelled in an earlier version of this story.
Employee ease of commute was among Bank of Texas’ top considerations when considering where to open its new DFW office, Dallas Market President Mandy Austin said. The average American spends 239 hours and more than $8K commuting every year, compared to 200 hours and more than $6K before the pandemic, according to a 2022 study by Clever Real Estate. Dallas ranks among the top 10 worst cities for commuters, per Clever’s data.
“It’s a real challenge, the commute, but we are addressing that by putting our office locations where the talent is,” she said. “We’ve talked about that being a driving factor for how we develop moving forward.”
While hiring issues may pose a threat to future economic development in Texas, the state is still poised to outperform its competitors, said Will Hendrickson, senior managing director at Granite Properties.
“It’s all relative — you have to look at how Dallas and how Texas stacks up to other markets across the country,” he said. “When you do that comparison, Texas is still a good value. We have great availability of labor, and we are still in a great place to be competitive.