January 29, 2018
By Amy Wolff Sorter
The International Council of Shopping Centers’ 7th annual Texas Retail Forecast, which took place on Jan. 26, 2018 in Dallas, focused on retail trends throughout the Lone Star State in 2017, as well as what the next year will bring. Kicking things off was the keynote speaker, James Gaines, chief economist with the Real Estate Center at Texas A&M University.
In addition to getting a laugh by presenting the “Magic 8-Ball,” the 1970s novelty toy as his “crystal ball,” Gaines offered insight to attendees on topics ranging from the recent passage of the Tax Cuts and Jobs Act of 2017, to what’s happening in the housing market, to the Texas economy.
The tax talk pointed out that the reform might be a mixed bag. “The corporate tax rate is getting the most attention, especially from small businesses,” he said. Pass-through provisions could also impact real estate entities, with a possible C corporation conversion rush for the taxation pass-through advantage. However, Gaines acknowledged, “that will take six months to a year to figure out. Right now, everyone is figuring out how to game the system.”
Meanwhile, the housing industry was, in Gaines’ words “sort of recovered.” In other words, he went on to say, a decade after the start of the Great Recession, housing still isn’t all the way back. “Theoretically, housing is around 75%-85% of where it should be,” he said. In terms of interest rates, he thought the Fed would likely continue raising them in 2018, “despite the fact that GDP and inflation aren’t where they need to be.”
Meanwhile, the Texas economy did well in 2017. Gaines explained that, from 2010-2014, Texas was “blowing and going, due to oil and energy.” Though the state’s economy took a hit from the oil price drop, that issue is in the past, thanks to demand for energy from abroad. “The energy sector downturn for Texas is over,” Gaines stated. “It took a hit in 2016, recovered in 2017, and will continue in 2018.” The situation won’t be the same as the boom years of the 2010 to 2014 period, but the energy industry has stabilized, he noted.
As a result, Gaines said the Texas forecast is for 4.1% growth in 2018, versus the 2.9% growth forecast for the United States. “While the United States will do better in 2018,” he added, “Texas will do even better.”
For comments, questions or concerns, please contact Amy Sorter