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Texas' recovering office market, supply chain technology and Central American trade Focus of Dallas Feds Southwest Economy

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For immediate release: March 31, 2005

DALLAS—The latest issue of the Federal Reserve Bank of Dallas’ Southwest Economy examines the outlook for Texas’ beleaguered office market, advancements in supply chain management and Central American trade policies.

In “Empty Spaces: Are Texas Office Markets on the Road to Recovery?” associate economist D’Ann Petersen notes that sluggish Texas job growth has led to high office vacancy rates in Dallas, Houston and Austin.

Currently, Dallas leads the country with the highest office vacancy rate, and Houston’s and Austin’s rates are above the national average.

Petersen attributes the weakness in Texas office markets to a lack of job growth in industries that fuel demand for office space and to fewer corporate relocations. She also reports that the Dallas and Austin office markets were hit especially hard by the 2001 U.S. recession, economic fallout from September 11 and the downturn in the high-tech industry.

Nevertheless, Petersen sees positive signs for Texas office markets. Leasing activity is picking up, rents are stabilizing and long-term prospects for job growth in Texas are hopeful.

Houston holds the best prospects for recovery, according to Petersen, while the Dallas and Austin markets may be slower to recover.

In “Supply Chain Management: The Science of Better, Faster, Cheaper,” senior economist and policy advisor Thomas F. Siems states that technological advancements in “getting the right things to the right places at the right times for maximum profit” have contributed to improving the nation’s economic stability and accelerated productivity.

As a result, consumers are able to get more for less and live better than previous generations.

All parts of the supply chain—production, inventory, distribution and payments—have profited from technology designed to streamline operations, according to Siems.

“Successful businesses are reorganizing to take advantage of information technology and rethink the way work is done,” he writes. “The result, of course, is that consumers benefit from higher quality products, a greater selection of goods and lower prices.”

In “Domestic Policy No Match for Trade Stance of Central American Countries,” vice president and senior economist William C. Gruben finds that the countries that would be impacted by the pending Dominican Republic-Central American Free Trade Agreement (known as DR-CAFTA) already have liberalized their trade policies.

With regard to promoting additional trade openness in those countries, Gruben says, “the new agreement is just frosting on the cake.”

However, he also presents evidence that the DR-CAFTA countries have not been pushing their nontrade domestic policies—such as economic regulation, property rights protection, and wage and price flexibility—in a market-oriented direction as quickly as their trade policies.

The author concludes that the DR-CAFTA’s pending trade agreement with the United States will trigger faster growth, but that future policy steps consistent with open markets at home are equally important.

Find the March/April issue of Southwest Economy online at www.dallasfed.org.

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Media contact:
James Hoard
Phone: (214) 922-5307
e-mail: james.hoard@dal.frb.org