Oil and Gas Risks
Houston owes so much of our success to energy, but our dependence on it could hurt us. At Bisnow’s Impact of Oil and Gas event, Cushman & Wakefield executive vice chairman Tim Relyea said major energy companies’ trend to build their own facilities (particularly driven by low cost of capital) could leave vacant space around town. And as every new building one-ups everything before it, will we see more and more properties go obsolete? He says the fate of buildings from previous cycles is one of Houston CRE’s biggest questions. (They were new and cool and in the blink of an eye everyone's moved on to something cooler: it's our freshman year of high school all over again.) He’s tracking 8.5M SF that could free up soon Downtown, and is especially watching to see how Exxon’s building there will do as Shorenstein renovates and tries to backfill it.
Tim also keeps a close eye on M&A rumors, because those can impact real estate positively or negatively. Luckily, those are trending in our favor more and more. He says oil and gas M&A used to be geared to acquiring assets, and usually resulted in major layoffs. But these days, they’re often about gaining talent. And RSK [UK] Limited managing director Wayne Kelley says Houston is in a wonderfully unique position—we often benefit from M&As as companies retrench and consolidate here.
Forget about “peak oil”—Planning & Forecasting Consultants prez Dale Steffes says in a free market, it’s impossible to run out of oil supply. (Let's just take a minute and thank the dinosaurs for their contributions.) Instead, prices will increase so much that demand will drop and consumers will flock to other sources. He says energy companies spend a lot of time and money figuring out how to get oil, but they really need to improve their efforts to figure out what oil will cost.
We snapped our sponsor Commercial Resource Capital’s Richard Glass, Steve Hazen, Chris Dannat, Bryce Cole, and Jason Dannatt, who just closed a 450k SF BTS and a 127k SF building on Brittmoore. The firm’s two service lines teamed up recently: Richard and Steve sold 10 acres and a building on Beaumont Highway, and Jason arranged the acquisition loan and refi’d the buyer’s existing site. Now it owns 24 acres on Beaumont Highway.
Our sponsor Bury is getting used to working on tight sites—it’s handling the convention center Marriott Marquis and Millennium 2 office tower. The gents tell us the most difficult part of the hotel project is the joint referral process, abandoning existing ROW to put the land together. Bury is also teaming up with PMRG on two office projects, Piedmont’s Enclave Place and PM’s 3737 Buffalo Speedway.
NAI Houston’s Dan Boyles, Jason Whittington, Chris Caudill, Elka Laughlin, and Griff Bandy were looking bright and ready to go for the early hour. Dan and colleague John Ferruzzo recently closed a 20k SF lease for Delta Subsea at Candleridge Business Park. It’ll serve as the firm’s tooling solutions division HQ.