The early year oil price plummet’s effect on commercial real estate has been largely indirect, as the cloudy economic outlook has seen commercial real estate investors holding off for clearer skies, according a recent report by Reis.
“There was a lot of volatility on the stock market that was driven by tremendous uncertainty over lower oil prices,” Reis economist Barbara Denham tells Bisnow. “Because the stock market was plummeting, a lot of commercial real estate investors, tenants and developers were pausing on their real estate decision-making.”
The direct impact of the oil slump was minimal, with a slowdown in rent growth in some areas—but only 10 out of Reis’s 275 markets had a decline in rents, all of them in tertiary markets.
“Most of the impact is on a slower growth rate as opposed to a decline,” Barbara tells us.
Going forward, if oil stays low, Reis is keeping an eye on markets like Houston, where they’re seeing the biggest impact in terms of office vacancy, but for the short-term it doesn’t seem like the markets will be too upended by oil’s slide.
“The longer we go with this low oil price environment, the more cautious people will be,” Barbara says. “But already we’ve seen somewhat of a correction in oil prices.”
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