Energy Market Recovery Outlook Spectrum

Ranking markets based upon their forecasted recovery, it’s no surprise that markets most heavily concentrated with energy tenants are still struggling to return to equilibrium.

Office market

Industrial market

Dive deeper and see what's driving each market:

Dallas Office Market

Energy sector stable, looking to growth and M&A opportunities

Dallas’s energy sector is diverse. The region is anchored by large national and regional headquarters for groups such as Exxon, Pioneer and Kosmos to companies serving the industry like Flowserve, Energy Transfer Partners and Panda Power Funds, as well as smaller players and start-ups.

Fort Worth Office Market

CBD investment continues as XTO spaces begin redevelopment

While energy remains important in Fort Worth, it is no longer the leading economic driver in the office market. Industry-wide M&A activity and rightsizing continues with tenants surrendering excess space while maximizing efficient footprints.

Houston Office Market

Energy tenant activity jumps—yet the specter of shadow space looms

Market fundamentals in Houston’s office market have improved in 2019. Vacancy dropped 140 bps from its peak in mid-2018, absorption is positive, job growth and tenants in the market activity is robust, and new construction is leasing quickly. This trend may be short-lived, however, given some massive blocks of space coming back to market pending a number of large-scale relocations.

Houston Industrial Market

It’s all downstream from here— sector’s success shapes market

Leasing activity from energy tenants is up almost 15 percent from last year as the downstream sector and broader industrial economic drivers continue to strengthen. Deal volume was largely driven by plastics and other refined products, which totaled 1.7 million square feet of transaction activity, followed by oilfield services for 568,000 square feet and pipe/valve/fitting companies for 536,000 square feet.

Pittsburgh Office Market

Energy tenants rightsize as the energy markets remain steady

Major energy tenants in the region have begun to shift their footprint as the energy market remains steady. Total vacancy has fallen over the past year; however, EQT has begun to market a portion of its downtown headquarters for sublease, adding availability in the CBD’s Trophy Class.

Pittsburgh Industrial Market

Energy investment grows as natural gas production increases

Construction projects for energy-related investment peaked in 2017 at $1.7 billion across 15 projects. In 2018, that number dropped to 8 projects for a total of $1.1 billion. The Shell petrochemical facility will continue to support the investment in 2019; however, additional investment from downstream users remains to be seen.

Denver Office Market

Hold, wait and watch: Energy is cautiously optimistic

Rightsizing is the real estate strategy du jour for Denver’s largest energy firms; some have shed 40.0 percent of occupied space. Anadarko renewed and contracted by 45,000 square feet, while Whiting relocated into 100,000 fewer square feet. Subleases made available during the energy downturn have largely been absorbed, but the likes of Encana and QEP have recently brought large blocks of space to market.

Edmonton Industrial Market

Industrial market on slow but steady ground

Energy tenants and landlords remained wary in 2018 due to deteriorating market conditions and cite the provincial elections, which took place in the second quarter of this year, as a point of contention. This delayed decision-making throughout 2018 until after the election cycle ended. Some have even decided to hold out until after the federal election's verdict later this year.

Calgary Office Market

New government brings optimism to Alberta energy market

Capital spending and market access remain the two key restraints for Alberta’s oil and gas products. It is estimated that $20.62 billion in revenue was lost in 2018 due to WCS Oil trading at an average discount of $26.50 to the American WTI product. This differential can largely be attributed to capacity restraints on exporting Albertan products into foreign markets.

Calgary Industrial Market

Economic recovery improves activity for industrial space

Manufacturing in Calgary is weighted toward smaller, distributable oil and gas products. Average lease size for industry-related companies is lower as firms like Sanjel and Tesco have downsized or moved operations elsewhere. Aside from a few manufacturers, much of the large-scale operations were located further north in Nisku and the surrounding Edmonton markets.