Rising Oil Prices Increase Demand for Energy Office Space, Correspond with Industrial Boom

As oil prices approach $62.oo/barrel, experts predict an eventual rebound for Houston’s office markets. This optimism is tempered by a report from JLL, which warns that “a record overhang of sublease space coupled with permanently changed capital expenditures and space requirements means despite the optimism, recovery for energy-related markets is still a long way off.”

Biznow’s analysis cites that Houston has “experienced declining energy occupancy over the last year, the result of companies rightsizing and streamlining operations to reduce costs and shedding excess space to the sublease market.” Despite increased hiring for white-collar positions, companies are expected to continue to “migrate toward smaller, more efficient office footprints and shadow space being backfilled.”

The industrial market, on the other hand, is experiencing rapid growth and expansion as several big-box distributors have taken interest in Houston’s (limited) warehouse inventory. With growing demand and relatively little spec space, there are many industrial constructions in progress or being planned. Biznow’s Kyle Haggerty added that, “A growing market with little spec space is expected to tighten the market even further as users begin to occupy the space. An uptick in user requirements and sub-5% vacancy will likely push rents. Houston’s industrial sector logged its 69th consecutive quarter of growth in Q3.”

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