Los Angeles, May 16, 2014 – The billions of dollars invested in unconventional energy exploration is dramatically impacting economic and commercial real estate activity in key North American exploration hubs, creating opportunities for both investors and developers, according to a new report from CBRE Group, Inc.
The inherent real estate risks in exploration markets are changing due to evolving technologies and the sheer significance of estimated recoverable reserves, suggesting that the investment horizon may sustain over several decades and not mirror the boom and bust cycle of past conventional plays.
The CBRE report, “Energy Revolution Impact on Americas Commercial Real Estate” explores the real estate impacts of the global energy industry. The energy industry is global by nature, yet can have significant impacts on local economies and commercial real estate markets where there is a concentration of industry activity. While assessing the interactions between this global industry and local real estate fundamentals, two market types emerge—operations and exploration markets—and the energy functions in each present unique real estate challenges and opportunities.
Operations markets (locations that house the headquarters and/or regional operations centers of office-based energy professionals) have experienced tightening office market fundamentals over the past few years. Caracas and Houston, which both have seen 500-basis-point drops in vacancy since 2010, have led this trend.
Exploration activity applies numerous pressures to commercial real estate markets in regions where resources are extracted and/or processed, oftentimes creating a marked imbalance between demand and supply. This dynamic has resulted in high lease rates across all property types, significant development activity and above average investment returns, which is attracting growing interest from the real estate investment and development community.
The report was authored by Jessica Ostermick, CBRE’s Director of Research and Analysis in Denver, Colorado, and Sara Rutledge, CBRE’s Director of Research and Analysis in Dallas, Texas.
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2013 revenue). The Company has approximately 44,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through approximately 350 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.