Energy recovery cultivates improving real estate fundamentals, U.S. energy production and exports hit record high

HOUSTON, June 27, 2019 – The energy industry continues to adapt amid renewed pressures to do more with less. Despite changing cycles and the unpredictable state of global affairs, JLL’s newly-released 2019 North America Energy Outlook says opportunities abound for companies in each industry segment.

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State of Energy CRE Markets

As oil prices have stabilized in 2018 and 2019, commercial real estate energy markets are experiencing varying levels of demand with the industrial sector outperforming its office counterpart.

In energy-heavy markets like Houston and Calgary, demand for office space during the downturn atrophied completely. However, in the last few quarters, glimmers of positivity have emerged in the hardest-hit office energy markets, and leasing activity has increased among energy occupiers in most markets even as office inventories in these cities remain tenant-favorable.

Industrial real estate continues to outshine its office counterparts within energy markets, as the flight-to-quality trend, well-known in the office market, makes its way into the industrial sector. As such, the report shows that construction activity climbed in three of the four tracked industrial energy markets, with an aggregate rise of over 30 percent year-over-year.

Both leasing activity and energy occupiers in the market are on the rise in Houston and Pittsburgh, as companies specializing in all phases of energy production and manufacturing are sustaining industrial demand in 2019.

Flexibility and the Workforce of Tomorrow

Energy companies are facing significant challenges in attracting and retaining high-value STEM (science, technology, engineering, math) talent in a highly-competitive business environment where virtually every company is a technology company.

As leaders in the oil and gas industry are struggling to replace an aging workforce, the problem has accelerated in recent years, as the number of full-time undergraduate students enrolled in petroleum engineering programs has seen a 42 percent decline since 2015.

Energy companies are seeing the value of modern workplaces as they compete to attract and retain qualified employees,” said Bruce Rutherford, co-lead of JLL’s Energy Practice Group. “In order to appeal to this younger generation, many are following the lead of the high-tech industry in providing a more activity-based design with new amenities and benefits.”

The industry also faces a hurdle of perception as young workers are more drawn to high tech giants whose brands have become synonymous with youth, diversity, flexibility and work-life balance. The energy sector has found itself in an uphill battle in the fight for qualified employees as large numbers of millennials and members of Generation Z who desire to make a positive impact in the world, have adopted the view that energy companies are not positive contributors to the environment.

Uncertainty and Volatility in North American Energy

The United States and Canada are two economic power houses with vastly different energy economies, subject to many variables and pressures from local, regional, and global forces. However, the report states that the U.S. continues to gain market share across the energy spectrum, from shale extraction to renewable power generation, while Canadian energy has struggled to realize meaningful gains amid continued political and environmental opposition.

The U.S. has been a net energy importer since the 1950s, but continued growth in all manner of energy-related exports should see the U.S. becoming a new energy exporter in 2020. The nation already surpassed Russia late last year to become the largest crude oil producer in the world for the first time since 1973.

Energy records mentioned in the report include:

  • The U.S. and Canada are consuming more energy than ever before.
  • U.S. energy production and exports hit new highs in 2018.
  • U.S. natural gas liquid production continues to hit record highs.

Additional content, including a city-by-city analysis of what’s driving each market is available here:

2019 North America Energy Outlook.

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Contact: Rebecca Kiest
Phone: +1 713 598-1876
Email: Rebecca.Kiest@am.jll.com

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