office<\/a> markets.<\/p>\nThe 36-page Occupier Research Report, Oil: the Commodity We Love to Hate,<\/em> states that oil prices are expected to remain below $60 per barrel through the end of next year and possibly below $70 per barrel through 2020. One of the main takeaways from a protracted low-oil scenario is that consumers and non-energy producing markets benefit, while oil-producing markets around the globe are facing pressures, some more intense than others.<\/p>\n\u201cWhile the positives from lower oil prices outweigh the negatives in terms of impact on global economic growth, the effects on the office market are more of a mixed bag,\u201d Kevin Thorpe, Cushman & Wakefield\u2019s global chief economist, said in a prepared statement. \u201cMost energy-producing office markets have seen economic slowing and lower occupancy levels, while stronger consumer spending has boosted occupancy virtually everywhere else. For occupiers, the prolonged oil price rebalancing will create efficiency and cost-saving opportunities in some markets, but rental pressure in others.\u201d<\/p>\n
The report notes that, as a group, the world\u2019s largest energy-producing markets are \u201cexperiencing slower economic growth, slower job creation and weaker office sector fundamentals.\u201d The good news is that \u201cnot all energy-producing markets are created equal.\u201d While some markets like Moscow;\u00a0Aberdeen, Scotland; Calgary, Alberta, Canada; and Houston in the U.S.\u00a0have faced problems, others are holding their own and \u201csome are even thriving.\u201d<\/p>\n
In the United States, which provides 13.9 percent of global oil production and is set to surpass Saudi Arabia as the top-producing country, Houston and Oklahoma City are the top oil-centric markets. The energy industry accounts for between 13 and 17 percent of the economy in those cities. Since the drop in oil prices in 2014, they have had some of the highest office vacancy rates in the U.S. Those markets were hit hard because prior to the slowdown construction was booming to deal with increased demand. Unfortunately, new product hit the market after oil prices dropped and demand had slowed. Cities like Dallas and Denver, which have more diverse economies, have seen their office markets hold up much better.<\/p>\n
Canada, which provides 4.8 percent of the global oil production, has also been hit hard by energy sector job losses and office vacancy increases, particularly in the Alberta province. Alberta is responsible for nearly 80 percent of the nation\u2019s energy output and so the sustained low oil prices have hurt many of the cities, including Calgary. The CBD office sector in Calgary has seen 4.3 million square feet of space returned to the market.<\/p>\n
\u201cPrior to the oil price bust, Calgary boasted the highest 15-year CBD office growth rate in the country, with 750,000 square feet absorbed per year. With 2.7 million square feet of new developments underway, the availability rate in Calgary\u2019s premium class A CBD buildings is projected to reach around 27.5 percent by late 2017,\u201d the report notes.<\/p>\n
Latin America, which provides 11.2 percent of global oil production, has had different impacts because of the varied political structures and economic conditions among the countries. Similar to the U.S., those cities that rely heavily on energy for their economies have been hit harder than those with more diverse economies. Caracas, Venezuela, has an office market that is highly influenced by the oil industry, compared to Mexico City and Bogota, Colombia, which have not seen as much impact on their office markets.<\/p>\n
\u201cCaracas, however, sits apart as its economy is dominated by oil. The negative impact of low oil prices on this city\u2019s office market has been compounded by the catastrophic mismanagement of the overall economy in Venezuela,\u201d the report stated.<\/p>\n
In Europe, Middle East and Africa (EMEA), demand for office space by the energy sector is likely to fall in cities that are more driven by the oil industry.<\/p>\n
\u201cEnergy employment has fallen across many EMEA cities and this trend is likely to continue,\u201d James Taylor, partner\u00a0of\u00a0Leasing Tenant Representation for C&W, said in a prepared statement. \u201cMoscow and Abu Dhabi employ the largest number of energy workers, and energy-centric cities like Aberdeen and Stavanger, Norway, are also vulnerable to oil price fluctuations.\u201d<\/p>\n
Moscow, for example, has seen office rents fall by almost a third year-over-year and office leasing and rental growth are also expected to be down in 2017.<\/p>\n
But cities like London, with a diverse occupier base, \u201care likely to benefit from lower oil prices as other industries are buoyed by lower costs of production.\u201d<\/p>\n
Markets in the Asia-Pacific region have also mostly benefited from the lower oil prices, the report found.<\/p>\n
\u201cThe filtering down of lower oil prices to lower food and fuel prices has subdued inflationary pleasures, boosted consumer spending, and given Asian central banks greater scope for monetary easing,\u201d stated David Jones, international director of global occupier services for C&W.<\/p>\n
Office space in cities like Singapore has hardly been affected because energy companies are not large occupiers. But Perth, Australia, has seen its office vacancy rate increase to 17.2 percent from 15.2 percent, much of it blamed on the oil slump.<\/p>\n
In China, job growth slowed sharply in cities like Dalian and Tianjin, but still remained positive. Other cities like Shanghai that aren\u2019t energy-focused have benefited from the effects of cheaper oil and many companies are growing. The report notes \u201csubstantial office supply\u201d is expected to come online with the next two and a half years leading to an increase in space availability in some oil-centric markets.<\/p>\n
\u201cThe window of opportunity will not remain open for occupiers forever,\u201d noted Thorpe. \u201cMany energy cities have strong long-term fundamentals and the energy sector will ultimately recover.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
The latest report from Cushman & Wakefield shows how the drop in oil prices since mid-2014 has impacted the world\u2019s major energy cities.<\/p>\n","protected":false},"author":1068,"featured_media":1004153907,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21808,21783,23891,21742,21747,21786],"tags":[],"class_list":["post-1004153905","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured","category-investment","category-national","category-latest","category-office","category-sustainability"],"acf":[],"yoast_head":"\n
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<\/a>