Success is often the result of taking a misstep in the right direction.
Oct 21, 2016 Champaign Williams, Bisnow
The supply-demand imbalance in the oil industry has led to some of the lowest oil prices since the 2008 financial crisis—and that’s impacting the commercial real estate industry.
Coming out of the recession, Brent Crude peaked at $115.19 a barrel in 2014. But then massive global oil output coupled with a lack of demand triggered a huge price correction that sent crude prices to lows of $26.01 earlier this year, according to Cushman & Wakefield’s latest oil report. Global suppliers have been working to reach a deal to cut supply. OPEC agreed to cut production for the first time in eight years at the end of September, shocking investors. Members of the organization agreed to limit production to no more than 33 million barrels a day, except for Iran, which will be exempt. Since the announcement, crude prices have been on the rise—as of Oct. 20, crude prices have risen to $50.63 a barrel. This news is important for the commercial real estate industry, Cushman & Wakefield chief economist Kevin Thorpe says. “It’s interesting because most people, when they think of commercial real estate they think of job creation, interest rates and cap rates. Though they know oil is impactful, they’re not sure how impactful,” Kevin tells us. “Here are four good reasons why the commercial real estate industry should care about oil.”
1. Low Oil Prices Ultimately Boost Consumer Spending
For every one-cent drop in gas prices, US consumer spending increases by $1B throughout the course of the year, according to C&W stats. More consumer spending essentially leads to a rise in business profits, which boosts job creation and ultimately increases office demand.
- Oil Price Shock Has Had A Huge Impact On Global Office Markets
As mentioned above, increased consumer spending can ultimately result in more job creation—which is the biggest driver behind office demand. Since oil prices began falling in mid-2014, global office demand has increased by 18% and the world economy has created roughly 32 million new jobs in addition to seeing vacancy rates fall by 50 to 100 basis points. Though other economic factors also impact employment and the office sector, low oil prices have been an added help to non-energy-focused companies.
- Oil Prices Also Impact Construction Costs Build-outs are less pricey when oil is down.
“Low oil prices make it cheaper to transport raw materials,” Kevin tells us. “Oil goes into the creation of roofing, and other construction materials—when oil prices go down, it typically means the hard costs goes down.”
- One Negative—Oil-Dependent Markets Energy-centric markets aren’t celebrating, though. Those cities that account for most of the US’s oil production are getting hit hard by plunging prices, leading to slower economic growth and less job creation—though the level of impact varies greatly from city to city.
SEE IT ALL:
Phoenix Commercial Real Estate and Investment Real Estate: investors and Owner / Users need to really know the market today before making a move in Commercial Properties or Investment Properties in Phoenix / Tucson / Arizona, as the market has a lot of moving parts today. What is going on socio-economically, what is going on demographically, what is going on with location, with competing businesses, with public policy in general — all of these things affect the quality of selling or purchasing your Commercial Properties, Commercial Investment Properties and Commercial and large tracts of Residential Land in Phoenix / Tucson / Arizona. Therefore, you need a broker, a CCIM (Certified Commercial Investment Member) who is a recognized expert in the commercial and investment real estate industry and who understands Commercial Properties and Investment Properties.
I am marketing my listings on Costar, Loop-net CCIM, Kasten Long Commercial Group. I also sold hundreds millions of dollars’ worth of Investment Properties / Owner User Properties in Retail, Office Industrial, Multi-family and Land in Arizona and therefore I am working with brokers, Investors and Developers. I am also a CCIM and through this origination ( www.ccim.com ) I have access to marketing not only in the United States, but also international. Click here to find out what is a CCIM: https://en.wikipedia.org/wiki/CCIM
Feel free to contact Walter regarding any of these stories, the current market, distressed commercial real estate opportunities and needs, your property or your Investment Needs for Comercial Properties in Phoenix, Tucson, Arizona.
Kasten Long Commercial Group tracks all advertised apartment communities, including those advertised by other brokerages. The interactive map shows the location of each community (10+ units) and each location is color coded by the size (number of total units).
Walter Unger CCIM, CCSS, CCLS
I am a successful Commercial / Investment Real Estate Broker in Arizona now for 20 years. If you have any questions about Commercial / Investment Properties in Phoenix or Commercial / Investment Properties in Arizona, I will gladly sit down with you and share my expertise and my professional opinion with you. I am also in this to make money therefore it will be a win-win situation for all of us.
Please reply by e-mail firstname.lastname@example.org or call me on my cell 520-975-5207
Walter Unger CCIM
Senior Associate Broker
Kasten Long Commercial Group
2821 E. Camelback Rd. Suite 600
Phoenix , AZ 85016
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