How oil prices impact commercial real estate

Illinois residents may have noticed that the price of oil dropped from June 2014 to February 2016. At its peak, oil cost $107 a barrel while it only cost $26 a barrel at its lowest point. While a drop in oil prices was good for consumers at the pump, it meant fewer jobs in the energy industry. According to the University of Houston, there were 217,000 job losses during this time period in the United States.

There were another 44,000 job losses in Canada according to the Canadian Association of Petroleum Producers. In addition to those job losses, lower oil prices also had an impact on hotel and commercial occupancy rates. This was caused in cities such as Dallas and Houston by a slowdown in oil-field equipment manufacturing. In Houston, there was 11 million square feet of empty office space. Cities in Canada were also left with empty space because of lower oil prices.

For instance, Edmonton had 6 million square feet of empty office space while Calgary was left with 5.6 million square feet of sublet space. However, many tenants honored their leases or worked out new terms with their landlords. A decline in office space in Houston and Calgary was offset by new demand from the government and from the healthcare sector.

Those who are interested in buying office buildings or purchasing land for development may wish to talk with an attorney. As was apparent with the falling oil price issue, there may be economic matters that could have a direct impact on a particular area or piece of property that an attorney could provide some insight on.

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