Oil Prices Pose Slippery Issues for Office

HOUSTON-The region’s office market benefits from strong demand from energy-related companies as high fuel prices produce mixed results in the office sector nationwide, according to recent analyses by major brokerage firms. Reports suggest office markets in cities like Houston and Denver, with a high percentage of energy-related firms, are faring relatively well in the current economy, but high gasoline prices could dampen demand for suburban office space and could push development into more of an urban versus suburban direction.

Cushman & Wakefield Inc.’s recent report gives some idea about how the commercial real estate industry is viewing the impact of rising gas prices. It is entitled: “Hunkering Down: With oil prices adding insult to economic injury, real estate is starting to feel the effects.”

The C&W report says the spike in global oil and natural gas prices this year–and the strong likelihood that they will remain above $100 per barrel for some time–”will have an enormous impact on the global economy, holding back growth, redistributing wealth and increasing inflationary pressures.” The effect on the real estate industry will be: “slowing demand, creating new sources of capital and putting upward pressure on building operating costs,” C&W’s team concludes.