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Falling oil prices, what does that mean for Houston warehouse space for lease and the real estate ma

Published December 11, 2014 by Eric Hughes #

12/19/14 Update:

$56.52 per barrel at close of trading today.  3% increase.  Now let us do this for a few weeks in a row.  Doubtful.

$55.46 per barrel at 8:32 AM today with morning trading up 2% or so. Interesting that the fall of oil pricing has seemed to slow significantly, albeit for 2-3 days. If pricing settles in the mid $50’s per barrel for more than 3-6 months, Houston will be shedding some jobs and businesses. My customers have already indicated they are putting projects on hold until some reasonable forecasting can be developed on pricing.  Oddly enough, more commercial development was announced in the energy corridor last week for new a new class A office property for lease.

$60.94 per barrel. That is the price of oil at the time of this post. A month ago oil was trading over $77 a barrel. Where will it stabilize? Only time will tell. What is certain is that Houston faces some real challenges in its industrial real estate market. Warehouses have been leasing and selling at all time highs. Development of bulk distribution is also in full swing. Now the scale back of industry absorbing space and rents will start to suffer. Developers of speculative warehouses for lease or sale are now likely to be sitting on empty buildings for some time with other owners facing tenants who may fold up shop and thereby leaving vacant property. The market was probably due for a correction with new freestanding warehouses trading at $75 to $85 PSF for shells on a purchase and $.75 PSF/month+ on rentals. Heavy leveraged owners are the most vulnerable and others with substantial cash reserves may see some opportunities in the market. Businesses looking for space to lease should see some relief in pricing over the next six months.

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Centermark Commercial Real Estate specializes in Industrial and Office in the Greater Houston area. CCRE is the exclusive affiliate broker for WarehouseFinder.NET in Houston, TX.

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