Oil prices help predict office rents
March 12, 2014

Oil Rig

You can thank big oil for skyrocketing office rents, according to a survey produced by a local commercial real estate firm.

Rents should peak over the next one to two quarters before falling back to current levels, according to the Houston office of New York-based Studley Inc., which ranked as the 16th-largest commercial real estate firm in Houston, according to Houston Business Journal research.

Marketwide, across all classes, the average rent price is $25.69 per square foot, according to Studley, with peak prices in the Central Business District, at $34.05 per square foot, the Woodlands at $33.73 per square foot and the West Loop at $29.74 per square foot for the past quarter. But the trend appears to affect the majority of the city.

The report analyzed the relationship between employment, crude oil prices and office rents in the Houston area. The research found that lagged changes in oil prices have more of an impact in Houston rent growth for the short term than changes in office employment growth.

Commercial rents in the Houston office market have reached an all-time high, with asking prices on combined Class A and B space up 12 percent since the end of 2010, Studley reports.

It’s a trend based on supply and demand, and fueled by Houston’s thriving energy market. Oil price changes explain 20 percent of the variability in changes in Houston metro-area employment growth, according to the study.

“A large percentage of Houston’s private sector employment is directly or indirectly involved in the energy industry,” said Steve Biegel, co-branch manager at Studley’s Houston office. “As oil prices rise, the energy industry thrives as do the firms who directly or indirectly support them, driving expanding employment which in turn drives demand for office space.”

Oil prices help predict office rents

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