How to Combat Dwindling Oil Prices in Houston with Smart Commercial Real Estate Decisions

Since Houston, Texas is so dependent on oil, the dramatic drop in oil prices since 2015 has placed a serious crimp on the city’s development. Fortunately, the business-friendly tax regulations, recreational activities and solid infrastructure, have made the city a popular destination for emigrants from around the world. Learn how to combat dwindling oil prices in Houston with smart commercial real estate decisions.

Houston Commercial Real Estate Blossoms

Dwindling oil prices and commercial real estate in HoustonAs the energy firms were arriving during the 2000s, Houston construction firms created first-class facilities for their personnel. Houston commercial office space has continued to expand as seen by the numerous tower cranes. “Houston absorbed between 3.9 and 4.8 million square feet of office space in 2015 ….”

In 2016, there are still 22 office buildings under construction. Real estate experts estimate that the sub-lease market may have 10 million square feet available by the end of 2016. As oil prices have declined, residents have been forced to adjust their thinking on a number of subjects, including commercial real estate.

Remember the “Oil!”

Since 1866, Houston, Texas has been at the center of oil and natural gas production in the United States. There are more than a dozen Fortune 500 energy firms headquartered in the town (as of 2013). These firms are involved in oil and natural gas extraction, oilfield equipment and refining.

The latest run of rising oil prices from 2002 to 2008 has increased the amount of Houston executive suites available. In 2002, the West Texas Intermediate (WTI) price for a barrel of oil was about $20; by 2008, the high price of $140 per barrel was reached. Houston was swimming in so much “Black Gold” that not even the Beverly Hillbillies could keep up. Residential and commercial real estate developments were plentiful as people flocked to the city for jobs.

Houston: Fastest Recovery After 2008

Of course, the entire world was hurt by the sub-prime mortgage crisis of 2008; but of all major cities, Houston had one of the fastest recoveries. Part of this was due to the solid tax base, business-friendly environment and oil price stabilization thereafter. Forbes and the U.S. Bureau of Statistics ranked Houston as #1 for “job creation” with a “year-over-year” average of 4.5%.

In 2013, Entrepreneur Prasant Pallikandi chose Houston over Boston because Houston had its “booming energy sector, medical tech firms, and on-fire economy.” In Houston, “There was so much more room to grow.”

The “Greater Houston Partnership” published the winning ways of the city in its April 2016 “The Economy at a Glance” Newsletter. “Houston’s still setting records – Metro Houston led the nation in population growth last year (2015), adding more than 159,000 residents …. Since the April 2010 Census, Houston added more than 736,00 residents [12.45%], the largest gain of any metro area over that period.”

Texas is Business-Friendly

“Talk is cheap” when it comes to “creating jobs.” Every metropolitan area needs to perform this task, but only a few succeed. Success requires a business-friendly philosophy.

The State of Texas has gone out of its way to create a place where growth can be achieved. The “24/7 Wall St” organization calculated that amongst all of the states, Texas had the 4th lowest individual and corporate tax burden. Texas has no state income tax. These business-friendly tax laws have encouraged emigration of the top entrepreneurs. With a spacious Houston executive suite , business owners have a better chance of earning healthy profits.

New York Congestion, Taxachusetts, California “Red Tape” and Chicago Debt Woes.

Chicago debt problems have lead to an average of about 5,000 Chicago residents, leaving the Windy City for Houston each year. Many of these emigrants are well-educated, but frustrated with the ineptitude of the Chicago politicians. In Houston, residents can choose from 337 parks, numerous events at the NRG Stadium and the local “Mahatma Gandhi” district.

Corporations want 1. Low taxes, 2. Few regulations, 3. Well-trained workers, 4. Solid infrastructure and a 5. Booming economy. The City of Houston can fulfill all of these requirements. A Houston executive suite places entrepreneurs in the thick of the action.

But, Isn’t the Energy Sector Down?

After oil prices declined sharply in 2008, they started to recover, see-sawing until they hit a mild plateau around May 2014. Reports of high supply and low demand were rampant with oil tankers lining up at the ports of Galveston, Singapore and Basra. Eventually, the price of oil broke down to hit a low of $39 per barrel in 2016.

An attempt to reduce petroleum production at Doha, Qatar by the oil producing exporting countries (OPEC) in April 2016 failed. Bakers Hughes estimated that the oil rig peak of 1,609 in October 2014 was down to 351 by April 2016. Large banks are cutting lines of credit to the energy firms.

Houston: Port of Call

So, what still remains in Houston as the energy market suffers?

The truth is the City of Houston has done a great job of reinvesting the profits from the oil booms of the 2000s. There are numerous service-oriented jobs in health care, retail and hospitality. Furthermore, the Port of Houston continues to be very active.

For 2015, the Port of Houston was rated as the #1 United States destination for international trade (based on tonnage). It was the largest Gulf Coast container port – handling 68% of 2015 traffic. It also ranked #2 in terms of total foreign cargo value.

Boxer Property Houston Office Space

While the energy field may have declined, it is not going to be in contraction forever. The City of Houston is ideal for expansion or relocation with plenty of great activities for families and a great business-friendly environment. Contact Boxer Property to find your own office space for rent in Houston – so you will be well-positioned to benefit from the next economic boom.