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JLL: Energy Companies Taking Conservative Approach to Office Leasing This Time Around; SF Per Employee Down 40%

Bruce Rutherford

HOUSTON – (Realty News Report) – Houston’s office market has a 9.5 million SF supply of sublease space and 76 percent of that comes from energy companies, according to JLL’s 2018 North American Energy Outlook report.

Even though oil is back above $60 a barrel, energy firms are being more conservative about leasing office space – leasing smaller spaces with shorter terms and indicating they will rely on co-working space.

“Fundamental changes in the way oil and gas companies do business is impacting real estate markets in energy-centric cities,” said Bruce Rutherford of JLL’s energy practice group.

A laser-focus on cost control and the new normal of ‘doing more with less’ is influencing energy tenants’ lease structures and space use, JLL said.

“When oil prices exceeded $100 per barrel, energy companies were less concerned with real estate exposure. Many executed ‘large and long’ real estate strategies that secured massive amounts of space for an extended period of time,” JLL said. “Today, they want lease structures that are shorter, more flexible, and provide the ability to mitigate risk with options. Typically, this involves a core amount of space for traditional occupancy; expansion and termination options throughout the lease term; and access to flexible or co-working space.”

Recent benchmarking data shows energy firms have reduced their space per employee, in some cases by more than 40 percent, since the oil downturn.

June 6, 2018 Realty News Report Copyright 2018



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