Oil Drilling Highlights Need for Certain Properties

HOUSTON – Ralph Bivins of Realty News Report: The latest edition of The Ralph Bivins Project podcast, features an interview with Mike Spears, managing principal of Lee & Associates – Houston.

Industrial buildings for manufacturing – a nearly forgotten product type – are going to be in high demand soon. Why? Drilling new oil wells is going to become prevalent again and manufacturing buildings will be sorely needed, Spears said.

RALPH BIVINS:This is the Ralph Bivins Project podcast and we’re here today in Houston, Texas, the energy capital of the world, where oil is now more than $100 a barrel and gas is nearly $4 a gallon. We’re considering what’s going to happen next. Today, we are lucky to have with us Mike Spears of Lee & Associates- Houston. He’s the managing principal there, and he knows what’s going on in the Houston market. We’ve been talking about energy, and we are thinking that with oil at these prices, something good has to happen. There must be some kind of benefit coming.

MIKE SPEARS:Thank you for having me as your guest, Ralph. Regarding the energy sector, here’s what’s interesting. Oil prices today are about $107 a barrel. This is the highest we’ve seen in a very, very long time.

There was a lot of talk, back around 2014, when we had a bit of a downturn in energy prices. The music stopped. I do most of my work in the industrial real estate sector in Houston and prior to the occurrence of the downturn, we had a lot of fun, it was crazy, for the better part of 12 to 15 years. We enjoyed the growth, not only in the energy sector, but in all the sectors around Houston.

Energy is, far and away, one of the largest drivers in the real estate market. It is probably the biggest business driver individually. We have become much more diverse today. A lot of emphasis today is being placed on the price of oil. Well, that price can and will change – and there’s not necessarily anything we can do to change it. There are a lot of outside factors – such as the Saudis, the Russians and the overall world market.

It is really important to look at the combination of the prices of oil and the rig count. It’s not just the companies that pump oil out of the ground, it’s all those companies that service the industry, the valve companies and the groups that supply the blowout preventors and all the manufacturing in general. Houston’s industrial market is very unique from other markets in the U.S. from the point of view of its focus.

To LISTEN to the Entire Podcast CLICK HERE.

MIKE SPEARS: Here is what’s interesting to me.  I was looking at the statistics from a month ago.  These stats predate the Ukraine War. At that time, we were looking at oil going up close to 90 bucks a barrel. And then I looked at the rig count, it was about 14 percent of what it was the last time the price of oil was at $90 a barrel. Part of the reason is that the technology is better, and companies can pull a lot more oil out of the ground. What these numbers indicate, which is more important, is that for the most part, we are not drilling yet. Despite the fact that the price of oil has increased, we are not drilling. There are certain factors that prevent us from drilling. A lot of companies got burned in the last energy downturn. A lot of them went out of business or were bought out. Right now, everyone seems to be sitting on the sidelines. So, the oil drilling market has been sitting idle for some time, yet we are seeing either one of the hottest – or the hottest – industrial market in Houston. It’s crazy. There is a huge influencing factor – the oil drilling sector — that is not doing anything.

There are a few drilling scenarios coming and we’ll talk about these later. But one thing that this situation tells us. Houston has clearly become more diverse. And despite our traditional reputation, Houston has moved into a spot where it is not as dependent on oil and gas as it used to be. We’re booming right now – and we’re not even drilling. I can’t wait to see what happens when the oil market starts drilling again.

RALPH BIVINS: So, we’ve had this big increase in oil prices in 2022 and a little before that. No one is drilling a lot. When you talk about prices this high, the need so great and the supply so slim on a global scale, sooner or later, drilling will have to happen, and it will open up a ton of demand for these properties.

MIKE SPEARS: At some point, the public will say, ‘We’re really sick and tired of paying $6, $7 or $8 or wherever you’re at for gas.’” We are the politicians’ bosses, and the price of gas needs to be brought down. You can talk about handing out money to lessen the burden of gas prices. The reality is, there’s only one way to bring down the price of gasoline and that’s to produce. There are so many geopolitical factors here. We used to buy oil from Russia, we stopped that. Now, we are trying to convince Europe to do the same thing, because we can deliver right to their doors – especially with all the liquid natural gas (LNG) plants built in the years preceding the current oil price hikes. There are 11 more permits out there, all waiting to be stamped to get started working energy sources. That’s huge. We have more natural gas – and, by the way, that’s clean energy. It’s ready to go – and we can export it.

There’s a lot of power being held in providing energy. We have that ability – and we’ll get back to it. I’m not an energy guy, I’m a real estate broker. But will this help our market? You bet.

Mike Spears’ biography

Having established a remarkable career spanning more than 22 years with more than $1.5 billion in transactions, Mike Spears serves the Greater Houston area, with a focus in industrial property, land and investment sales. During his career, Mike has created and maintained professional relationships with industry leaders.

As the managing principal at Lee & Associates – Houston, Mike oversees daily operations and supervises a team of 40 brokers. Prior to his affiliation with Lee & Associates, Mike spent 15 years with TNRG, serving as the company’s president for seven years, where he participated in more than 700 transactions, including leasing, sales and industrial project development.

In addition to his commercial real estate success, Mike is an active member of the Society of Industrial and Office Realtors (SIOR), an exclusive, nationally recognized organization whose members produce at the top of their respective markets while upholding the highest ethical standards. He also holds the designation of CCIM (Certified Commercial Investment Member) and is a member of the National Association of Industrial and Office Professionals (NAIOP).

April 13, 2022 Realty News Report Copyright 2022

To LISTEN to the Entire Podcast CLICK HERE.

File: Oil Drilling Highlights Need for Certain Properties

NEWS UPDATE: Horizontal drilling permits for new wells in the Permian Basin hit an all-time high in March 2022, with 904 total permit awards, driven by elevated oil prices and production demand, Rystad Energy research shows.

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