Earlier this spring, we wrote about the Denver office market feeling the pinch of the downturn in the oil and gas industry. The full post, “Denver Feeling the Pinch: Denver Office Market Finally Feeling the Effects of Downturn in Energy Industry,” can be found here.
The Denver Business Journal recently ran an article entitled, “Energy slump opens up office space in metro Denver” in which attributed current vacant office space in Denver’s central business district to “low energy prices resulting in consolidation and bankruptcy at energy companies with office space in Denver.”
However, National Real Estate Investor (“NREI”) reports that “Denver’s direct vacancy rate is the lowest reported in markets with heavy reliance on oil and gas industries, at 11.9 percent.”
In fact, one of the older partners that I work with recalled that during the oil downturn in the 1980s, entire office buildings in Denver were totally shut down and locked up because it cost more to operate them than was economically feasible for the few number of office tenants at the time.
- The good news is – Denver is currently nowhere near where it was during energy downturn in the 1980s.
Therefore, while the downturn in the energy industry has definitely had an impact on Denver’s office vacancy rate, it is not that bad…after all, Denver has the lowest vacancy rate when compared to other markets that depend on the energy sector for occupants.
What about other cities that are reliant on the energy sector? Well, they also seeing an impact on their office markets.
Houston, Dallas, Tulsa and Oklahoma City have also reportedly experienced significant office vacancies.
In fact, NREI reports that Houston’s office vacancies rose alarmingly and that suddenly the office windows reflect that buildings have “become hollowed out as companies leave.” The NREI reports that, “[n]evertheless, sources says Houston is much better positioned to recover from the shock of the oil price plunge than in previous cycles.”
According to the NREI, Dallas is reportedly getting creative when dealing with the extra office vacancies – “Landlords in downtown Dallas are converting old office buildings into hotels and multifamily properties.”
“Real estate insiders, however, remain optimistic about the chances of a fast recovery,” according to the NREI article.