Energy Firms Take Conservative Office Leasing Approach; SF Space Per Employee Falls 40%
Bruce Rutherford
HOUSTON – (Realty News Report) – Houston’s office market currently has 9.5 million square feet of sublease space available, and energy companies account for roughly 76 percent of that supply, according to JLL’s 2018 North American Energy Outlook report.
Although oil prices have climbed back above $60 per barrel, energy firms are taking a more cautious approach to office leasing—opting for smaller footprints, shorter lease terms, and greater reliance on flexible and co-working space.
“Fundamental changes in the way oil and gas companies operate are affecting real estate markets in energy-focused cities,” said Bruce Rutherford of JLL’s energy practice group.
JLL notes that an intensified focus on cost control and a new “do more with less” mentality are reshaping how energy tenants structure leases and use space.
“When oil surpassed $100 per barrel, energy companies were less concerned about real estate exposure and many pursued ‘large and long’ strategies, securing vast amounts of space for extended periods,” JLL explained. “Today, companies prefer shorter, more flexible leases that reduce risk. Typical approaches include maintaining a core workspace for traditional operations, incorporating expansion and early termination options during the lease term, and retaining access to flexible or co-working space.”
Recent benchmarking shows that, since the oil downturn, some energy firms have cut their space per employee by more than 40 percent.
