The booming oil and gas industry is driving competition for prime real estate in Denver and a handful of other cities across the United States, according to a new report from Jones Lang LaSalle (JLL).
The Chicago-based commercial real estate brokerage on Wednesday issued its first “Energy Outlook” report (download here), and listed Denver, along with Calgary, Dallas, Houston, Philadelphia and Pittsburgh, among cities expected to benefit from up to 75 percent of the 3.5 million new energy jobs expected to be created by 2035.
The remaining 25 percent of the jobs are expected to be in other geographic regions, such as the financial centers of New York City and Chicago, the report said.
“The rapid growth in domestic oil and gas production has made a large but uneven impact on the U.S. economy,” said Bruce Rutherford, JLL’s international director and energy practice leader.
“In the top energy cities, commercial real estate markets are booming, with growth creating scarcity — and thus a landlord-favorable market. This applies not only to offices, but also to retail, hotel, multifamily, industrial and distribution facilities and sites,” he said.
The firm said energy companies are leasing space in Denver at a “rapid pace,” and that competition is driving rates above the asking price.
“An analysis of energy leasing transactions revealed that energy tenants in Denver’s central business district paid an average of 9.7 percent above landlords’ initial asking office space rental rates,” according to the report.
Much of the commercial real estate demand is coming from industries and companies that support the energy sector, and hiring in the energy sector of spurring demand for multifamily and retail space, the report said.