The Price of Oil and Houston Office Rents

by CoyDavidson on March 26, 2011

Will Elevated Oil Prices Spike Houston Rental Rates?

Below is a graph plotting the price per barrel of crude oil and the weighted average “Class A”  asking rental rate in the Houston office market from the 4th quarter of 2001 through the 4th quarter of 2010. You will notice the corresponding upward movement in both oil prices and rental rates that occurred beginning in the first quarter of 2007 and the subsequent downward trend in rental rates at the beginning of 2009 after oil prices plummeted.

The premise is while elevated energy prices are not necessarily good for the national economy, it drives expansion and hiring in the energy industry resulting in accelerated absorption of office space in the Houston office market. I should note that while energy plays a huge role in the Houston economy, the city is more diversified than often perceived and natural gas prices have an impact as well.

Crude Oil Price per Barrel vs. Avg. Class A – Asking Rent PSF

Sources: US Energy Administration | Colliers International

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