2017 JLL Energy Outlook
7
North America 2017
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Transcript of 2017 JLL Energy Outlook
North America
2017
Key themes
State of energy markets1
Upstream, midstream, downstream update2
Checking in on small-town America3
Future of clean energy4
State of energy markets
Employment
• All markets saw average 1.4% y-o-y increase in energy employment except Calgary
Office
• Despite this, energy occupancy declined across all markets y-o-y – DFW lowest ratio;
Calgary and Houston highest, markets “bouncing along the bottom”
• Sublease inventory declining overall, but still well above long-term averages – Houston
leads nation with 10.4 m.s.f. available
Industrial
• Faring better than office as trends outside energy are resulting in massive absorption
(eCommerce, etc), MFG space most impacted but a smaller proportion of inventory overall
Source: JLL Research
-2.0%
-1.0%
-0.7%
-0.7%
-1.3%
-2.2%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Fort Worth
Dallas
Pittsburgh
Denver
Houston
Calgary
2016 2017
Office markets – energy tenant occupancy
Fort Worth0.8 m.s.f.
Denver1.0 m.s.f.
Pittsburgh1.4 m.s.f.
Dallas2.0 m.s.f.
Calgary3.2 m.s.f.
Houston10.4 m.s.f.
Office markets – sublease magnitude
Upstream, midstream, downstream update
Source: JLL Research
Upstream
• Companies restructuring lease agreements and putting space on sublease market in an
effort to rightsize and streamline operations, though new subleases slowing dramatically
Midstream
• Largely unaffected by downturn, experiencing growth due to rising global demand for
American oil and gas (LNG and petrochem) – affect on CRE not as dramatic
Downstream
• Houston and Pittsburgh major benefactors of investment in the sector, boding well for
market health, especially when factoring other industrial demand
0306090
120150180210240
2013 2014 2015 2016 2017*
Mill
ion b
arr
els
*Through July
U.S. crude oil exports by destination
World
Europe
Canada
China 464,000 jobs to be created by 2025
from chemicals industry
Checking in on small-town America
Source: JLL Research
• Small towns which grew with shale boom left to deal with aftermath of slumping prices and
limited or consolidating E&P activity
• Ratio of “down” markets to “up” is 3-to-1, with “tenant favorable” cities - or those with
decreasing occupancy and activity - representing 101 out of 133 small towns
• No difference in small-town performance when comparing by shale formation – all hit hard
• With oil and natural gas prices low and technology making process more efficient, net new
employment growth and demand for CRE property in the oil patch unlikely in near-term
Landlord favorable Tenant favorable
PopulationAverage size of
towns:
14,143
residents
PopulationAverage size of
towns:
27,735
residents
101 towns
32 towns
Rents
falling
Rental decline
stabilizing
Rental growthslowing
Rents rising
Peaking
phaseFalling
phase
Rising
phaseBottoming
phase
Landlord favorable Tenant
favorable
Future of clean energy
• In 2016, nearly $60 billion clean energy market in U.S.
• Two-thirds of total electricity supply in Canada from renewable sources in 2016
• More than 65% of Fortune 100 companies now have clean energy targets
• CRE occupiers, owners and operators are seeking innovative and emerging
technologies to reduce energy consumption and in turn boost profit margins
• Continued evolution creating new ways to leverage sector in CRE arena, forging
opportunities for owners, investors and tenants
0.10.8
1.2
3.3
1.62.1
2012 2013 2014 2015 2016 YTD 2017
Corporate renewable dealsCapacity (GW)
Eli Gilbert
Senior Vice President
+1 713 425 5903
Rachel Alexander
Research Manager
+1 713 888 4044
