Posted: June 05, 2012
Oil and gas firms fuel downtown real estateDavid Lewis
America runs on oil and gas, and the oil and gas industry runs on paperwork. Leasing, permitting, exploring, complying: Just about all aspects of the industry require lots of documents.
That means office space, which is why the swiftly growing Colorado oil and gas business today is the leading edge of the commercial real estate market
"The industry’s affinity for financial districts, trophy space, and proximity to like-kind tenants at the center of the region’s ‘oil patch’ results in the oil and gas industry being a major force in Denver’s central business district," according to "The Oil & Gas Industry: Economic Impact on the Denver CBD Office Market," a December 2011 report by Casey Grosscope, associate director of Denver-based Newmark Knight Frank Frederick Ross.
Grosscope calculates that as of the third quarter of 2011, the oil and gas business leased about 3.2 million square feet of downtown Denver office space, or about 15 percent of all the central business district’s office space.
In addition, Grosscope figures oil and gas sector growth equals almost 1.6 million square feet of additional space absorption, with as much as 300,000 square feet of that happening this year and next.
Major players in the industry’s office growth include Houston-based Anadarko Petroleum Corp., which recently expanded into 221,000 square feet of downtown space, and EnCana Oil & Gas (USA) Inc., which occupies about 570,000 square feet in the Republic Plaza building.
Other oil and gas exploration and production companies expanding their downtown presence include: Newfield Exploration Co., MarkWest Energy Partners LP, EOG Resources Inc., Whiting Petroleum Corp., and Noble Energy Inc.
Nor is downtown Denver commercial real estate’s only beneficiary: Exxon Mobil in March announced it was moving about 700 employees of its XTO Energy subsidiary into a new, 52,000-square-foot western regional headquarters office in Englewood.
"Exxon Mobil historically has not had a big presence here in the Denver area," Grosscope says. "Adding a large office here is saying a lot for what Denver has to offer in terms of quality of life, and the other big oil and gas companies that are here in Denver are also a draw."
Nor, for that matter, is the downtown Denver area the only place benefiting from oil and gas company expansion: Noble Energy recently opened a 65,000-square-foot field office in Greeley, while Anadarko Petroleum said it was completing a new 42,000-square-foot office in Evans, Colo., also in Weld County.
Another trend consists of Calgary-based oil and gas companies opening Colorado offices. One example is Calgary’s Crescent Point Energy Corp., which last August opened a downtown Denver office with 15 employees.
"We have a little bit higher vacancy rate here than in Calgary," Grosscope says, noting that square footage costs less here than up north.
"Denver has become more of a national-scale site – and in Calgary’s case, an international place to say, ‘Here’s an option if you can’t find space in your own market.’ The oil and gas industry here is changing the office market to where it is becoming more of a landlord-favored market, where landlords are having the upper hand, where two years ago it was certainly a tenants’ office market," Grosscope notes.
David Lewis is a freelance writer based in Denver.