Collins The Trend Tracker
by Mike Collins
October 27th, 2014

Effect of the Energy Boom on Housing

Much of the focus on the new energy boom seems to be on the potential negative environmental impacts of fracking and other methods. While we must be mindful of the environmental effects of this energy boom, the same can be said of farming, generating electricity or erecting buildings. One aspect of the energy boom that is often lost in the noise of discussion is the extremely positive effect that the energy boom is having and will continue to have on the residential and commercial building segments. Jones Land LaSalle reports that, since 2002, nearly four out of ten jobs created in the U.S. have been related to natural gas and oil drilling. These jobs are growing at over twice the rate of other jobs. Already, nearly 10 million U.S. jobs are connected to the energy sector, a figure that is expected to increase 35 percent by 2035.

The effects of this energy boom will be obvious and widespread. When drilling is first initiated in an area, the focus is on providing housing for drilling workers. Early solutions include workforce housing and hotels, which are typically built using modular methodology. As drilling areas become more established, however, demand for more permanent housing increases. This includes multi-family housing and, eventually, typical single-family housing.

As these drilling operations become more successful and profitable, energy companies will build corporate and regional headquarters. Related businesses and service providers will begin to establish central business districts and office campuses in suburban areas near energy hubs. Each drilling area also supports the growth of office space for the numerous oilfield services providers that are needed. All of this expansion, in turn, creates additional jobs.

As is the case in the larger economy, the health of residential housing in these energy driven markets then drives the growth of the retail environment. Retail vacancy is dropping sharply in major energy hubs like Dallas, Houston, Denver and Pittsburgh.

Another strongly positive aspect of the energy boom is that it is taking place in a wide swath of the nation, from the Dakotas down to Texas and over to Pennsylvania. The East and West Coasts have always had unique drivers that benefitted their markets, including technology, finance and entertainment. The fact that this energy boom is taking place in parts of the country where growth has historically been more tepid should have a stabilizing effect on the overall economy.

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