Cushman & Wakefield Occupier Research - Oil: The Commodity We Love to Hate

KEY TAKEAWAYS • The shale revolution has introduced a supply dynamic that will likely result in a lower long-term equilibrium price for oil. • Baring a production freeze or unforeseen event, oil prices are expected to remain below $60 per barrel through 2017, and most forecast below $70 through 2020. • The impact of a protracted low oil price scenario is mixed: energy-producing regions struggle while consumers and non-energy producing markets benefit. • Not all energy-producing markets are created equal. While certain office markets, such as Moscow, Aberdeen, Calgary, and Houston have faced significant headwinds due to the oil shock, others are holding up well, and some are even thriving.

• For occupiers, the prolonged oil price rebalancing will create lease negotiation leverage and cost saving opportunities in some markets, but rental pressure in others. • With oil prices remaining low, occupiers in many markets will benefit from lower office build-out costs and lower space energy costs. • The window of opportunity will not remain open for occupiers forever, however. Many energy cities have strong long-term fundamentals, and the energy sector will ultimately recover.

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