CBRE Global Energy Cities Report

ENERGY SECTOR
TRENDS
GLOBAL ENERGY HUBS
October 2014
Preface
04
Global Energy Overview
06
Aberdeen
Abu Dhabi
Calgary
Denver
08
Dubai
Houston
Mexico City
Perth
12
Singapore
Stavanger
Key Contacts
16
09
10
11
13
14
15
17
18
© 2014 CBRE Group, Inc.
3
ENERGY SECTOR TRENDS October 2014
CONTENTS
ENERGY SECTOR TRENDS October 2014
PREFACE
WELCOME TO THE October 2014 EDITION OF OUR GLOBAL ENERGY CITIES REPORT.
 The aims of this paper are to analyse the performance of office markets where energy companies have
a significant presence, and to assess the impact on activity in these market as well as provide a
detailed insight into 10 of the key energy cities globally.
 The real estate markets covered in this report include several specialist energy-dependent cities where
the sector dominates activity due to proximity to oil and gas fields, as well as international business
centres with multiple sectors and energy sector headquarters.
 The impact of shifts in energy demand and prices on office markets are most pronounced in the
specialist energy-dependent markets, albeit with significant variation in rental trends within this group.
 Global shifts in energy demand towards emerging markets will have a substantial bearing on rental
levels in energy-dependent markets.
RICHARD HOLBERTON
Senior Director – EMEA Research
E: [email protected]
MICHAEL ARMSTRONG
Director – GCS EMEA
E: [email protected]
IAIN LANDSMAN
Associate Director – Aberdeen
E: [email protected]
GLOBAL ENERGY OVERVIEW
The pace and shape of the global economic recovery, important though it is, is only one of many
influences on the future dynamics of global energy markets. In fact there is scope over the next 20 years
or so for many of the longstanding characteristics of the sector to undergo profound and lasting changes.
These include the global pattern of production and consumption: major shifts in the profile of energy
demand with rapid growth in demand from emerging markets especially China, India and the Middle
East; changes in world energy mix including growing use of renewables and new sources with differential
price trends between (and sometimes within) the different sources; energy security in a challenging
geopolitical environment, and balancing the demands of economic and environmental objectives – to
name just a few.
GLOBAL ENERGY CONSUMPTION RISES BY 2.3%
Against this complex background, some longstanding trends do remain intact. Global energy
consumption rose by 2.3% last year, higher than the previous year as mature economies stabilised.
Emerging non-OECD (Organisation for Economic Co-operation and Development) economies again
dominated consumption growth, accounting for 80% of the increase despite, in some cases, lower
economic growth than their own recent experience. Oil still represents the largest component of global
energy consumption but its share, at around a third, continues to decline which is one reason why prices
have failed to accelerate further, even though growth in production failed to keep pace with consumption
growth.
ENERGY SECTOR: THE CLIMATE CHANGE DEBATE
Emerging non-OECD countries now account for the majority of global oil consumption and their role will
expand further, with China and India particularly prominent. On one estimate China is about to become
the world’s largest oil-importing country, and India to become the largest importer of coal within the next
few years. As well as reflecting rapid growth in these markets, this also derives from the growing energy
self-sufficiency in the US. Prospective rapid economic growth in many parts of Africa will also greatly
boost the (currently low) levels of access to mainstream energy sources. These factors are expected to
continue to produce an increase in energy-related CO2 emissions, even in the context of improved energy
efficiency and carbon reduction proposals – thus keeping the sector at the forefront of the climate change
debate.
© 2014 CBRE Group, Inc.
4
CRUDE OIL PRICE ($US), 2000 – 2014
WORLD ENERGY DEMAND, 1990 – 2040
800
140
Quadrillion BTUs
120
100
80
60
600
400
200
40
Q2 2000
Q1 2001
Q4 2001
Q3 2002
Q2 2003
Q1 2004
Q4 2004
Q3 2005
Q2 2006
Q1 2007
Q4 2007
Q3 2008
Q2 2009
Q1 2010
Q4 2010
Q3 2011
Q2 2012
Q1 2013
Q4 2013
Europe
Other OECD
India
Latin America
2040
2025
2010
0
2000
0
20
1990
Brent Spot price ($US)
160
North America
China
Africa
Middle East
Source: Macrobond
Source: Exxon Mobil
CHANGING LANDSCAPE – RENT RISES IN KEY EMERGING MARKET ENERGY CITIES
For property markets whose occupier base is heavily-based on energy producers and supporting functions,
the landscape is changing. The big demand shift that is underway in favour of non-OECD markets will
continue, and increasingly spur changes in the supply-side both in terms of the emergence of new sources
of production and its composition across different energy types. There have already been some dramatic
rises in rental levels in some of the key emerging-market energy cities, notably in Asia and Latin America,
generally well above the growth rates observed in more mature and diverse markets. This report analyses
rental trends in 34 energy-related markets across the world, and profiles ten of them in more detail.
A notable finding is that rent increases in energy-dependent markets dominated by the sector has outpaced
both the average rate of rent growth across the sample, and the broader CBRE global index. This owes
much to the dramatic growth in Caracas where unusual market fundamentals and high inflation have
increased rent significantly. Other emerging markets such as Almaty and Baku have also seen substantial
growth, as have the more mature markets of Houston and Edmonton.
ENERGY CITIES, PRIME RENT LEVELS AND % CHANGE
50
40
30
20
10
0
-10
-20
-30
-40
-50
Caracas
Jakarta
Baku
Manila
Ho Chi Minh City
Houston
Singapore
London
Almaty
Edmonton
Hong Kong
Lagos
Takoradi
UK South East
Denver
Abu Dhabi
Pittsburgh
Aberdeen
Shanghai
Beijing
Moscow
Paris
Dubai
Accra
Stavanger
Port Harcourt
Mexico City
Calgary
Sao Paulo
Buenos Aires
Rio de Janeiro
Perth
Luanda
500
450
400
350
300
250
200
150
100
50
0
Prime rent ($US per sq ft per annum) (lhs)
Y-on-Y % change (rhs)
Source: CBRE
© 2014 CBRE Group, Inc.
5
ENERGY SECTOR TRENDS October 2014
Inter-regional variations in prices will affect not just the role of energy prices in supporting or hindering
economic development, but also the competitiveness and export shares of the major producers. Overall this
looks most likely to favour Asia and the US over Europe, but could also have a major impact on the global
pattern of corporate investment decisions. Allied to a redrawing in the global map of consumption, which
becomes increasingly focussed on Asia, trade patterns also reconfigure with rising flows to Asia not only
from the Middle East but also other sources including Africa, Latin America and Russia.
ENERGY SECTOR TRENDS October 2014
GLOBAL ENERGY OVERVIEW
ENERGY SECTOR – PRIME OFFICE RENTS RANK
CITY
COUNTRY
CLASSIFICATION
LOCAL CURRENCY
END OF Q2 2014
USD RATE PER SQ FT % CHANGE
PA (Q2 2014)
YONY
Caracas
Venezuela
Energy-dependent
Bs 2750.00 per sq. m pm
487.5
Hong Kong
Hong Kong
Business centre
HKD 143.08 per sq. ft. pm
221.5
7.0
London
UK
Business centre
GBP 107.50 per sq. ft. pa
183.7
10.3
Luanda
Angola
Energy-dependent
USD 160.00 per sq. m pm
178.4
-11.1
Beijing
China
Business centre
RMB 750 per sq. m pm
134.6
0.0
Moscow
Russia
Business centre
USD 1200 per sq. m pa
111.5
0.0
Singapore
Singapore
Business centre
SGD 11.4 per sq. ft. pm
108.8
10.7
Paris
France
Business centre
Euro 800 per sq. m pa
101.8
0.0
Lagos
Nigeria
Energy-dependent
NGN 140000per sq. m pa
79.8
6.1
Shanghai
China
Business centre
RMB 425.8 per sq. m pm
76.4
0.0
Dubai
UAE
Business centre
AED 280 per sq. ft. pa
76.2
0.0
Sao Paulo
Brazil
Business centre
BRL 141.92 per sq. m pm
71.6
-4.0
Rio de Janeiro
Brazil
Business centre
BRL 141.73 per sq. m pm
71.5
-5.2
Perth
Australia
Business centre
AUD 800 per sq. m pa
70.1
-5.9
Jakarta
Indonesia
Business centre
IDR 702936 per sq. m pm
66.1
42.4
Almaty
Kazakhstan
Energy-dependent
USD 55 per sq. m pm
61.3
10.0
Baku
Azerbaijan
Energy-dependent
USD 50.0 per sq. m pm
55.7
17.6
Aberdeen
UK
Energy-dependent
GBP 32.0 per sq. ft. pa
54.7
1.6
Calgary
Canada
Energy-dependent
CAD 56.1 per sq. ft. pa
52.4
-3.5
UK South East
UK
Business centre
GBP 28.50 per sq. ft. pa
48.7
5.6
Abu Dhabi
UAE
Business centre
AED 1850 per sq. m pa
46.8
2.8
Houston
US
Energy-dependent
USD 45 per sq. ft. pa
45.0
12.5
Ho Chi Minh City
Vietnam
Business centre
USD 40.0 per sq. m pm
44.6
12.7
Accra
Ghana
Energy-dependent
USD 38 per sq. m pm
42.4
0.0
Edmonton
Canada
Energy-dependent
CAD 42.63 per sq. ft. pa
39.8
8.3
Denver
US
Business centre
USD 33.62 per sq. ft. pa
33.6
3.2
Stavanger
Norway
Energy-dependent
NOK 2000 per sq. m pa
30.3
0.0
Manila
Philippines
Business centre
PHP 1150 per sq. m pm
29.4
15.0
Mexico City
Mexico
Business centre
USD 25.48 per sq. m pm
28.4
-1.2
Buenos Aires
Argentina
Business centre
USD 23.90 per sq. m pm
26.6
-5.2
Pittsburgh
US
Business centre
USD 26.60 per sq. ft. pa
26.6
2.1
Takoradi
Ghana
Energy-dependent
USD 18 per sq. m pm
20.1
5.9
Port Harcourt
Nigeria
Energy-dependent
NGN 25000 per sq. m pa
14.2
0.0
280.0
Average all markets
12.7
Average energy-dependent
25.2
Average business centre
4.5
CBRE global index
1.9
© 2014 CBRE Group, Inc.
6
ENERGY SECTOR TRENDS October 2014
MAP OF MAJOR GLOBAL ENERGY HUBS
Aberdeen, UK
Stavanger, Norway
Moscow, Russia
Calgary, Canada
London & South East, UK
Pittsburgh, US
Denver, US
Paris, France
Baku, Azerbaijan
Shanghai
Houston US
Mexico City
Hong Kong
Manila, Philippines
Caracas, Venezuela
Takoradi & Accra, Ghana Port Harcourt, Nigeria
Lagos, Nigeria
Luanda, Angola
Rio de Janerio, Brazil
Sao Paulo, Brazil
Dubai, UAE
Almaty, Kazakhstan
Ho Chi Minh City, Vietnam
Singapore
Jakarta, Indonesia
Perth, Australia
Buenos Aires, Argentina
Abu Dhabi, UAE
SUMMARY:
 For property markets whose occupier base is heavily-based on energy producers and supporting
functions, the landscape is changing. There have already been some dramatic rises in rental levels in
some of the key emerging-market energy cities, notably in Asia and Latin America, generally well
above the growth rates observed in more mature and diverse markets.
 Rent increases in energy-dependent markets dominated by the sector has outpaced both the average
rate of rent growth across the sample, and the broader CBRE global index. Caracas, Almaty and Baku
have all seen substantial growth, as have the more mature markets of Houston and Edmonton.
© 2014 CBRE Group, Inc.
7
ENERGY SECTOR TRENDS October 2014
ABERDEEN
CITY SNAPSHOT
 Aberdeen became the capital of the European oil and
gas industry with the development of the UK
continental shelf in the early 1970s. The City and the
surrounding region is a key engine for the Scottish
and UK economies and the strength of Aberdeen’s
economy has consistently bucked National and
International Trends.
 Aberdeen’s property market is intrinsically linked to
the fortunes of the energy sector. The stabilising of the
oil price has led to widespread investment by the
energy firms in the UK continental shelf which has
resulted in increased activity in the office sector.
 Take up in Aberdeen offices reached a record
830,000 sq. ft. in 2012 and although 2013 saw it
reduce by 14% this was primarily down to a lack of
ready to occupy stock. Despite a weak first half of
2014 there should be strong uptake in the second
half of the year with a number of large transactions
on build-to-suit properties due to complete.
 Industrial markets are likewise affected with a noted
shortage of ready to occupy space which is leading to
an increase in the number of companies going down
the build-to-suit route.
 Since the start of 2011, 10 of the 25 largest leasing
transactions in the UK outside Central London and
South East have involved energy sector companies in
Aberdeen.
 Prime rents are the highest of any UK regional city at
£32 per sq. ft. and incentives are minimal. Prime
offices rents are expected to reach £33 per sq. ft. by
2015 as prime stock is increasingly squeezed.
 The majority of requirements are from the energy
sector with the main focus on the city centre and the
'Western Corridor'.
 Staff retention and recruitment is key and companies
see workplace quality as an important part of a wider
employee value proposition, however, companies are
also starting to utilise their existing space more
efficiently and work place strategies are being
adapted to reflect this.
ABERDEEN – OFFICE TAKE UP vs CRUDE OIL
PRICE
KEY ABERDEEN MARKET STATISTICS
Take-up
H2 2013
H1 2014
421,823 sq. ft.
212,233 sq. ft.
Long-term half yearly average
take-up
300,117 sq. ft.
Total Market Stock
8,500,000 sq. ft.
Grade A Availability
72,425 sq. ft.
68,948 sq. ft.
1.0%
0.9%
Grade A Vacancy Rate
RECENT ABERDEEN TRANSACTIONS
TENANT
ADDRESS
DATE
Statoil
Prime Four,
Kingswells
Sep 2014
45,000 (option for an
additional 45,000)
SIZE (SQ FT)
Aker
Solutions
Aberdeen
International
Business Park, Dyce
Aug 2014
335,000
Wood
Group
Hareness Road,
Altens
Aug 2014
215,000
One Subsea Prime Four,
Kingswells
Jan 2014
35,000
EnQuest
Palmerston Road,
Harbour
Aug 2013
120,000
Premier Oil
Prime Four,
Kingswells
May 2013
63,000
GDF Suez
North Esplanade
West, Harbour
May 2012
40,000
Grade A Space
Aberdeen
The Point
The Silver Fin Building
Rubislaw 7
Marischal Square
Total Available Space
(sq. ft.)
80,000
132,611
105,500
175,000
Standard Flr Plate
(sq. ft.)
12,000
13,003/17,136
24,805
9,600/26,600
Q4 2015
Q4 2016
Q4 2016
Q1 2017
Available
© 2014 CBRE Group, Inc.
8
ABU DHABI – OFFICE TAKE UP vs OIL PRICE
600
Take-up ('000s sq. ft.)
140
120
100
80
60
40
20
0
500
400
300
200
100
Take-Up (sqft)
2014
2013
2012
2011
2010
2009
 Abu Dhabi is the seat of government in the UAE and
the largest of the seven Emirates. It occupies
approximately 80% of the UAE and holds
approximately 94% of proven UAE oil reserves,
making it the seventh largest holder and producer in
the world. It ranks 11th in the world for gas.
 The government closed out long held concessions in
early 2014 making way for new partners in
developing the industry and increased interest from oil
majors is expected in the upstream business.
 The Abu Dhabi office market shows weak, but stable
demand levels leading to a stagnation in commercial
rents, despite the on-going drive for economic
diversification, making the economy less dependent
on oil, which still accounts for over 50% of the
Emirate’s GDP.
 There is mixed availability of commercial space across
the market, where potential occupiers remain focused
on prime Grade A stock, sustaining rents at the top
end of the market.
 New space requirements from professional services
firms have played an important role in elevating
overall office demand levels during the quarter. As
has the recent growth in sectors such as finance,
hospitality, aviation, healthcare and tourism, where a
number of companies have been found to be
upgrading or expanding their footprint due to new
headcount requirements. Smaller office units, less
than 5,000 sq. ft., remain the most popular whilst oil
and gas, government and semi-government continue
to be key demand generator for larger offices (excess
of 10,000 sq. ft.).
 A total of 9,000,000 sq. ft. of new office
accommodation will be delivered over the next 24
months. Grade A building rental levels typically fall in
the range of AED150–195 / sq. ft. / annum.
However, there were some deals observed which are
higher than the typical market average.
Oil Prices (US$/barrel)
CITY SNAPSHOT
Average Oil price (US/barrel)
KEY ABU DHABI MARKET STATISTICS
Take-up
H2 2013
H1 2014
717,119 sq. ft.
914,932 sq. ft.
Long-term half yearly
average take-up
574,480 sq. ft.
Total Market Stock
39,396,000 sq. ft.
Grade A Availability
3,957,000 sq. ft.
3,890,000 sq. ft.
10.00%
9.90%
Grade A Vacancy Rate
RECENT ABU DHABI TRANSACTIONS
TENANT
ADDRESS
DATE
SIZE (SQ FT)
ZADCO
The Landmark
Under Offer
Wood
Group
International Tower
2013
19,000
TAQA
Sowwah Square
2013
60,000
Mubadala
Petroleum
Sowwah Square
2013
75,000
170,000
Grade A Space
Abu Dhabi
The Landmark
Total Available Space
(sq. ft.)
Standard Flr Plate
(sq. ft.)
Available
Sowwah Square
International Tower
Etihad Towers
170,000
950,000
150,000
30,000
17,000
19,000
19,000
10,000
Q3 2014
Q3 2014
Q3 2014
Q3 2014
© 2014 CBRE Group, Inc.
9
ENERGY SECTOR TRENDS October 2014
ABU DHABI
2,000
1,500
1,000
500
0
-500
-1,000
Q1 2014
Q3 2013
Q1 2013
Q3 2012
Q1 2012
Q3 2011
Q1 2011
Q3 2010
Absorption
Q1 2010
Q3 2009
$105
$90
$75
$60
$45
$30
$15
$0
Q1 2009
 Driven by an energy based economy, Calgary remains a
cornerstone of the oil and gas industry in North America.
With the emergence of the high tech, financial,
environmental and professional services sectors,
commercial real estate in Calgary is in high demand.
 According to Calgary Economic Development, the energy
sector accounted for 76,900 jobs in 2012, representing
9.7% of Calgary’s total employment. Furthermore, the
energy sector contributed $33.8 billion to Calgary’s gross
domestic product in the same year. To illustrate the
significance of the energy sector to Calgary’s economy,
2012 marked a year in which Calgary led the Canadian
economy with the highest labour force productivity, the
highest labour force participation rate, the lowest
unemployment rate and the highest wages and salaries
per employee. In response to this, over the last ten years
Calgary’s population and labour force has been
expanding at roughly three-times the national rate.
 The energy industry is an essential growth engine for
Calgary’s office market. Calgary has seen extraordinary
growth in the number of head offices over the past 10
years, increasing from 84 in 2003 to 135 in 2012,
according to Calgary Economic Development. Calgary is
second only to Toronto in the absolute number of head
offices in Canada, but on a per capita basis, Calgary
boasts 10.3 head offices per 100,000 people compared
to 4.1 per 100,000 in Toronto. 74% of the head offices
in Calgary are from the energy sector, most of which are
situated in the central business district (CBD). There is also
a major clustering of engineering firms dominating the
office market along the southern fringe of downtown
Calgary, commonly referred to as The Beltline.
 This energy concentration has also put Calgary’s Class A
office space at a premium relative to other Canadian
cities. As of Q2 2014, Calgary’s downtown Class A office
space commanded the highest rent for CBD office space
in Canada at CDN$35.28 per sq. ft., thus representing a
34.3% premium over the national average. Suburban
Class A office space was also the most expensive in the
country at CDN$24.82 per sq. ft., or 36.9% higher than
the national average.
WCS Oil Price (per barrel)
CALGARY – ABSORPTION vs. OIL PRICE
CITY SNAPSHOT
Net Absorption ('000s sq. ft.)
ENERGY SECTOR TRENDS October 2014
CALGARY
Western Canadian Select (price/barrel)
KEY CALGARY MARKET STATISTICS
Absorption
H2 2013
H1 2014
-1,216,354 sq. ft.
423,292 sq. ft.
5-year half yearly average
Absorption
501,241 sq. ft.
Total Market Stock
39,306,872 sq. ft.
Downtown Office Vacancy Rate
9.1%
10.0%
RECENT CALGARY TRANSACTIONS
TENANT
ADDRESS
DATE
SIZE (SQ FT)
Cenovus
Brookfield Place
Jul 2014
TransCanada
Fifth Avenue Place Feb 2014
299,000
TransCanada
Telus Tower
Feb 2014
150,000
Husky Energy
Western Canadian Jan 2014
Place
925,000
Harvest
Operations
Scotia Centre
Jan 2014
147,000
Inter Pipeline
Fund
Calgary City
Centre
Dec 2013/
Jul 2012
168,000
Long Run
Exploration
Eau Claire Tower
Oct 2013
100,000
Brion Energy
707 Fifth Street
Jul 2013
250,000
Athabasca Oil
Penn West Plaza
May 2013
149,000
MEG Energy
Eau Claire Tower
Mar 2013
296,000
Imperial Oil
Quarry Park
Sep 2012
821,000
1,000,000
Grade A Space
Calgary
Bow Valley Square lV
Total Available Space
(sq. ft.)
Standard Flr Plate
(sq. ft.)
Available
Bankers Hall West
Fifth Avenue Place West
Centennial Place East
198,701
107,334
394,699
197,188
11,954
21,500
23,000
21,600
Q1 2015
Q1 2015
Q2 2016
Q4 2016
© 2014 CBRE Group, Inc.
10
CITY SNAPSHOT
DENVER – ABSORPTION vs. OIL PRICE
 Denver is one of North America’s key energy markets and
uniquely has representation from both oil and gas
companies as well as the renewables industry. Denverbased energy exploration companies are involved in oil and
gas extraction in the Bakken, Niobrara, Marcellus, Utica
and various Canadian plays. Companies locate in Denver
for its central location among energy resources and high
quality of life.
 The recent shale boom has contributed to positive
absorption, rising lease rates and tight vacancy rates in
Denver during this cycle. The average asking lease rate
increased for the 11th consecutive quarter in Q2 2014,
reaching a record $22.53 per sq. ft. and posting a 4.1%
year-over-year gain. The market recorded direct vacancy of
13.4% in Q2 2014, down 32 basis points year-over-year.
 While the prior energy boom directly supported the
construction of several of Denver’s largest office assets, the
recent energy revolution has more indirectly impacted new
construction activity by improving market fundamentals. A
total of 2.6 million sq. ft. of space is currently under
construction.
 In 2012 and 2013, energy companies leased 1.2 million
sq. ft. of office space in the Denver market, accounting for
12.5% of total demand by sq. ft. Denver’s oil and gas
tenants are largely concentrated in the downtown
submarket, which significantly boosted downtown market
fundamentals. Eighty-eight percent of the 1.2 million sq. ft.
leased by energy companies in 2012 and 2013 occurred
downtown and energy industry leases accounted for 33.1%
of total sq. ft. leased downtown. Even more notable, energy
accounted for 67.7% of the positive absorption downtown
between Q1 2011 and Q2 2014.
 The multi-tenanted buildings downtown with the highest
concentration of energy occupiers are Granite Tower,
Republic Plaza, World Trade Center II, 1700 Broadway,
World Trade Center I, and 1001 17th Street. Encana,
Anadarko, Newfield Exploration and Whiting Oil and Gas
are the largest energy tenants in Denver. The current
footprint estimate for downtown energy tenants is 5.0
million sq. ft.
140
$1,000
120
80
0
60
40
-$500
20
Absorption (RHS)
2014
2013
2012
2011
2010
-$1,000
2009
0
US$ 000's
$500
100
Oil Price, $, mid-quarter (LHS)
KEY DENVER MARKET STATISTICS
Take-up
H2 2013
H1 2014
1,166,825 sq. ft.
829,360 sq. ft.
Long-term half yearly
average take-up
298,249 sq. ft.
Total Market Stock
Class A Availability
108,678,913 sq. ft.
8,906,640 sq. ft.
9,198,566 sq. ft.
11.6%
12.0%
Class A Vacancy Rate
RECENT DENVER TRANSACTIONS
TENANT
ADDRESS
DATE
SIZE (SQ FT)
Discovery Natural
Resources (f/k/a FIML
Natural Resourses)
410 17th St
Jun 2014
31,277
Liberty Resources, LLC
1200 17th St
May 2014
21,387
Renewable Energy
Systems Americas, Inc.
10901 W
120th Ave
Mar 2014
38,999
DA Davidson
1550 Market St Mar 2014
20,693
QEP
1050 17th St
Mar 2014
40,000
Resolute Energy
Corporation
1700 Lincoln
Jan 2014
56,156
Pioneer Natural
Resources
1401 17th St
Jan 2014
39,632
Grade A Space
Denver
1144 Fifteenth
Total Available Space
(sq. ft.)
Standard Flr Plate
(sq. ft.)
Available
1401 Lawrence
Republic Plaza
1801 California
631,785
298,000
110,455
586,905
24,631
22,198
22,875
25,000
Immediate
Immediate
Immediate
Immediate
© 2014 CBRE Group, Inc.
11
ENERGY SECTOR TRENDS October 2014
DENVER
ENERGY SECTOR TRENDS October 2014
DUBAI
CITY SNAPSHOT
DUBAI – RENTAL vs. SUPPLY
 The discovery of oil in 1966 was a defining moment in
Dubai’s history and was the leading factor in Dubai’s rapid
development into a modern and internationally recognised
city.
 Within the Untied Arab Emirates, Dubai has the second
highest oil reserves, however, these are significantly
lower than those seen in the capital Abu Dhabi. Dubai’s
oil reserves have reduced over the past decade and are
expected to be exhausted within the next 20 years.
Furthermore, the total contribution to the GDP from the
Oil and Gas sector in 2013 was only 1.5%. As a result,
Dubai has pursued other revenue streams and looked to
diversify income generation across a diverse range of
business sectors.
 With Dubai now being recognised as a global business
hub and a gateway to the Middle East, it is the city of
choice for most companies regional headquarters. All
the major international oil and gas companies follow
this trend and have an extensive presence in Dubai.
Given the ongoing unrest in many parts of the Middle
East, Dubai’s ability to offer unrivalled political stability,
infrastructure, amenities and services (schools,
healthcare, housing and retail), providing a quality of life
that is attractive to workers and residents. Therefore, we
do not envisage this position changing in the near
future.
 The Dubai office sector has emerged from the downturn
over the last 24 months with greater stability seen across
the wider market. There has been strong recovery across
certain sub-markets where many of the oil and gas
companies are located i.e. TECOM, DAFZA, JAFZA and
the DED Central Business District. This trend has been
driven in part by a flight to quality, with the majority of
occupier movements comprising office upgrades,
expansions and consolidations into higher quality
buildings in prime locations. Office rental rates in these
areas have increased, with further growth expected over
the foreseeable future, due to the limited supply of good
quality office buildings.
 We expect to see continued strong activity within the Oil
and Gas sector, with many regional projects being
managed from Dubai. Improving economic conditions in
the UK, Europe and US will provide further impetus to
regional market activity, which will encourage foreign
business to enter the region and / or expand their
existing operations.
90
450
60
300
30
150
0
0
2009
2010
2011
2012
2013
2014
Office stock' million sq ft (LHS)
Prime Rents (AED/sq ft/annum) -(RHS)
KEY DUBAI MARKET STATISTICS
H2 2013
H1 2014
Total Market Stock
82,430,000 sq. ft.
83,680,000 sq. ft.
Grade A Availability
14,010,000 sq. ft.
13,380,000 sq. ft.
17%
16%
Grade A Vacancy Rate
RECENT DUBAI TRANSACTIONS
TENANT
ADDRESS
DATE
SIZE (SQ FT)
Sinopec
Dubai World
Central
May 2014
10,000
Dragon Oil
Enoc House
Apr 2014
50,000
Amec
Business
Central Towers
Nov 2013
10,000
Confidential
Convention
Tower
Sep 2013
15,000
Schlumberger
Burj Daman
Apr 2013
60,000
Confidential
One Financial
Tower
Mar 2013
15,000
Lukoil
Dubai Property
Group HQ
Mar 2013
50,000
Grade A Space
Dubai
Bamboo Building
Total Available Space
(sq. ft.)
Burj Al Salam
1 JLT
JAFZA One
210,000
550,000
565,000
1,000,000
25,000
11,500
21,500
14,000
Licensing
On-Shore
On-Shore
Off-Shore
Off-Shore
Available
Q4 2014
Immediate
Q4 2015
Q2 2015
Standard Flr Plate
(sq. ft.)
© 2014 CBRE Group, Inc.
12



$120
$100
$80
$60
$40
$20
Net Office Absorption
Q1 2014
Q3 2013
Q1 2013
Q3 2012
Q1 2012
Q3 2011
Q1 2011
Q3 2010
Q1 2010
$0
Oil Price (WTI, $/bbl, Qtr Avg)
2,000
1,500
1,000
500
0
-500
-1,000
-1,500
Q3 2009

Houston is often referred to as the 'Energy Capital of the
World' for its concentration of firms and employment across
all industry business lines and has more recently become
the centre for applied technology in the sector. The
metropolitan area is home to 3,700 energy-related
establishments, including headquarters or major operations
of 19 of the top 25 publicly traded oil and gas exploration
and production firms in the U.S., such as ConocoPhillips,
Chevron and Baker Hughes.
The industry’s presence in Houston accounts for more than
40% of total energy-related employment in the U.S. and
has been an important driver for the market’s strong
employment and office market performance in this cycle. As
of July 2014, Houston has added almost three jobs for
every one lost in the recession to achieve a new total
employment peak of 2.9 million and the expansion
continues at twice the national rate. One-fourth of the new
jobs added since 2010, or about 105,000, were created in
energy-related sectors.
With support from energy company expansions, net office
absorption has averaged 1.1 million sq. ft. per quarter
since 2011. During the first half of 2014, energy-related
companies were responsible for 1.5 million sq. ft. of net
absorption in Houston. In terms of leasing activity, the
market closed a total of 5.6 million sq. ft. in 462 leases the
first half of 2014 with 28% of the leases done by energy
companies, representing 2.7 million sq. ft. of space.
As a result, office vacancy has nearly recovered from the
recession and rents are rising across the market. Class A
rents continue to test new highs, averaging
$37.69 per sq. ft. market-wide in Q2 2014. In addition to
tight fundamentals, tax increases from higher property
valuations are putting upward pressure on rents.
Given the large number of energy companies with
operations in Houston, most submarkets have at least a
minor energy presence. The greatest concentration of
energy companies, however, can be found in western
Houston submarkets, such as the West Loop, Katy Freeway,
Westchase, and the aptly named, Energy Corridor.
Predictably, market fundamentals are tight in these areas,
which also represent more than 40% of the
16.3 million sq. ft. of office construction underway in
Houston. To the north, there is a growing cluster of energy
company activity with the more than 3 million sq. ft., 20building campus underway near The Woodlands.
Q1 2009

HOUSTON – ABSORPTION vs. OIL PRICE
Net Absorption ('000s sq. ft.)
CITY SNAPSHOT
Oil Price (WTI, $/bbl, Qtr Avg)
KEY HOUSTON MARKET STATISTICS
Net Absorption (sq. ft.)
H2 2013
H1 2014
3,187,325
2,819,137
Long-term Half Yearly Average
Net Absorption (sq. ft.)
1,238,366
Total Market Stock (sq. ft.)
193,551,155
197,038,507
Class A Availability (sq. ft.)
6,907,122
7,670,266
7.3%
7.9%
Class A Vacancy Rate
RECENT HOUSTON TRANSACTIONS
TENANT
ADDRESS
DATE
Energy XXI
1021 Main
May 2014
SIZE (SQ FT)
171,016
Memorial
Production
500 Dallas Street
May 2014
111,566
Motiva
Enterprises
500 Dallas Street
May 2014
109,373
Sanchez Oil
and Gas
1000 Main Street
May 2014
80,752
Kiewit Energy 3831 Technology Forest
May 2014
70,561
FMC
12707 North Freeway
Technologies
Apr 2014
151,372
Key Energy
1301 McKinney
Apr 2014
89,011
Air Liquide
9811 and 9807
Katy Freeway
Jan 2014
222,210
Cheniere
Energy
700 Milam
Dec 2013
167,446
Statoil
CityWest Place
2 and 4
Oct 2013
581,000
Grade A Space
Houston
Energy Center II-IV Eldridge Place (One – Three)
Williams Tower
Fulbright
Total Available Space
(sq. ft.)
27,259
64,113
51,182
104,494
Avg. Flr Plate
(sq. ft.)
27,024
22,490
22,000
24,452
Q3 2016
Immediate
Immediate
Immediate
Available
© 2014 CBRE Group, Inc.
13
ENERGY SECTOR TRENDS October 2014
HOUSTON
MEXICO CITY – OFFICE TAKE UP vs OIL PRICE
350
120
300
100
250
80
200
60
150
40
100
20
50
Take up (sq.ft)
H1 2014
2013
2012
0
2011
 Mexico is among the world’s top oil producers and
has the world’s fourth largest recoverable shale gas
reserves: but oil and gas production has declined
over the past decade, due to lack of investment and
greater need for industry expertise. Oil production has
fallen from 3.4 million barrels per day in 2004 to 2.5
million barrels today.
 Until now, private companies were only allowed to
hold service contracts with Pemex. The recently
approved reform breaks up a state monopoly in the
energy sector in Mexico that has existed for more
than 75 years.
 Under the new law, foreign and private domestic
energy companies will be able to explore, produce
and refine oil, thus the reform will allow investment
from private and international companies in the oil
and gas sectors along with electricity generation,
which will increase energy production considerably.
 BBVA Compass estimates these reforms could
generate $1.2 trillion in economic activity and create
2.5 million jobs over the next decade. Bidders are
expected to start signing new contracts with the
Mexican state in 2015 to explore, produce and
refine oil.
 The reforms have generated an increase in potential
office requirements from energy companies, which
now represent 12% of the total demand for Class
A/A+ office space in Mexico City, while 1 year ago
they accounted for only 3% of total demand, and it is
to keep increasing.
 Experts estimate that the reform will lead to 1.5 – 2.0
M square feet of new office space demand from oil
companies, but we are certain that the related sectors
(construction, mining, electric, engineering, etc.) and
the suppliers of these companies will also grow
exponentially.
2010
CITY SNAPSHOT
‘000s
ENERGY SECTOR TRENDS October 2014
MEXICO CITY
Oil price (USD$/barrel)
KEY MEXICO CITY MARKET STATISTICS
Take-up
H2 2013
H1 2014
59,567 sq. ft.
295,896 sq. ft.
Long-term half yearly
average take-up
121,252 sq. ft.
Class A Market Stock
46,962,950 sq. ft.
Grade A Availability
13,539,567 sq. ft.
9,849,182 sq. ft.
9.87%
10.04%
Grade A Vacancy Rate
RECENT MEXICO CITY TRANSACTIONS
TENANT1
BUILDING
DATE
SIZE (SQ FT)
Confidential
Terret
Q2 2014
43,056
Sempra
Torre New York Life
Q2 2014
29,063
Noble Energy
FORUM
Q2 2014
7,602
Confidential
Terret
Q2 2014
21,528
Gesa Eólica
Torre Summa
Q4 2013
6,394
CONUEE
Revolución 1877
Q3 2013
30,225
Green Power
Cervantes Saavedra 193
Q3 2013
15,349
Grade A Space
Mexico City
Virreyes
Total Available Space
(sq. ft.)
Standard Flr Plate
(sq. ft.)
Available
Terret Sur
Torre Diana
Torre Reforma
480,038
341,980
638,300
538,196
34,444
20,613
32,292
9,440
Q1 2015
Q3 2014
Q1 2016
Q2 2015
© 2014 CBRE Group, Inc.
14
WESTERN AUSTRALIA –
RESOURCES INVESTMENT vs. NET ABSORPTION
CITY SNAPSHOT
Jun-2014
Dec-2013
Jun-2013
Dec-2012
Jun-2012
Dec-2011
Jun-2011
Dec-2010
Jun-2010
Dec-2009
 The Perth office market has historically been dominated by
140,000
2,250
the resources and energy sectors. The performance of the
two have recently acted independently, with a downturn in
90,000
1,500
the iron ore sector having a significant negative impact on
the overall market.
40,000
750
 The energy sector, however, has remained reasonably
buoyant, with a sustained level of demand from the sector,
-10,000
0
contradicting but not counteracting the general movement of
-60,000
-750
the local hard-rock mining sector.
 Perth has become a major hub for the oil and gas sector
throughout the region with Chevron going so far as
proposing to build its own office tower HQ in the Perth CBD
Net absorption (sqm) - LHS
Expenditure ($m's) - RHS
within the new Elizabeth Quay precinct, with the building
estimated to be completed in 2019.
 The combination of major energy sector projects exploring
KEY PERTH MARKET STATISTICS
the concept of floating oil and gas extraction as well as the
H2 2013
H1 2014
rising cost of local engineering labour has led to suggestions
Take-up
-12,500 sq.m.
-36,000 sq.m.
that white collar employment could be outsourced to offshore
Long-term
half
yearly
~
+9,500
sq.m.
locations, however recent transactions from major energy
average take-up
companies have hinted that some of these employment
Total Market Stock
1,600,000 sq.m.
opportunities, at least, will remain in Perth.
62,000 sq.m.
77,500 sq.m.
Grade A Availability
 Engineering specific firms, however, continue to contract,
predominantly because of the cyclical nature of the resources
10.2%
12.7%
Grade A Vacancy Rate
sector. Currently the contraction is largely localised to hardrock mining specific projects with some ending and others
RECENT PERTH TRANSACTIONS
not obtaining approval to commence. However, this could
TENANT
ADDRESS
DATE
SIZE (SQ M)
potentially be compounded by the potential outsourcing of
Woodside
Capital Square, Jul 2014
55,000
engineering work, flagging a more fundamental change in
Perth
the local energy sector which may have a long-term affect on
KBR
Raine Square,
Jul 2014
1,700
the local market.
Perth
 Should this change be adopted by the energy sector this
ConocoPhillips 53 Ord Street,
Dec 2013
7,000
would augment the poor performance of the local office
West Perth
market, with the energy sector currently being the main
Inpex
Central Park
Jun 2013
4,000
contributor to economic growth in Western Australia.
Chevron
QV.1 Perth
May 2013
28,500
 Additionally, although delayed, the hard-rock mining
slowdown is also effecting the industrial market, with the
Shell
Kings Square
Q1 2013
19,500
(KS2), Perth
strong growth experienced in that market over a sustained
period now cooling as more opportunities become available
Chevron (to
Elizabeth Quary 2013 (~2019
60,000
develop/ own)
completion)
as well as land releases providing greater opportunities for
development.
Grade A /
Premium Space
– significant
availability
Perth
863 Hay Street
Total Available Space
(sq. m.)
Standard Flr Plate
(sq. m.)
Available
Kings Square, KS1
Brookfield Place 2
Woodside Plaza, 240 St
Georges Terrace
6,000 (approx.)
22,612
21,000
40,000 (approx.)
1,300
1,220
2,100
2,400
Immediate
Q2 2015
Q3 2015
2018
© 2014 CBRE Group, Inc.
15
ENERGY SECTOR TRENDS October 2014
PERTH
CITY SNAPSHOT
SINGAPORE – OFFICE TAKE UP vs. OIL PRICE
 The oil industry has been an integral part of
Singapore’s economy, ever since oil trading activities
started in 1891. Over the years, oil has been the
catalyst for which the refineries provide advantaged
feedstock, therefore maintaining the competitiveness
of the chemical industry. Today, Singapore is the
undisputed oil hub in Asia and is one of the world’s
top three export refining centres.
 The oil and gas industry has been a valuable sector
that contributed almost 5% of Singapore’s gross
domestic product. Jurong Island is the centre of
Singapore's petrochemical industry. Companies
operating on the island share facilities and utilities to
reduce their operating costs and benefit from
government tax incentives.
 Almost all major international oil companies have
refining and distribution interests in Singapore.
Chevron's Caltex has a major operations centre in
Singapore and holds a 50-percent stake in one of
Singapore's refineries. Other significant international
companies also have high levels of investment in
Singapore's energy sector and have acquired many
petrochemical and refining assets.
 Major players of the oil and gas industry have been
key occupiers in the Singapore office market and
many global energy companies have their regional
headquarters based here.
 Office take up for Singapore reached 416,235 sq. ft.
in October 2014. This is 76% lower than the levels
recorded for H2 2014, reflecting a general weakness
in demand for first half of 2014.
 The island wide vacancy rate actually edged up
slightly in Q2 2014 from 4.3% to 4.4%. With vacancy
rates across most sub-markets at or below 5% and
with limited new office developments over the next
two years, rents are expected to continue growing till
the second half of 2016.
 The average Grade A rent for Q2 2014 was S$10.60
psf / month reflecting a growth of 3.4% q-o-q.
$140
$120
$100
$80
$60
$40
$20
$0
1,500
1,000
500
‘000s
2,000
0
-500
2014 Q1
2013 Q3
2013 Q1
2012 Q3
2012 Q1
2011 Q3
2011 Q1
2010 Q3
2010 Q1
2009 Q3
-1,000
2009 Q1
ENERGY SECTOR TRENDS October 2014
SINGAPORE
Office Net Absorption
Europe Brent Spot Price ($ per Barrel)
KEY SINGAPORE MARKET STATISTICS
Take-up
H2 2013
H1 2014
394,362 sq. ft.
416,235 sq. ft.
Long-term half yearly
average take-up
742,028 sq. ft.
Total Market Stock
54,604,855 sq. ft.
Grade A Availability
1,404,080 sq. ft.
1,395,835 sq. ft.
4.5%
4.3%
Grade A Vacancy Rate
RECENT SINGAPORE TRANSACTIONS
TENANT
ADDRESS
DATE
SIZE (SQ FT)
FMC
Technologies
Creative Building
(International
Business Park)
May 2014
55,660
Cargill
CapitaGreen
(Raffles Place)
Apr 2014
50,000
Louis Dreyfus
MBFC Tower 3
(Marina Bay)
Sep 2013
19,000
Swire Pacific
Offshore
The Concourse
(Beach Road)
July 2013
28,000
BG Group
Asia Square
(Marina Bay)
Jan 2012
32,000
Confidential
The Metropolis
(One-North)
Dec 2012
150,000
Grade A Space
Singapore
CapitaGreen
Total Available Space
(sq. ft.)
Standard Flr Plate
(sq. ft.)
Available
South Beach
Marina One
Duo
700,000
645,000
1,875,000
570,000
6,000 – 22,000
15,000 – 19,000
34,000 – 100,000
26,000 – 31,500
Q1 2015
Q1 2015
Q4 2016
Q4 2016
© 2014 CBRE Group, Inc.
16
120
100
150
80
100
60
40
50
20
0
US$ Dollar per barrel
200
0
2013
2012
2011
2010
Total Office Stock (000' sq m)
2009
2008
2007
2006
2005
2004
2003
2002
 Stavanger is the capital of the oil and gas industry in
Norway and home to Forus, one of the leading oil
and gas clusters worldwide. The City and the
surrounding region is a key engine for the Norwegian
economy. The Stavanger real estate office market is
highly dependent on the activity in the North Sea. The
market in general faces challenging times ahead as
many tenants are putting in place cost efficiency
measures. Older secondary stock in particular is and
will continue to struggle with vacancy going forward.
 After a period of strong office development in
Stavanger and Forus in particular the development of
new builds is expected to decline. Vacancy in the
region has increased slightly over the last 12 months
and is currently estimated at 7.30%. Vacancy is
expected to increase further with underlying vacancy
(which includes leased buildings that are not fully
utilised or even vacated) estimated as high as 12-15%
at Forus, affecting the vacancy in the region as
a whole.
 The demand for offices in the Greater Stavanger
region has been stable, with the majority of it focused
on clusters such as Hinna Park and Forus. With
Stavanger being the capital of the Oil and Gas
industry in Norway and one of Europe’s fastest
growing cities, the demand for office, combination
and residential development over the last decade has
pushed the land prices upwards. Higher land prices
together with the current fall in investments and cost
saving focus in the Oil and Gas sector have led to a
recent drop in commenced development activity.
However, the population in the greater Stavanger
region is expected to increase by 30 % within 2040,
which is anticipated to create an increased demand
for office space in the long run.
 The high discrepancy of the Stavanger market means
that both yield and rent levels vary significantly across
the different sub-markets. Prime yield is estimated at
6.25% in Stavanger CBD and Hinna Park, while
prime yield in the Forus area is considered slightly
higher at 6.50%. Rents achieved in the greater
Stavanger region are ranging between 900 – 2600
NOK per sq. m, highly depending on location,
standard and size.
STAVANGER – OFFICE DEVELOPMENT vs. THE OIL
PRICE AND INVESTMENT LEVEL
Office Stock, (000’ sq. m)
CITY SNAPSHOT
Office Vacancy
Brent crude (right axis)
KEY STAVANGER MARKET STATISTICS
Office Supply
H2 2013
H1 2014
86,800 sq. m
25,300 sq. m
Long-term yearly average
supply
73,700 sq. m
Total Market Stock
2,125,000 sq. m
Total Availability
153,000 sq. m
165,000 sq. m
7.0%
7.3%
Total Vacancy Rate
RECENT STAVANGER TRANSACTIONS
TENANT
ADDRESS
DATE
Wintershall
Gullfaks, Hinna Park
Feb 2014
14,000
Rowan Drilling
Koppholen 20, Forus
Nov 2013
3,900
Siemens
Golf Tower, Forus
Jun 2013
10,000
National
Oilwell Varco
Stavanger Business Park, Jul 2013
Forus
6,200
Petrolink
Kanalsletta 4, Forus
Jan 2013
5,100
Total E&P
Finnestadveien 44,
Dusavika
Dec 2012
25,600
Jun 2012
6,900
Maersk Drilling Forus Production Arena
SIZE (SQ M)
Grade A Space
Stavanger
Forus Office Arena
Total Available Space
(sq. m.)
Standard Flr Plate
(sq. m.)
Available
Kanalsletta 3
Vassbotnen 15
Forus Golf Tower
12,800
6,000
2,200
6,000
1,520
3 590
1,056
2,125
Q2 2016
Q4 2014
Q2 2015
Q2 2015
© 2014 CBRE Group, Inc.
17
ENERGY SECTOR TRENDS October 2014
STAVANGER
ENERGY SECTOR TRENDS October 2014
KEY CONTACTS
ABERDEEN
No.1 St Swithin
Row
Aberdeen
AB10 6DL
T: +44 (0)1224 219000
IAIN LANDSMAN
DERREN MCRAE
RUPERT BOWEN-JONES
MIKE YOUNG
ANGUS FRASER
TREVOR DAVIES
ANTHONY ALBANESE
SAM DEPIZZOL
NICK CARLILE
MIKE YOUNG
Associate Director
E: [email protected]
Managing Director
E: [email protected]
ABU DHABI
Sons of Darwish
Building
Zayed 1st Street
Abu Dhabi
PO Box 53585
T: +971 2619 7800
Associate Director
E: [email protected]
Head of Agency
E: [email protected]
CALGARY
Suite 500
530 – 8th Avenue,
S.W.Calgary
T2P 3S8
T: +1 403 263 4444
Executive Vice President
E: [email protected]
Associate Vice President
E: [email protected]
GREG KWONG
Regional Managing Director
E: [email protected]
DENVER
1225 17th Street,
Suite 2950
Denver, CO 80202
T: +1 720 528 6300
Vice President
E: [email protected]
Senior Vice President
E: [email protected]
DUBAI
Emaar Square,
Building 6
Dubai
PO Box 500529
T: +971 4 437 7200
Associate Director
E: [email protected]
Head of Agency
E: [email protected]
© 2014 CBRE Group, Inc.
18
ENERGY SECTOR TRENDS October 2014
HOUSTON
700 Louisiana
Street,
Suite 2700
Houston
TX 77002
T: +1 713 881 0900
TREVOR HIGHTOWER
SANFORD W. CRINER
CRAIG K. BEYER
PABLO YRIZAR
RICHARD SCHMIDT
DIEGO FERNANDEZ
LUKE MENEZIES
CHRIS HYNES
MORAY ARMSTRONG
DAVID MCKELLAR
Managing Director
E: [email protected]
Executive Vice President
E: [email protected]
Executive Vice President
E: [email protected]
MEXICO CITY
Montes Urales
470 Piso 2
Lomas de
Chapultepec
Mexico, D.F,
11000
T: +52 (55) 52 84 00 05 Executive Vice President
E: [email protected]
Director
E: [email protected]
Manager
E. [email protected]
PERTH
Level 4,
225 St Georges
Terrace
Perth, 6000
T: +61 08 9488 4000
Senior Consultant
E: [email protected]
Senior Managing Director
E: [email protected]
SINGAPORE
6 Battery Road
#32-01
Singapore
049909
T: +65 6224 8181
Executive Director
E: [email protected]
Director
E: [email protected]
OSLO
Dronning Mauds
Gate 10
PB 1284
0111, Oslo
T: +47 40 00 57 66
CHRISTER NICHOLAS FARSTAD JOHN SOLBERG
Executive Director
E: [email protected]
Managing Director
E: [email protected]
© 2014 CBRE Group, Inc.
19